As the 2025 beach season kicks off, a new 4.5% state tax is now applied to all short-term rentals in Delaware. 

This includes Airbnb, Vrbo, Booking.com, and private rentals for stays of 31 nights or less. Hotels and motels are exempt from this tax.

Sussex County considered an additional 3% tax but voted against it. However, individual towns can impose their own rental taxes separately.

For example, one Lewes vacationer who booked and paid for her rental in December 2024 was able to avoid the new tax entirely for her 2025 stay, locking in a one-year reprieve.

How the Tax Works

The Delaware Division of Revenue oversees tax collection. Here are the key details:

• Applies to homes, condos, apartments, houseboats, trailers and similar residential units rented for 31 nights or fewer
• Does not apply to any hotels or motels
• Tax is collected either by the property owner or the rental platform (if used)
• Guests are responsible for paying the tax, but property owners and third-party platforms like Airbnb and Vrbo are responsible for collecting and remitting the funds to the state.
• Payment is due by the 15th of the month following the month of collection
• A $25 Delaware business license is required for all rental operators and intermediaries like Airbnb and Vrbo before beginning to rent out their properties 

If the rental is canceled in part or in full, the corresponding tax must be refunded.

To put the cost into perspective, a typical oceanfront condo rental in Rehoboth Beach priced at $3,995 for a week could reach nearly $4,885 after adding the state tax, local levies, processing fees, and charges for linens and damage waivers, almost $890 above the listed price.

Enforcement and Penalties

The Delaware Division of Revenue is actively monitoring compliance using various audit tools. 

Penalties for noncompliance include:

• 5% per month late filing penalty
• 0.5% monthly interest until payment is made
• Up to 25% additional penalty for failure to pay owed taxes
• Penalties apply to both property owners and rental platforms

Staying Compliant

Property owners not using a rental platform must:

• Obtain a Delaware business license first
• Collect and submit the 4.5% tax directly to the state’s Division of Revenue

When asked whether Airbnb, Vrbo, Booking.com, Expedia, TripAdvisor or any other rental listing company had obtained a license, Division of Revenue Executive Assistant Bobbi DiVirgilio provided a Delaware business license search page to look up license information.

A check of the page May 21 showed no licenses for the above intermediaries for Lewes, Dewey Beach, Rehoboth Beach or Wilmington. 

For details about the short-term rental lodging tax, visit revenue.delaware.gov/info/tims.

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Source: Cape Gazette