Housing Sample Finds 84% Of OC Short-Term Rentals Properly Licensed But Whether Paying Room Tax Needs Further Study

Housing Sample Finds 84% Of OC Short-Term Rentals Properly Licensed But Whether Paying Room Tax Needs Further Study
File photo by Chris Parypa

OCEAN CITY — The good news on the short-term vacation rental issue in Ocean City is the majority of renters are acquiring the requisite business license and likely remitting the appropriate room tax, but resort officials are preparing to go after the scofflaws that are not.

For about two years, Ocean City officials have been monitoring the proliferation of short-term vacation rentals in the resort brokered by on-line platforms such as Airbnb and VRBO, for example. The concern has largely been on two fronts including the apparent lack of room tax collection on one hand and the sanctity of the neighborhoods in which the short-term rentals were located.

Airbnb, VRBO and similar Internet sites enable property owners to rent homes, apartments and even single rooms to visitors searching for accommodations by bypassing the traditional rental companies. Just as Uber and similar companies have transformed the public transportation industry, Airbnb, VRBO and similar companies have rocked the traditional rental industry with millions of available vacation accommodations in thousands of cities across the U.S. including Ocean City.

The working assumption for the last year or so among Ocean City officials has been the majority of the short-term vacation rentals likely weren’t acquiring the requisite business license and, therefore, were not remitting the required room tax. It has been a serious concern in a resort town with thousands of hotel rooms and condos playing by the rules with a growing number of private, short-term rentals apparently not.

However, Mayor Rick Meehan said during Monday’s Tourism Committee meeting careful research conducted by staff including City Manager Doug Miller and Finance Director Martha Bennett revealed the majority of short-term rental listings in Ocean City were licensed. Meehan said Miller and Bennett went through the on-line short-term rental listings in Ocean City one by one to collect the data.

He said there were currently 600 total short-term rental listings in the Ocean City area and a sampling of 120 was used as a start to determine if there were trends on which ones were licensed and which ones were paying the requisite room tax. From that 120 sample, 62 VRBO listings were checked and it turns out 56 of those were licensed and six were not.

Similarly, 59 Airbnb listings were sampled, of which 45 were licensed and 13 were not. In total, of the 120 listings studied, 101 were licensed and 19 were not, for a compliance rate of around 84 percent. If the trends held true and were extrapolated out over the entire 600, about 505 are likely licensed and 95 are not.

Of course, those short-term rentals acquiring the proper business license is only part of the equation. Determining if they are collecting, and perhaps more importantly remitting the required room tax is a different story.

“The good news is, most have the required rental license,” he said. “The assumption is those with licenses are paying the room taxes. We’re now in the process of seeing if the unlicensed short-term rentals are paying room tax. The assumption is they probably are not.”

In short, there are short-term rentals that are acquiring the business license and remitting room tax and there are likely some licensed short-term rentals that are not remitting room tax. There are also short-term rentals that are not licensed, but may be remitting room tax, and finally there are likely some that neither acquire the business license nor remit room tax. Meehan said the next step in the process is a deeper dive into the latter.

“We’re going to go through this data with the county,” he said. “We’re going to go through each and every one of them and find out exactly which ones are licensed and which are not, and which are paying room tax and which are not. I think this is the best way to do this.”

Meehan said the only way to identify short-term rentals in Ocean City has been to systematically go through the listing sites, such as Airbnb and VRBO, for example, and check the addresses against the city’s business license data and the county’s tax records. However, a challenge has been the listings do not always include a street number and actual address. Nonetheless, the process has been tedious but successful in identifying the short-term rental properties.

“It has been fairly easy, but there are always challenges,” he said. “In some cases, it’s easy to identify the property or condo building, but the listings don’t always include unit numbers. We’re going to keep going through them one by one and determine which are getting the license and which are remitting room tax. We can do a lot with this information. We now have more information on these than we ever had.”

Tourism Committee member and resort hotelier Michael James said some might be collecting the room tax, but might not be remitting it to the county and ultimately Ocean City’s coffers. James cited a recent personal experience as an example.

“We used a short-term rental in Florida and we met the property owner and made arrangements including the room tax,” he said. “We assumed they remitted the room tax to the appropriate taxing body, but there was no way of knowing for sure. I think we might see some of that here.”

About The Author: Shawn Soper

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Shawn Soper has been with The Dispatch since 2000. He began as a staff writer covering various local government beats and general stories. His current positions include managing editor and sports editor. Growing up in Baltimore before moving to Ocean City full time three decades ago, Soper graduated from Loch Raven High School in 1981 and from Towson University in 1985 with degrees in mass communications with a journalism concentration and history.