The Airbnb, VRBO room tax loophole

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Good afternoon,

Last week, the Cape Gazette pointed to a giant loophole in the Sussex County room tax.

The editorial noted that users of  increasingly popular app-based rentals (Airbnb, Vrbo) do not have to pay the tax. 

The  Cape Gazette was correct in pointing out that the room tax should apply to all short-term rentals. However, the editorial did not mention the fundamental unfairness of  local room taxes that were green-lighted a couple of years back by the General Assembly.

Unlike the hefty state tax, which is used for both tourism promotion and to fill state coffers, county and municpal room taxes give counties and cities extra dollars to play with.

Given our state’s unique government structure, the argument that money is needed for roads and police protection rings hollow. State Police patrol most unincoproated commercial areas of Delaware, with the costs of major highways often borne by the state.

We also have the potential for abuse, as shown when a trial balloon calling for Kent County room tax revenues to go to a sports field complex was wisely shot down.

Thanks to the infusion of federal money during the Covid-19 pandemic, there is no current need for county and municipal room taxes.

Putting a moratorium on the tax for a couple of years would give lodging establishments a chance to shore up finances  that took a beating from the pandemic.

Long term, the State of Delaware and its local government units need to make sure that short-term rentals pay their fair share.

This is the final newsletter for the week as we take a break for Thanksgiving. Have a safe and happy time with friends and family. – Doug and Sharon Rainey.

 

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