Possible lodging tax coming to Rehoboth

Hotels, motels and tourist home guests in Rehoboth Beach may see a new city tax next year. Rehoboth commissioners agreed to move forward with a proposed charter change that would allow the city to impose up to a 3 percent lodging tax on those entities.

During a commissioner workshop Sept. 11, Mayor Paul Kuhns said, the city will first look to the General Assembly for the authority to impose the lodging tax.

The state already collects a lodging tax of 8 percent on hotels and motels. Kuhns said most of that money leaves Rehoboth – 5 percent goes to the state’s general fund; 1 percent goes to beach replenishment; 1 percent goes to the State Tourism Office and the remaining 1 percent is split among county tourism offices. Kuhns said this new lodging tax would be for Rehoboth only.

Currently, visitors who rent residential units pay an accommodations tax of 6 percent, raised from 3 percent in November 2017. This new tax would not affect residential renters.

City solicitor Glen Mandalas said the proposed charter change was spurred by the General Assembly’s passage of a bill during the past session permitting county governments to impose and collect a lodging tax of no more than 3 percent on hotel, motel and tourist home rooms. An amendment to the bill exempts rentals by the Delaware Department of Natural Resources and Environmental Control from the local lodging tax.

Mandalas said another bill permitting municipal governments to impose and collect a lodging tax was also introduced, but failed to make it out of committee. He said the General Assembly took the stance that if a municipality wants to make the change, it has to ask individually. He said the wording for Rehoboth’s proposed change mirrors the wording used for the county lodging tax bill.

Mandalas said two other municipalities – Middletown and Newark – were given approval by the General Assembly to impose and collect a lodging tax of no more than 3 percent.

Commissioner Stan Mills said this was something the city ought to pursue. The city doesn’t have to impose the tax, but, he said, it’s prudent to get authority to do so on the books.

Commissioner Kathy McGuiness asked if the money could be designated for something specific or if this would just go into the city’s general fund.

“I don’t want to tax for the sake of taxing,” she said.

Kuhns said he expected it would not be designated for something specific, but was something that could be discussed during budget talks.

Kuhns said city commissioners will be voting on the charter change during the regular monthly meeting Friday, Sept. 21.

If passed, Mandalas said there’s no time frame for approval from the General Assembly, which resumes session in January.