City of Lewes, DE Taxation

Editor's Note: The provisions of this ordinance, originally designated as Ch. 4, were redesignated Ch. 172, Art. I, to maintain the organizational structure of the Code.

§ 172-1 Definitions.

As used in this article, the following definitions shall be applicable unless the context clearly indicates a different meaning:

DEED

Includes any instrument or writing pursuant to which title or possession of any real estate within the corporate limits of the City and any land outside the corporate limits of the City but under the jurisdiction of the City pursuant to 57 Del. Laws, c. 170, § 33,[1] shall be quitclaimed, granted, bargained, sold, conveyed or transferred by a seller, vendor, grantor, assignor or transferor to any purchaser, buyer, vendee, grantee, assignee or transferee, except as provided in § 172-2, and shall include the following:

[Amended 8-13-1990]

Except as provided in Subsections B and C hereof where beneficial ownership in real estate is transferred through a conveyance or series of conveyances of intangible interest in a corporation, partnership or trust, such conveyance shall be taxable under this article as if such property were conveyed through a duly recorded document as defined herein and subject to the exemptions contained herein, except those exemptions contained in § 172-2J and N.

No bona fide pledge of stock or partnership interest as loan collateral nor any transfer of publicly traded stock or publicly traded partnership interest shall be deemed subject to taxation under this article.

Where the beneficial owners of real property prior to the conveyance or series of conveyances referred to in this section own 80% or more of the beneficial interest in the real estate following said conveyance or conveyances, such transfer shall not be subject to tax under this article. Where the beneficial owner of real property prior to the conveyance or series of conveyances referred to in this article own less than 80% of the beneficial interest in the real estate following said conveyance or conveyances, such transfer shall not be subject to tax under this article unless determined by the City Manager to be properly characterized as a sale of real property. Such characterization shall take into account the timing of the transaction, beneficial ownership prior to and subsequent to the conveyance or conveyances, the business purpose of the corporation, partnership or trust, and such other factors as may be relevant.

DOCUMENT

Any deed, lease, instrument or writing whereby any real estate within the corporate limits of the City and any land outside the corporate limits of the City but under the jurisdiction of the City pursuant to 57 Del. Laws, c. 170, § 33,[2] or any interest therein, shall be quitclaimed, bargained, sold, leased or otherwise conveyed to the grantee.

[Amended 8-13-1990]

There shall be included in this definition any contract or other agreement or undertaking for the construction of all or a part of any building, all or a portion of which contract, agreement or undertaking (or any amendment to the foregoing) is entered into, or labor or materials are supplied, either prior to the date of the transfer of the land on which the building is to be constructed or within one year from the date of the transfer to the grantee.

[Added 7-13-1998]

(1)

No building permit shall be issued for any such building unless and until the person or persons (including corporations or other associations) requesting such permit shall demonstrate in whatever form may be specified by the Mayor and City Council a form of affidavit, that:

(a)

No transfer as described in this section has occurred within the preceding year;

(b)

No portion of the contract for construction for which the permit is requested was entered into and no materials or labor with respect to the building have been provided within one year of the date on which the property was transferred; or

(c)

There has been paid a realty transfer tax on the document as defined in this article.

(2)

In addition no certificate of occupancy shall be issued relative to any building on which a tax was provided by this article unless and until the owner recertifies the actual cost of the building and pays an additional tax due as a result of such recertification.

(3)

A "building" for purposes of this subsection shall mean any structure having a roof supported by columns or walls, which structure is intended for supporting or sheltering any use or occupancy, but shall not include any alteration of or addition to an existing building where the cost of said alteration or addition is less than 50% of the value of the property transferred.

(4)

A "transfer" for purposes of this subsection shall include any transfer made by a "deed" as described in this article, other than this subsection, and shall not include any transaction excluded from the definition of "deed" under the provisions of § 172-2.

