New Delaware lodging tax adds 4.5% to short-term rental stays

A new tax on short-term rentals (STRs) in Delaware went into effect January 1, 2025. Legislation passed in September imposes a tax at the rate of 4.5% of the rent on every STR stay in the state.

The new law defines a short-term rental as “a house, duplex, multiplex, apartment, condominium, houseboat, trailer, or other residential dwelling unit where a tourist or transient guest, for consideration, rents sleeping or living accommodations for no more than 31 consecutive nights.”

The definition excludes hotels, motels, and tourist homes, which are accommodations that have at least five permanent bedrooms for the use of tourists or transient guests, but do not have cooking facilities for the use of guests. Tourist homes were already required to collect lodging tax from guests before the new legislation was passed. Properties that offer short-term stays directly to guests “on a casual and isolated basis” for no more than 10 nights total in a year — and charge rents that are substantially below market rates — are exempt.

The law requires “accommodations intermediaries” to obtain a license from the Delaware Division of Revenue and collect and remit the STR tax. Intermediaries are defined as “any person engaged in the business of facilitating or arranging a short-term rental … on a website or through other means, including the renting of properties subject to a timeshare plan.”

This includes STR marketplaces such as Airbnb and Vrbo, owners who arrange stays directly with guests, and real estate brokers. Owners who arrange guest stays exclusively through another intermediary (such as a marketplace) aren’t considered accommodations intermediaries and don’t need to register or collect the tax. 

The STR tax is imposed on all STR rents, which exclude municipal taxes, linen rental fees, cleaning fees, insurance fees, security deposits, other add-on fees not usually considered part of the rent, or money received from a month-to-month holdover lease. 

The tax must be collected “no later than the earlier of the final payment of all rent due or occupancy of the STR.” Lodging tax returns and payments are due monthly. Short-term rental operators registered with the Delaware Division of Revenue are required to file returns each assigned filing period, regardless of whether they had any short-term rental income or collected lodging taxes during the reporting period.

Along with registration and lodging tax collection, accommodations intermediaries must also include the STR license number in all marketing materials and provide the state with information to aid in compliance enforcement. Accommodations intermediaries who don’t follow the law may face interest and penalties.

Under the new Delaware lodging tax law, hosts are responsible for collecting and remitting lodging taxes unless an intermediary does it for them. Avalara MyLodgeTax can help STR hosts automate and simplify lodging tax compliance. For more on vacation rental lodging taxes in Delaware, see our state vacation rental tax guide. If you have tax questions related to vacation rental properties, drop us a line and we’ll get back to you with answers.