Hello all,
The recent story on Airbnb’s report on its economic impact within the State of Delaware prompted a question on taxes.
On paper, Airbnb would seem to provide a good way to collect taxes at the time the reservation is made. That’s how it is done in several nations and various political subdivisions in the U.S.
Delaware could extend its lodging tax – which is now paid by hotels, but not rentals – to Airbnb or similar apps. A portion of the tax supports local visitors bureaus.
In Delaware, beach municipalities tax seasonal rentals. Of late, sharp increases in the rental tax rate were made in an apparent reaction to the state eying a potentially lucrative source of revenue.
The issue of the state needing a piece of the action deserves consideration. After all, law enforcement outside municipalities is handled by the Delaware State Police, with some county support. The state also provides health and other services that in most states would be handled by counties.
The cost of such services is considerable, given the growth along Coastal Highway and the fact that Delaware does not impose a sales tax that would help fund these services. The gross receipts tax does bring in some money from retailers.
For now, the state needs to keep a closer eye on disruptive technologies like Airbnb and calculate the true cost of services it provides.
Have a great day. The newsletter returns tomorrow. – Doug Rainey, publisher.