LEASE

Includes any document in writing transferring or purporting to transfer a title or possessory interest by a seller, vendor, lessor, assignor or transfer to any purchaser, buyer, vendee, lessee, assignee or transferee in or to any of the following:

A condominium unit or any property or properties subject to the Unit Property Act (25 Del. C. § 2201 et seq.) for a determinable term of five years or more.

An interest in land owned by another or improvements owned by another located on land owned by another, or both, for a determinable term of five years or more.

The exercise of any right or option to renew or extend the title or possessory interest in an existing document or instrument in writing where such renewal or extension is for a period of five years or more.

TRANSACTION

Includes the making, executing, delivering, accepting or presenting for recording of a deed or lease as defined herein.

VALUE

Includes in the case of a deed the amount of actual consideration thereof, including liens or other encumbrances thereon and ground rents or a commissary part of the liens or other encumbrances thereon and ground rents where such liens and encumbrances and ground rents also encumber or are charged against other lands, tenements or hereditaments, provided that where such documents set forth a small or nominal consideration, "value" shall be determined from the price set forth in, or actual consideration for, the contract of sale or lease, or, in the case of a gift or other document without consideration, from the actual monetary worth of the property granted, bargained, sold, leased or otherwise conveyed, which, in either event, shall not be less than the amount of assessment of such lands, tenements or hereditaments as shown on the books of the City.

[1]

Editor's Note: See Charter § 33.33.

[2]

Editor's Note: See Charter § 33.33.

§ 172-2 Certain deeds and leases exempted.

As used in this article, document, deed and lease shall not include any of the following:

Any conveyance by will.

Any lease other than those described or defined in § 172-1.

Any conveyance between corporations operating housing projects pursuant to Delaware Code, Title 31, Chapter 45, and the shareholders thereof.

Any conveyance between nonprofit industrial development agencies and industrial corporations purchasing from them.

Any conveyance to nonprofit industrial development agencies.

Any conveyance between husband and wife.

Any conveyance between persons who were previously husband and wife but who have since been divorced, provided such conveyance is made after the granting of a final decree in the divorce and the real estate or interest therein subject to such conveyance was acquired by the husband and wife, or husband or wife, prior to the granting of the final decree of divorce.

[Amended at time of adoption of Code (see Ch. 1, General Provisions, Art. II)]

Any conveyance between parent and child or the spouse of such a child.

Any conveyance:

(1)

To a trustee, nominee or straw party for the grantor as a beneficial owner;

(2)

For the beneficial ownership of a person other than the grantor, where if such person were the grantee, no tax would be imposed upon the conveyance pursuant to this article; or

(3)

From a trustee, nominee or straw party to the beneficial owner.

Any conveyance between a parent corporation and a wholly owned subsidiary corporation, provided that such conveyance is without actual consideration.

[Amended at time of adoption of Code (see Ch. 1, General Provisions, Art. II)]

Correctional deeds without actual consideration.

Any conveyance to or from the United States or this state, or to or from any of their instrumentalities, agencies or political subdivisions and the University of Delaware.

[Amended at time of adoption of Code (see Ch. 1, General Provisions, Art. II)]

Any conveyance to or from a corporation or a partnership where the grantor or grantee owns stock of the corporation or an interest in the partnership in the same proportion as his interest in, or ownership of, the real estate being conveyed; provided, however, that this subsection shall not be applicable to any distribution and liquidation or other conveyance resulting from the partial or complete liquidation of a corporation, unless the stock of the corporation being liquidated has been held by the grantor or grantee for more than three years; and provided further that this exemption shall not apply to any conveyance from a partnership to its partners unless the partners' interest in the partnership has been held for more than three years.

[Amended at time of adoption of Code (see Ch. 1, General Provisions, Art. II)]

Any conveyance by the owner of previously occupied residential premises to a builder of new residential premises when such previously occupied residential premises are taken in trade by such builder as a part of the consideration from the purchaser of new, previously unoccupied premises.

[Amended at time of adoption of Code (see Ch. 1, General Provisions, Art. II)]

Any conveyance to the lender holding a bona fide mortgage which is genuinely in default, either by a sheriff conducting a foreclosure sale or by the mortgagor in lieu of foreclosure.

