By Bill Silva and Bill Sullivan
Governments across Delaware have targeted hotel guests who come to Delaware on business and pleasure to be a source of additional tax revenue. It’s a classic case of taxation without representation, leaving only the industry to speak for them. The tax assessments have gone essentially unopposed. The Delaware Hotel and Lodging Association, with the support of destination marketing organizations across Delaware, is extremely disappointed that our guests (and yes, some are Delaware residents) are being overly and unfairly taxed and urge that the tax itself and the use of the funds be challenged and changed.
1. Why target just the hotel industry and our guests? We pay our taxes, hire residents, and bring economic growth to many sectors ¬– e.g., restaurants, attractions, shopping, casinos. The arguments that our guests cause communities to provide additional services is unfair as that would apply to many segments of our economy.
2. Current lodging tax: In a state that touts “tax-free shopping” we already tax hotels in the amount of 8%, often an unpleasant surprise to guests at hotel front desks who often believe “tax-free shopping” also applies to hotels. The creators of that tax had the vision to allocate the 8% as follows: 5% to the State General Fund to help offset costs of visitors; 1% to the Beach Replenishment Program; 1% to state tourism marketing efforts; and 1% prorated to each of the three county tourism marketing agencies.
3. Support tourism: Not one cent of the new lodging taxes is going to tourism marketing at state or county level. Instead governments are taking it all for their use with little concern about helping our tourism industry offset the negative tax with more marketing. The industry has asked for some portion of this tax to go to marketing, as the current 8% law so brilliantly did! We have directly asked New Castle County and the City of Newark and have been ignored or told NO!
4. AirBnb: Not one government group has taken the step to tax AirBnb rentals in the same manner as the hotel industry. These “illegal hotels” provide direct competition to our hotels but are NOT treated the same when it comes to lodging tax, safety requirements, tax reporting and collection, labor laws and business taxes. Many states and cities have fairly addressed this, and AirBnb had actually helped collect the taxes to be used for government costs and tourism marking, a real win-win!
5. Kent and Dover: The General Assembly took action in late June, without any industry hearing or input, on legislation that could substantially damage the competitiveness of the lodging industry in Kent County, particularly within the bounds of the City of Dover. When combined with the 8% state lodging tax, this could lead to a lodging tax of up to 14% within the incorporated limits of Dover. The idea of a direct 3% tax to support one venue, the Delaware Turf, is outrageous and sets a harmful precedent.
What does the hotel industry want?
1. Stop targeting hotels: Limit the total lodging tax amount to 11% or less.
2. Support tourism: Allocate at least half of the new tax to the tourism marketing agencies, at the state and county level, so they can market and offset the impact of more taxes on our valued guests.
3. AirBnb: Tax them as hotels are taxed, so that money can be used for government operations and tourism marketing!
4. Defeat the Tax for Delaware Turf. While we all value Delaware Turf, it is unfair to tax all visitors to Kent County at a level that could be as high as 14%. Other sports and tourism destinations do not get this targeted tax treatment. That level of tax would drive business away and hurt our ability to operate hotels and provide jobs and taxes.
Bill Silva is the chairman of the Delaware Hotel & Lodging Association (DHLA) and Bill Sullivan is a board member and former chairman of DHLA.