Guest view: Local government adds lodging tax, ignores Airbnb and pockets the proceeds


(The following guest column is from the  Delaware Hotel and Lodging Association. Your comments are welcome. Simply hit reply to this newsletter and type out your thoughts)

Sadly, the governments all areas of Delaware have targeted the loyal guests of hotels that come to Delaware on business and pleasure, to spend their money, as a source of additional tax revenue. A classic case of “taxation without representation”, leaving only the industry to speak for them. Starting in New Castle County and spreading to all three counties and many towns, this tax has gone essentially unopposed.

The Delaware Hotel and Lodging Association, with the support of the destination marketing organizations in Delaware, is extremely disappointed that our guests (and yes some are Delaware residents) are being overly and unfairly taxed and urge that the tax itself and the use of the funds be challenged and changed.

Our concerns
  1. Why target just the hotel industry and our guests? When we pay our taxes, hire residents, and bring economic growth to many sectors (restaurants, attractions, shopping, casinos, etc.)? The arguments that our guests cause communities to provide additional service is unfair as that would apply to many segments of the Delaware economy.
  2. Current Lodging Tax- in a State that touts “tax-free shopping” we already tax hotels in the amount of 8 percent, often an unpleasant surprise to guests at hotel front desks who are led to believe that “tax-free shopping” would apply to hotels. The industry has collected and paid that tax for many years. The creators of that tax had the vision to allocated the eight percent as follows- five percent to the state General Fund to help offset costs of visitors, 1 percent to the Beach Replenishment Program, one percent to state tourism marking efforts, and 1 percent prorated to each of the three county tourism marketing agencies.

No support for tourism

  1. Support Tourism – Not one cent of the new lodging taxes is going to tourism marketing at state or county level, instead, governments are taking it all for their use, with little concern about helping our tourism industry offset the negative tax with more marketing. 
  2. Airbnb – not one government group has taken the step to tax Airbnb rentals in the same manner as the hotel industry. These “illegal hotels” provide direct competition to our hotels but are NOT treated the same when it comes to lodging tax, safety requirements, tax reporting and collection, labor laws and business taxes. Many State and Cities have fairly addressed this, and Airbnb had actually helped collect the taxes to be used for government costs and tourism marking, a real win-win.
  3. Kent and Dover – The Delaware General Assembly took action very late in June, without any industry hearing or input, on legislation which has the potential to substantially damage the competitiveness of the lodging industry in Kent County particularly within the bounds of the City of Dover. These bills are Senate Substitute 1 to Senate Bill 178, legislation which would enable Kent County to enact a lodging tax of up to three percent, and House Bill 255 legislation which would enable Kent County to enact a lodging tax of up to three percent. When combined with the state lodging tax, currently levied at an 8 percent rate, this could lead to a lodging tax of up to 14 percent within the incorporated limits of Dover. This is a problem and will drive away the group and individual guests who will pay this. The idea of a direct 3 percent tax to support one venue, the Delaware Turf, is outrageous and sets a harmful precedent.

What  the lodging industry wants

  1. Stop Targeting hotels – limit the total lodging tax amount only  11 percent or less.
  2. Support Tourism – allocate at least half of the new tax to the tourism marketing agencies, at the State and County level, so they can market and offset the impact of more taxes on our valued guests.
  3. Airbnb – Tax them as hotels are taxed, so that money can be used for government operations and tourism marketing.
  4. Defeat the Tax for DE  Turf- while we all value DE Turf, it is unfair to tax all visitors to Kent County at a level that could be as high as 14 percent. Other sports and tourism destinations do not get this targeted tax treatment. That level of tax would drive business away and hurt our ability to operate hotels and provide jobs and taxes.
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