Any conveyance to a religious corporation or other body or person holding title to real estate for a religious organization if such real estate will not be used following such transfer by the grantee, or by any privy of the grantee, for any commercial purpose; provided, however, that only that portion of the tax which is attributable to and payable by the religious corporation or other body or person holding title to real estate for a religious corporation under § 172-3 of this article shall be exempt.

(Reserved)[1]

[1]

Editor's Note: Former Subsection Q, regarding conveyances by or to organizations exempt from ad valorem real estate taxes, was repealed at time of adoption of Code (see Ch. 1, General Provisions, Art. II).

Any mortgage.

Any conveyance to or from a volunteer fire company, organized under the laws of this state; provided, however, that only that portion of the tax which is attributable to and payable by the volunteer fire company under § 172-3 shall be exempt.

[Added 7-13-1998]

Any conveyance without consideration to an organization exempt from tax under Section 501(c)(3) of the federal Internal Revenue Code [26 U.S.C. § 501(c)(3)].

[Added 7-13-1998]

Any conveyance to a nonprofit conservation organization when the property is purchased for open space preservation purposes.

[Added 7-13-1998]

Any conveyance of a "mobile home," defined as a manufactured home, transportable in one or more sections, which, in the traveling mode, is eight body feet or more in width and 40 body feet or more in length, or when erected on site as 320 or more square feet; is built on a permanent chassis, designed to be used as a year round dwelling with or without a permanent foundation when connected to the required utilities, and is manufactured since June 15, 1976, has been built in accordance with the National Manufactured Home Construction and Safety Standards [this definition is found in 25 Del. Code § 7003(2)]; provided, however, that tax on said conveyance has been paid pursuant to 30 Del. Code § 3002, Motor Vehicle Document Fee.

[Added 7-13-1998]

Any conveyance between siblings, half-siblings or step-siblings.

[Added 11-13-2000]

Any conveyance to or from an organization exempt from tax under § 501(c)(3) of the federal Internal Revenue Code when the purpose of said conveyance is to provide owner-occupied housing to low- and moderate-income households by rehabilitating residential properties and reselling said properties without profit.

[Added at time of adoption of Code (see Ch. 1, General Provisions, Art. II)]

Any conveyance to or from a land bank formed under Chapter 47 of Title 31.

[Added at time of adoption of Code (see Ch. 1, General Provisions, Art. II)]

§ 172-3 Tax levied; amount; apportioning of tax; property less than $100 exempt.

Every person who makes, executes, delivers, accepts or presents for recording any document, deed or lease, except as provided in § 172-2, or in whose behalf any document, deed or lease is made, executed, delivered, accepted or presented for recording shall be subject to pay for and in respect to the transaction or any part thereof a realty transfer tax at the rate of 1 1/2%, 1% of which shall be pursuant to the Charter of The City of Lewes and 1/2% pursuant to 22 Del. Code Ch. 16, of the value of the property represented by such document, deed or lease. Such tax shall be payable at the time of making, execution, delivery, acceptance or presenting of such deed for recording.

[Amended 7-13-1998[1]]

[1]

Editor's Note: This resolution also provided as follows: "Notwithstanding the effective date of the ordinance, the transfer of any real property within the town pursuant to a valid written contract entered into prior to the effective date of this ordinance (July 20, 1998) shall be exempt from the provisions of this ordinance which impose the additional 1/2% tax."

The transfer tax shall be paid by the purchasers in the transaction in the absence of an agreement to the contrary.

No tax shall be imposed on any conveyance where the actual value of the property being transferred is less than $100.

Every person who makes, executes, delivers, accepts or presents for recording any document, deed or lease defined or described in this article or in whose behalf any such document, deed or lease is made, executed, delivered, accepted or presented for recording shall be subject to pay for and in respect to the transaction a realty transfer tax at the rate of 1 1/2%, 1% of which shall be pursuant to the Charter of The City of Lewes and 1/2% pursuant to 22 Del. C. Ch. 16, of the value of the property represented by such document, deed or lease which tax shall be payable as follows:

[Amended 7-13-1998[2]]

(1)

The tax on the consideration attributable to the first year of the term shall be payable at the time of making, executing, delivery, acceptance or presenting of such document for recording.

