Post authored by Gary Schirmacher, CMP
Cities are trying to hit travelers with higher taxes than ever. Have you noticed how many cities are raising their lodging tax in recent weeks? Across the country, cities are “being forced” by their own admission to raise taxes to compensate for budget shortfalls. Is your budget prepared for these higher taxes?
These taxes can sometimes come into play within a calendar year making it very difficult for individuals and companies to budget for the increased expenditure. In many cities, there are three different taxes from city, county and use tax that can appear on a room folio. In fact, we added fields in our expense reporting tool to list up to five separate taxes on one room.
A 2009 report by the National Business Travel Association states “taxes for a single night at the national average room rate of $95.61 were $13.12. The combined lodging taxes levied by state, county and city averaged 13.73%. Tax rates ranged from 10.05% in Burbank, California, to 17.91% in New York.” It would be very interesting to see how this figure has increased in 2010.
According to Roger Wu from USA Today, “Taxing visitors is an old habit for local governments. Revenue from taxes on hotel rooms and rental cars have been used to fund tourism promotion, build stadiums and repair roads.” However, a website called TravelersFirst is assisting travelers in taking a stand against these taxes as well as informing them on which add-on fees apply.
There is much controversy on whether online travel agencies (OTAs) or hotels should pay more in taxes. In an excellent article, “Taxing controversy: Should hotels or booking engines be paying more in taxes?” Brad Tuttle explores the complicated issue of whether a city should receive tax on the room rate paid by the attendee or amount based on what the hotel actually collects after the OTA booking fees are assessed.
Personally, I believe that cities, states and even the federal government will continue to consider ways to tax travelers and meeting organizers. It’s easy money and with the economy re-bounding, occupancies are improving. Taxes are a simple way to squeeze more money out of travelers that are often reimbursed for the expenses surrounding their trip.
When does it end? Can we do anything to stop cities from increasing not only lodging, but also food and beverage taxes? Probably not, but we can budget sensibly and ask plenty of questions when considering which cities to book meetings in. When lodging taxes are averaging 18% and F&B taxes with service charges reach 35%, will a breakfast cost over $70/person at a hotel? It’s quickly approaching thresholds where tax amounts will become a key factor in deciding where to place business.
This Sales Tax Wiki is a great resource to look up taxes by state, and will make you realize the amount of money that an average person pays annually for taxes, especially if they are a traveler who purchases goods and services while on the road.
In addition, here are two other resources that provide information on why it’s so important to research and budget for taxes when you are traveling or planning a meeting. Travel Taxes in Top 50 US Destinations and Discriminatory Taxes on Travelers.
Gary Schirmacher, CMP is Experient’s Senior Vice President of Strategic Account Services. To learn more about him, click here.