What is Delaware’s short-term rental lodging tax ?

Delaware has imposed a short-term rental lodging tax at the rate of 4.5% upon every occupancy of a short-term rental within this state.  See 30 Del. C. ch. 62.

 

What is subject to the short-term rental lodging tax?

Rent is subject to the short-term rental lodging tax. Rent is defined as the consideration received for occupancy, valued in money, whether received in money or otherwise. Rent does not; however, include the following:

1. Municipal taxes, if any;
2. Linen rental fees;
3. Cleaning fees;
4. Insurance fees;
5. Security deposits;
6. Other add-on fees not usually considered part of the rent; or
7. Money received from a month-to-month holdover lease.

 

What is a short-term rental?

A house, duplex, multi-plex, apartment, condominium, houseboat, trailer, or other residential dwelling unit where a tourist or transient guest rents sleeping or living accommodations rented for no more than 31 consecutive nights.

 

Are there any exemptions?

Yes.  Short-term rental does not include the following:

1. Hotels, motels, and tourist homes (subject to a separate hotel, motel, or tourist home Delaware business license);
2. Rooms, groups of rooms, or other spaces used for assembly;
3. Dormitories or residential facilities of educational or vocation institutions;
4. Healthcare facilities licensed by the State;
5. Campsites, cabins, or similar facilities in campgrounds;
6. Overnight camps for adults or children; or
7. A rental arranged directly by the property owner, on a casual and isolated basis where the rent is substantially below market rates and the property is used as a rental for no more than 10 nights in aggregate per calendar year.

 

When does the new tax become effective?  This tax applies to short-term rental agreements entered into on or after January 1, 2025.

 

Who collects and pays the short-term rental lodging tax?

The accommodations intermediary is responsible.  The accommodations intermediary is defined as any person engaged in the business of facilitating or arranging a short-term rental to an occupant on a website or through other means, including the renting of properties subject to a timeshare plan and a real estate broker of record (not real estate licensees working under that broker). If the owner of the property uses a third-party rental listing company (e.g., Airbnb, Vrbo, Booking.com, Expedia, Tripadvisor, etc., or a local or similar a rental listing company) to book the short-term rental, only the third-party rental listing company is required to collect and remit the appropriate short-term rental accommodations tax.

 

What if I (the owner of the property), use a third-party to list my rental for rent as a short-term rental?

If the owner of the property uses a third-party rental listing company (e.g., Airbnb, Vrbo, Booking.com, Expedia, Tripadvisor, etc., or a local or similar a rental listing company) to book the short-term rental, only the third-party rental listing company is required to collect and remit the appropriate short-term rental accommodations tax. Additionally, the third-party rental listing company that books the short-term rental must be a Delaware licensed accommodations intermediary.

 

What if I am the owner of the property and I do not use a third-party intermediary?

The owner of a short-term rental property who does not use a third-party intermediary to book short term rentals is required to collect and remit the appropriate short-term rental tax and must be licensed by the Division of Revenue (required to obtain a Delaware accommodations intermediary business license ($25).

 

How does an accommodations intermediary file and pay the short-term rental lodging tax?

The amount of the tax collected for each month shall be filed and paid on The Division of Revenue’s online taxpayer portal (tax.delaware.gov) not later than the fifteenth day of the month following the month of collections.

 

What if a short-term rental is cancelled?

If a short-term rental stay is cancelled in whole, or in part, the cancelled portion of the stay is not subject to the short-term rental tax and any amount of tax collected for such cancelled portion must be refunded.

 

What penalties apply to late filing and/or payment of short-term rental lodging tax?

Short-term rental lodging tax filed late is subject to a penalty of 5% per month, plus interest of 0.5% per month from the original due date until paid.  In addition to the above penalties and interest, an additional penalty of 1% per month (not to exceed 25%) is imposed for failure to pay (in whole or in part) the tax liability shown to be due on a timely filed return (30 Del. C. §§ 533, 534).  Additionally, accommodations intermediaries are subject to interest and penalties for failing to file any required tax return, filing incomplete tax returns, or failing to remit data required by the Division of Revenue (30 Del. C. § 573).

 

What data will be required to be submitted with the short-term rental lodging tax form?

The accommodations intermediary must provide the State with all data necessary to enforce Chapter 62 of Title 30 of the Delaware Code.  This data shall, at a minimum, include the accommodations intermediary’s demographic identifiers (e.g., business license, name, etc.), the address of each rental unit, the number of nights rented for each unit, and the aggregate rents collected for each property.

 

Does the accommodation intermediary need a State of Delaware Business License?

Yes, accommodation intermediaries are required to obtain a Delaware Business license ($25) via onestop.delaware.gov prior to conducting accommodations intermediary services.

 

Additional guidance can be found in Technical Information Memorandum 2024-1, which is posted at revenue.delaware.gov/info/tims/