(2)

The tax on the consideration attributable to each successive year of the term thereafter shall be paid annually to the City Manager.

[2]

There shall be no tax imposed on any document, deed or lease presented for recording pursuant to a contract executed prior to November 1, 1987.

§ 172-4 Credit for property transferred by real estate brokers.

Where there is a transfer of residential property by a licensed real estate broker which property was transferred to him within 12 months next preceding the transfer by him as part of the consideration for the purchase of other residential property, a credit for the amount of the tax paid at the time of the transfer to the licensed real estate broker shall be given toward the amount of the tax due upon the transfer. If the tax due upon the transfer from the licensed real estate broker is greater than the credit given for the prior transfer, the difference shall be paid. If the credit allowed is greater than the amount of the tax due, no refund shall be allowed.

§ 172-5 Judicial sales; payment of tax.

The realty transfer tax imposed by this article shall be paid from the proceeds of any judicial sale of real estate as part of the costs of such sale before any such proceeds are applied toward any obligation, claim, lien, judgment or estate and of the writ upon which sale is made unless such transfer is exempt pursuant to the provisions of § 172-2O.

§ 172-6 Documentary stamps.

The payment of the tax imposed by this article shall be evidenced by the fixing of a documentary stamp to every document, deed or lease by the person making, executing, delivering or presenting such document, deed or lease for recording. Such stamp shall be affixed in such manner that its removal will require the continued application of steam or water, the person using or affixing such stamp shall write, stamp or cause to be written or stamped thereon the initials of his name and the date upon which such stamp is affixed or used so that such stamp may not again be used, provided that any other method of cancellation may be used if it is deemed expedient by the City Manager. The City Manager may provide through the evidence of payment of the tax to be shown on the document, deed or lease by means other than the affixing of documentary stamps.

§ 172-7 Preparation and availability of stamps.

The City Manager shall prescribe, prepare and furnish stamps of such denominations and quantities as may be necessary for the payment of the tax imposed and assessed by this article. The City Manager shall make provision for the sale of such stamps in such places as may be deemed necessary.

§ 172-8 Appointment of sales agents; commission.

The City Manager may appoint the Recorder of Deeds, in and for Sussex County, the Sussex Trust Company, or such other person or persons within or without the county as agents for the sale of stamps as used for payment of the tax imposed by this article.

A commission shall be allowed by the City Manager to such agents of 2% of the face value of the stamps.

§ 172-9 Payment of tax prerequisite to recording document, deed or lease.

No document, deed or lease upon which a transfer tax is imposed by this article shall be recorded in the office of the Recorder of Deeds, in and for Sussex County, unless proof of the payment of the transfer tax appears on the document.

§ 172-10 Statement of value required when recording.

Every document, deed or lease when lodged with or presented to the Recorder of Deeds, in and for Sussex County, for recording shall set forth therein as part of such document, deed or lease the true, full and complete value thereof or shall be accompanied by an affidavit executed by a responsible person connected with the transaction showing such connection and setting forth the true, full and complete value thereof or the reason, if any, why such document, deed or lease is not subject to tax under this article.

§ 172-11 Prohibited acts.

No person shall commit any of the following acts:

Make, execute, deliver, accept or present for recording or cause to be made, executed, delivered, accepted or presented for recording any document, deed or lease without the full amount of tax thereon being duly paid.

Make use of any documentary stamps to denote payment of the realty transfer tax without canceling stamp as required by this article.

Fraudulently cut, tear or remove from a document, deed or lease any documentary stamp or other evidence of payment of the transfer tax.

