If you operate any sort of overnight accommodations, you are required by state law to charge each customer a lodging tax. This may be a percentage of the rate you charge for each night’s stay, or a flat rate per room. This is in addition to the state and local sales tax you charge your customers.
Let’s say you charge $100 per night for a stay at your hotel. If the lodging tax rate is 7%, you’ll charge $107 (plus any other taxes or fees) to your customer, then pass that $7 on to the government. How does the government know what lodging tax you owe it? When you file your taxes, your income will indicate how many guests you have had in a year, and how many rooms you rented out. The lodging tax is calculated in your accounting system, and should always match up with what you pay Uncle Sam.
Why You Pay a Lodging Tax
When you start a business, the last thing you want is more business licenses, permits & tax to take care of. But lodging tax actually benefits you as a business owner. Your local and state government uses the money it collects from you and other lodging owners to pay for marketing to draw in more travelers. The tax might pay for the construction and maintenance of a visitor center, travel guides, and other travel resources to help visitors to the area.
Attracting more travelers to your city is a great benefit to your motel, bed and breakfast, or hotel, as it gives you a wider customer base. From there, it’s up to you to market to potential customers and let them know that your accommodations are the best in town.
So the next time you feel like grumbling about paying your lodging tax, consider all the customers you have had stay at your business, and realize it’s due, in part, to that very tax!