Ocean City, Maryland, residents reject short-term rental law in close referendum

Voters in Ocean City, Maryland, rejected a new STR law in a referendum, allowing residential rental operators to continue offering stays of less than five days.

Ordinance 2025-04, passed in March, required five-night minimum stays for single-family homes in R-1 residential and MH mobile home districts. The minimum stay would have increased to 31 nights in 2027. Opponents of the law gathered more than 1,000 petition signatures, meeting the requirements for a ballot measure. The referendum asked residents to vote for or against the STR ordinance, and the repeal passed by a narrow margin, with 834 votes against the law and 800 in favor. 

The town issued an 11-month moratorium on approval of new STR licenses in R-1 residential and MH mobile home districts beginning January 28, 2025. This doesn’t affect existing licenses. More than 9,000 registered STRs are located in the town outside of those zones.

While the ballot measure canceled the law affecting minimum required stays, other regulations for STRs are still in effect. Ocean City defines STRs as accommodations rented for 30 consecutive days or less, excluding hotels, motels, apartments, dormitories, and employee housing. STR operators are required to obtain an annual rental license and noise permit, as well as a supplemental annual STR license. Applicants must declare the number of bedrooms and available parking on the property and consent to inspections. The town may suspend or revoke rental licenses for violations of the law.

STR platforms such as Airbnb or Vrbo that facilitate booking transactions for rentals in Ocean City are required to verify their listings have valid licenses.

STRs in Ocean City must also be registered with the Comptroller of Maryland and collect, report, and pay state sales tax.

In Maryland, STR operators are considered “accommodations providers” that offer rights to transient guests to occupy a room or lodgings. Accommodations providers are required to collect state sales tax from their guests unless guests are renting on a monthly basis or are permanent residents. In resort areas, sales tax applies to all rentals for terms of four months or less. 

Operators aren’t required to collect lodging taxes if a third party, such as an STR marketplace, collects taxes on all STR transactions. STR marketplaces are required to collect state sales taxes from guests when a Maryland rental is paid for.

Worcester County Room Tax also applies to STRs in Ocean City that are rented for less than four months and one day. Hosts must register with the county, file monthly reports, and pay the tax collected from guests. Airbnb and Vrbo collect room tax for listings in Worcester County.

Avalara MyLodgeTax can help automate and simplify tax compliance for STR operators. For more on lodging taxes in Maryland, 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.