Fraudulently affix to any document, deed or lease upon which tax is imposed by this article any documentary stamp or other evidence of payment of the transfer tax which has been removed from any other document, any documentary stamp or other evidence of payment of the transfer tax if insufficient value, any forged or counterfeit stamp or other evidence of payment of the realty transfer tax or any impression, forged or counterfeited stamp, dye, plate or other articles.

Willfully remove or alter the cancellation marks of any documentary stamp or restore any such documentary stamp within intent to use or cause the stamp to be used after it has already been used or knowingly buy, sell, offer for sale, give away or use any such altered or restored stamp to any person for use.

Knowingly have in his possession any altered or restored documentary stamp which has been removed from any document, deed or lease upon which the realty transfer tax is imposed by this article, provided that the possession of such stamp shall be prima facie evidence of an intent to violate the provisions of this article.

Knowingly or willfully prepare, keep, sell, offer for sale or have in his possession any forged or counterfeit documentary stamp.

Accept for recording in the office of the Recorder of Deeds, in and for Sussex County, any document, deed or lease upon which the transfer tax is imposed without the proper documentary stamp or other evidence of payment of the transfer tax required by this article and as indicated in such document, deed or lease or accompanying affidavit.

§ 172-12 Determination of additional tax by City Manager, notice; redetermination; appeals.

If any person shall fail to pay any transfer tax imposed by this article for which he is liable, the City Manager may make a determination of additional tax and interest due by such person, based upon information within his knowledge or learned by him. All such determinations shall be made so that notice thereof shall reach the party or parties against whom it is made within three years after the recording of the document, deed or lease.

Promptly after the date of such determination, the City Manager shall send by certified or registered mail, with return receipt requested with postage prepaid, a copy thereof to the person against whom it is made.

Within 90 days after the date upon which the copy of determination of additional tax was mailed, such person may file with the City Manager a petition for redetermination of such tax. Every petition for redetermination shall state specifically the reason or reasons which petition believes entitles him to such redetermination and shall be supported by affirmation that it is not for the purpose of delay, and that the facts set forth therein are true and correct.

It shall be the duty of the City Manager within six months after the date of any determination to dispose of any petition for redetermination. Notice of the action taken upon the petition for redetermination shall be given to the petitioner promptly after the date of redetermination by the City Manager.

Any person shall have the right to review by a court of competent jurisdiction any determination made by the City Manager pursuant to this section.

Interest shall be added to any determination of additional tax and shall be computed at the statutory rate from the date any transfer tax shall have been paid to the date paid.

§ 172-13 Refunds.

Upon determination that any tax collection pursuant to this article has been collected improperly, the City Manager shall refund to the tax payer the sum so paid with interest from the date of payment at the rate of 9% per annum.

§ 172-14 Violations and penalties.

Any person who violates any of the provisions of this article shall be deemed to be guilty of a misdemeanor and, upon conviction in a court of competent jurisdiction, shall be fined not less than $50 nor more than $200 or be imprisoned for a term not to exceed 20 days, or both, and shall pay the costs of prosecution.

§ 172-15 Effective date.

This article shall become effective on November 1, 1987.

Article II Gross Receipts Rental Tax

[Adopted 8-13-2001]

§ 172-16 Notice of taxes.

The City Manager is hereby authorized annually and not later than April 1 of each year to direct a notice and questionnaire to each property owner and leaseholder, as defined in the Charter, such notice to advise property owner and leaseholder of the tax imposed for the rental of rooms, apartments, cabins and houses and of the tax for each such type of rental, together with a penalty for nonpayment of such tax. The questionnaire so included shall set forth the following:

Questionnaire. [please check the applicable block]
▪	I do not intend to rent any property.	[_____]
▪	I rent rooms, rooming home, apartments, cottages, cabins, houses, a rooming house, tourist home, "bed-and-breakfast inn," boardinghouse.	[_____]
▪	I AM SUBJECT TO THE STATE OF DELAWARE LODGING TAX UNDER TITLE 30, CHAPTER 61.	[_____]
Signed: __________ Date: _____
THE FEE FOR NONPAYMENT OF TAX IS FROM $50 PER DAY TO $500 PER DAY.

