Hotel Occupancy Taxes

What are Hotel Occupancy Taxes?

Cities may levy a tax on a person who pays for the use or possession of a room that is in a hotel, costs more than $2 per day, and is ordinarily used for sleeping.

How much hotel occupancy taxes may a city levy?

A city may levy a hotel occupancy tax in any amount up to, and including, seven percent of the price of the room. 

How does a city levy a hotel occupancy tax?

A hotel occupancy tax must be levied by ordinance.  The City of Center adopted this ordinance in 1984.  No election or other approval of the citizens is required. 

How may hotel occupancy tax revenues be spent by a city?

Hotel occupancy tax revenues are known  as “dedicated revenues”, as distinguished from general tax revenues such as property and sales taxes.  General revenues may be spent on nearly any lawful pursuit of a city.  Dedicated revenues, however, may only be spent on certain purposes defined by law.

Very generally speaking, all expenditures of city hotel tax revenue must promote tourism in the city.  This general rule can be further broken down into two parts, often referred to as the “two-part test”:

1.        All expenditures must promote the tourism and convention and hotel industry; and

2.       All expenditures must further fall into one of seven statutory categories:

a.       The acquisition of sites for and the construction, improvement, enlarging, equipping, repairing, operation, and maintenance of convention center facilities and visitor information center;
b.      Expenses associated with registration of convention delegates;
c.       Advertising, solicitations, and promotions that attract tourists and convention delegates to the city or its vicinity;
d.      Promotion of the arts;
e.      Historical preservation projects;
f.        Sporting events that promote tourism in counties of less than one million population;
g.       Transportation systems that transport tourists from hotels to the commercial center of the city, a convention center of the city, a convention center, other hotels, or tourist attractions, provided the system does not serve the general public.

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