The changing face of local lodging tax

For vacation rental owners, one of the challenges of lodging tax is that one property can be governed by several different tax jurisdictions. This means that if you rent out a vacation property, you may be responsible for collecting separate lodging taxes for the state, county, city, and even a special district.

Vacation rental owners need to be aware of their responsibilities in all jurisdictions — and keep an eye out for changes in local lodging tax laws. Not knowing about changes in lodging tax rates is no defense when tax authorities come to collect back taxes plus interest, or impose fines or penalties for noncompliance.

With the rising popularity of vacation home rentals, lodging taxes are increasingly viewed by local governing bodies as a means of growing tax revenue. This year, for example, many jurisdictions across the country voted on proposals to increase or implement lodging taxes. Recent examples include Stark County, Ohio, where the tax rate doubled from 3 percent to 6 percent; Okemah, Oklahoma, where a 5 percent hotel tax was approved by the City Council; and Montgomery, Alabama, where the City Council voted to increase the lodging tax by 1 percent.

Lodging tax proposals may also go directly to a public vote. In California alone in 2016, 23 hotel tax measures appeared on the ballot, with 14 of those passing.

Several more communities across the United States have such measures on their ballots this coming election season. In Monroe, Louisiana, a proposal for a 2 percent hotel tax to benefit the city’s Southside Economic Development District will go before voters Nov. 18. In Hudson, Iowa, voters will decide whether to approve a proposed 7 percent lodging tax on Nov. 7.

And in an unusual variation of a referendum in Denver, a proposal to raise the lodging tax by 1 cent on stays in hotels with 50 rooms or more will be voted on — but only by representatives of the hotels that would be affected by the tax.

Lodging taxes may sometimes be more attractive to politicians and voters because they’re mainly a tax on visitors rather than locals. However, that doesn’t mean they always sail through without opposition.

A ballot measure to increase the hotel tax in Baton Rouge, narrowly failed last year, with 51% of voters against it and 49% supporting it. However, this year’s ballot includes another proposal to increase the hotel tax in order to raise $3.32 million a year for tourism development.

In a high-profile 2016 vote with major economic consequences, a ballot measure to increase hotel tax in San Diego to pay for a new stadium for the NFL Chargers was soundly defeated. The Chargers have since relocated to Los Angeles.

More recently, in October, a proposal to raise Pennsylvania’s statewide lodging tax 5 percentage points to 11 percent was defeated in the state House of Representatives. Had the measure been approved, the increase would have brought the total lodging tax rate for Philadelphia — which has the highest lodging taxes in the nation — to 20.5 percent.

Vacation rental owners should pay special attention to lodging tax laws going to a vote this election season. But lodging taxes can change any time of the year. And with changes such as these becoming commonplace, it’s important to do your research and stay alert to ensure you’re not caught unawares by lodging tax legislation that affects you.