The questionnaire shall be returnable within 30 days of mailing to the City of Lewes. Any property owner or leaseholder who does not complete and return the form shall be presumed to have answered the question posed in the questionnaire in the negative.

§ 172-17 Gross receipts tax on rentals.

[Amended 4-20-2009]

There is hereby imposed and assessed a gross receipts tax at the rate of 5% of the rent for occupancy of any private and public lodging facilities and housing accommodations, including rooms, rooming homes, boardinghouse, bed-and-breakfast inn, rooming house, tourist home, cottage, cabin, house and apartment (whether in condominium or not), other than those that are subject to the State of Delaware's Lodging Tax under Title 30, Chapter 61. The payment of the tax shall be the responsibility of the person who is the owner of the property being rented; provided, however, that such person may designate an agent to collect and pay the tax to the City. Where said designated agent is a real estate broker or agent, the latter shall collect and pay the tax to the owner for the owner's payment to the City.

§ 172-18 Definitions.

As used in this article, the following terms shall have the meanings indicated:

OCCUPANCY

The use or possession of the right to use or possession of any property referred to in this article.

PERSON

Could be individuals, partnerships, firms, associations and corporations.

RENT

The consideration received for occupancy valued in money, whether received in money or otherwise, including all receipts, cash credits and property or services of any kind or nature.

§ 172-19 Rental tax report form; time period for filing and payment of tax.

[Amended 6-13-2005[1]]

Every person receiving any rent on which the tax is imposed shall be obligated to file, or have filed by a designated agent, a rental tax report form with the City Manager and to pay the City Manager, for the use of the City, the amount of tax due the City as follows: The tax on rent received in any year for occupancy which occurs during the period from January 1 through December 31 of that year shall be due and payable on or before the following February 1. For the initial year of implementation, the tax shall be December 1, 2005, through December 31, 2005.

[1]

Editor's Note: This ordinance also provided that it take effect 12-1-2005.

§ 172-20 Responsibility of owner/agent to obtain form.

The rental tax report form shall be furnished by the City Manager to the owner of the rental property, or designated agent thereof, at the time of issuance of the license required by Chapter 128. It is the responsibility of the owner of the rental property to obtain a rental tax report form from the City Manager.

§ 172-21 Form to be kept confidential.

The contents of the rental tax report form shall be kept confidential by the City as permitted by applicable state and federal law.

§ 172-22 Violations and penalties; nonrenewal of rental license.

Any person obligated to pay the tax imposed and assessed by this article who fails or refuses to file the required rental tax report from and to remit the tax required to be paid within the time and the amount specified, unless it is shown that such failure is due to reasonable cause, shall be charged, in addition to the amount of tax owned the City, interest thereon at the rate of 1 1/2% per month until such debt is fully paid. If such debt remains unpaid by the time of expiration of the license to rent the property concerning which the rental tax has not been paid, a renewal rental license shall not be issued with regard to such property. For any violation of this article or for the failure to pay the tax due pursuant to this article, the person receiving rent and/or the owner of the premises shall be subject to a penalty of not less than $50 and not more than $500 per day and shall pay the cost of prosecution, including the City's reasonable attorney's fees. Each day that such violation continues shall be deemed a separate offense punishable by like fine or penalty.

§ 172-23 Implementation of rental tax program; duties of City Manager.

For purposes of initial implementation of the rental tax program of this article, the City Manager is authorized and directed to send to each property owner notification of the adoption of the Gross Receipts Rental Tax Ordinance on or before September 15, 2001. The City Manager is further authorized and directed to send to each property owner the questionnaire, as provided in § 172-16 of this article, on or before April 1, 2002. The City Manager is further authorized and directed to take any steps deemed necessary to ensure the full compliance with the provisions of this article and to ensure that such provisions will be carried out in a fair and consistent manner. These steps shall include appropriate efforts to gain the fullest possible cooperation on the part of all rental agencies licensed to do business in the City.

§ 172-24 Effective date.

The provisions of this article shall become effective December 1, 2001.