Ocean City Continues Tracking Online Rentals For License, Tax Adherence

Ocean City Continues Tracking Online Rentals For License, Tax Adherence
Photo by Chris Parypa

OCEAN CITY – Efforts to manage short-term online rentals in Ocean City could get a boost from some outside help to track down scofflaws.

For at least the last two years, Ocean City officials have been monitoring the proliferation of short-term vacation rentals in the resort brokered by online platforms Airbnb and VRBO, for example. The concerns are varied, but two of the biggest issues include an apparent lack of a rental license in many cases. In other cases, even if property owners are acquiring the appropriate rental license, there is no guaranteed way to track if they are collecting and remitting the required room tax.

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 has 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 all over the country including Ocean City and surrounding areas.

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 likely 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.

During last Monday’s Tourism Committee meeting, Mayor Rick Meehan said town staff has had some success in identifying properties being rented without the requisite rental license, but the challenge has been determining if they are collecting and remitting room tax.

“We’re looking for ways to identify all of the rentals,” he said. “We have found about 9,000 have licenses, but we’re not 100 percent sure all of them are remitting rental taxes. We did some manual checking and identified some properties that were renting without licenses.”

Meehan said the town has been earnest in identifying scofflaws with some success.

“Some of them went to court and we prevailed,” he said. “In some of those cases, $500 fines were assessed.”

However, the mayor said the process has reached a point where some outside help might be needed to determine which resort properties are being rented through on-line platforms and which are remitting the required taxes.

“This isn’t something we can do manually,” he said. “We really need a web-based company to compare all of the rental properties to those remitting taxes. We need to get somebody to professionally assist us with this. In this world, it’s going to become even more prevalent.”

Indeed, it does appear to be becoming more prevalent. A check of Airbnb listings last week on the heels of a major winter storm revealed there were 137 properties available for rent in the resort area. They range from as low as $75 per night for a three-bedroom single-family home to $325 per night for an entire estate with six bedrooms, a pool, hot tub and other amenities and everything in between. Meehan said the rules regarding rental licenses and tax remittal apply regardless of the size or cost of the rental.

“All property owners receive rental licenses when the sale is concluded,” he said. “If you are renting your property, those are the rules whether you’re renting to your father, uncle, brother or whomever.”

While some of the Airbnb listings under Ocean City are in the 21842 zip code, others are in the county at-large, which creates another set of problems, according to Meehan.

“There is a parallel issue,” he said. “The county does not require a rental license and there are a significant number of rentals in the county that aren’t paying room tax. That’s a county issue, but they could be leaving a significant amount of revenue on the table.”

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.