What Is a Bed Tax and How Does It Work?

Local governments impose various taxes on temporary accommodations, such as hotel stays and short-term rentals. These charges are applied to guests for occupying a room or other living space for a limited duration. This taxation serves as a significant revenue stream for local jurisdictions, aiming to capture revenue from visitors rather than placing the entire burden on permanent residents.

Understanding the Bed Tax

A “bed tax,” often called an occupancy or lodging tax, is a fee levied on short-term accommodation rentals, typically for stays less than 30 consecutive days. This tax is paid by the guest occupying the room, not the lodging provider. The lodging provider, such as a hotel, motel, or short-term rental owner, collects the tax from the guest and remits these funds to the local government.

Local governments use bed tax revenue for specific initiatives. Funds often support local tourism promotion, marketing efforts, and the development or maintenance of public infrastructure like roads, parks, and convention centers. Some revenue also contributes to general municipal funds, supporting various public services. The bed tax is calculated as a percentage of the room rate charged to the guest. This percentage applies only to the room rate, excluding charges for services like food, amenities, or meeting rooms.

Key Characteristics and Variations

The “bed tax” is known by various names across jurisdictions, including hotel tax, transient occupancy tax (TOT), and tourism tax. Rates are not uniform and differ significantly by city, county, or state. State hotel tax rates might range between 2% and 6%, but local taxes can add substantially, with combined rates potentially exceeding 20% in some areas. Factors influencing these rates include local budget needs, tourism development goals, and the costs associated with public services impacted by visitor traffic.

Exemptions from bed taxes apply in specific situations. Stays exceeding 30 consecutive days are exempt, as the guest is then considered a permanent resident. Government employees on official business are often exempt, particularly federal employees, though conditions like direct agency payment or specific identification may apply. Nonprofit religious, charitable, or educational organizations may also qualify for exemptions when their employees travel for official business.

Obligations for Lodging Providers

Businesses offering short-term accommodations have specific bed tax obligations. They must register with local tax authorities before commencing operations. This registration often involves obtaining a general business license and a transient occupancy tax registration form. Lodging providers must accurately collect the bed tax from guests, ensuring it is stated separately from the room rate on the bill.

Maintaining records of collected taxes and any applicable exemptions is an ongoing responsibility. These records, which may include registration details, revenue summaries, and general ledgers, must be preserved for three to five years for audit purposes. Lodging providers must regularly report collected amounts to the taxing authority. These reports are filed monthly or quarterly, with deadlines usually by the last day of the month following the reporting period. Collected funds must be remitted to the government by these deadlines, with penalties for late payments. Even if no tax is collected, a return may still need to be filed.