Resort, County Partner On Effort To Collect Online Rental Room Taxes

Resort, County Partner On Effort To Collect Online Rental Room Taxes
Through sites like AirBNB, hundreds of online rentals are available during the summer months. File photo by Chris Parypa

OCEAN CITY — Efforts to rein in scofflaw short-term vacation rentals that are not acquiring rental licenses and remitting the appropriate room tax were renewed this week with approval of a draft ordinance intended to strengthen the rules.

For years now, Ocean City officials have been monitoring the proliferation of short-term vacation rentals in the resort brokered by third-part on-line platforms such as Airbnb and VRBO, for example. The intent is to ensure the hundreds of short-term vacation rentals listed online, through sites such as Airbnb and VRBO, are acquiring the requisite business license and collecting and remitting room tax.

The concern has largely been on two fronts including the apparent lack of business licenses for the hundreds of on-line vacation rentals in addition to the lack of room tax remittal for those that do acquire the requisite business license. The companies enable property owners to rent homes, apartments and even single rooms to visitors searching on-line for accommodations by bypassing the traditional rental companies.

To that end, Planning and Community Development Director Bill Neville and his staff along with the city solicitor have prepared a draft ordinance aimed at strengthening the town’s rental housing ordinance. Neville presented the draft ordinance to the Mayor and Council on Tuesday.

“Several years ago, we started working on the concept,” he said. “The concern was whether or not that format followed the same rules as traditional rental housing. Anyone renting short-term would have to follow the same rental license requirements. We reached out and did some additional coordination with Worcester County to try to ensure rental licenses were being acquired and room tax was being collected.”

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The draft ordinance prepared to strengthen the town’s rental housing ordinance includes multiple changes to the existing ordinance. It would require all rental advertisements to include the rental license control number and updates definitions to include all housing types required to have a rental license.

It would also impose record-keeping requirements on the property owner and the hosting platform and require the property owner or their agent to be registered with the Maryland State Comptroller for the reporting, collecting and payment of the state’s sales and use tax. The changes also include requiring the property owner of a rental unit certify that all federal, state, county and municipal taxes are paid and current prior to the issuing of a rental license, among other changes.

Because hotel rental and room tax is remitted to the county and then transferred back to the municipalities, in this case Ocean City, the town will likely need some collaboration with Worcester officials on tightening the regulations. To that end, Mayor Rick Meehan late last month fired off a letter to County Commission President Joe Mitrecic seeking the county’s cooperation with affecting the appropriate changes. In Snow Hill last week, the County Commissioners threw their support behind staff drafting a bill to increase room tax collection efforts from third party hosting platforms.

“The Mayor and Council would like to request that the Worcester County Commissioners consider amending the county code to impose a requirement on third-party hosting platforms to collect and remit hotel rental tax,” Meehan’s recent letter to the commissioners reads. “Hosting platforms such was Airbnb, VRBO and many others have become very popular and a more common way for entities to list their property for rent to our visitors in Ocean City and Worcester County.”

Meehan explained in the letter the hosting platforms are not responsible for collecting and remitting room tax, which essentially leaves it up to the individual property owners. According to the letter, while some short-term rental property owners are following the rules by getting business licenses and remitting the appropriate amount of tax, many are not, which is why the strengthened ordinance is being proposed now.

“Currently, the owners of said properties are responsible for the collection and remittance of the hotel room tax,” the letter reads. “Unfortunately, hosting platforms are not responsible for this. We believe there are a number of properties listed on the hosting platforms that do not have a rental license, thus, the owner is failing to collect and remit hotel rental tax to the county.”

In the letter to the county commissioners, Meehan asserted the issue essentially boils down to fairness.

“Our local hotels, motels, property management companies and many of our private property owners are complying with the collection and remittance of hotel rental tax,” the letter reads. “There should be a level playing field. We need to hold hosting platforms responsible for collecting and remitting the proper amount of hotel rental tax.”

The council voted 6-0 with Council President Matt James absent to forward the draft ordinance to first reading at a future meeting.

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.