Proposed legislation that would give New Castle County the authority to levy a room tax of up to three percent may open the door to other cities and counties seeking the same revenue source.
The Newark City Council will hold a special meeting on May 7 at 6 p.m. to consider a resolution to express support for House Bill 395 that would allow all municipalities within the state to impose the tax on hotel rooms.
In Dover, House Bill 395 was introduced that would allow smaller municipalities to levy a room tax. The bill could also open the door to Kent and Sussex counties seeking the same authority in coming years through a separate measure.
Currently, only Wilmington imposes a two percent room tax under legislation that bars municipalities with fewer than 50,000 people from levying the tax.
The Wilmington tax, which was initially proposed as a temporary measure, is now baked into the city’s revenue mix.
Last year, the lodging industry came close to seeing all of the revenue from the current eight percent state room tax going into state coffers. The tax now splits revenue between the state, beach replenishment and funding for convention and visitors purposes.
The lodging industry objects to a portion of the proposed New Castle County tax not going to promoting tourism and not expanding the tax to reservation apps like Airbnb, VRBO or seasonal rentals.
The industry claims Airbnb is allowing the formation of illegal hotels that are not subject to room taxes and health and safety standards.
Municipalities in Coastal Sussex County have raised rental taxes, perhaps in response to the threat of an expansion of the state tax.
