Ocean City, Maryland, halts new short-term rental permits in residential zones for another year

The City Council of Ocean City, Maryland, has extended its moratorium on new short-term rental (STR) permits in Residential 1 (R1) and Mobile Home (MH) districts through January 3, 2027. The current pause that went into effect in January 2025 was set to end in January 2026, giving officials another year to consider STR regulations for those districts.

Officials are considering regulations for the districts that could include a seven-night minimum stay, capping or freezing STR permits, restricting the number of STRs one owner can operate, and allowing only one renter per seven-day period. The moratorium could be lifted earlier than scheduled if new rules are adopted.

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 provide the town with contact details for a person who is legally authorized to accept legal notices and address property issues, authorized to handle code violations, and able to respond to property issues within 60 minutes. Property owners must consent to inspections and observe occupancy and safety regulations. 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.

Earlier this year, Ocean City voters rejected a new STR law affecting the R1 and MH housing districts, which contain around 300 licensed STRs out of around 9,000 located in the town.

Ordinance 2025-04, passed in March, required five-night minimum stays for single-family homes in those 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.

STRs in Ocean City are required to register 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.

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

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.