Lodging taxation in the United States: A qualitative review

With economic difficulties nationwide, Local, State and Federal governments are under increased pressure to raise revenues to cover budget shortfalls. A popular trend is to target transient guests by taxing the lodging industry. Imposing or increasing these tax rates usually is met by opposition from the lodging businesses affected as a portion of the tax is often paid by the business. Currently, knowledgeable consumers have access to information through online resources and can quickly compare hotel prices, inclusive of tax. Consumers utilize this information to avoid staying in excessively high tax areas, when possible, and consequently shift the tax burden to the lodging industry. This research uses data from four studies conducted by the American Hotel and Lodging Association augmented by additional sources to provide a qualitative review of lodging tax rates, trends, changes, and jurisdictional issues. The primary objective of this research is to provide a valuable resource for taxing authorities and the lodging industry. Previous studies have indicated that a majority of the hotel tax burden is borne by consumers, with a lesser impact on the lodging industry. This research provides some evidence that locations with high lodging taxes, relative to neighboring areas, can be adversely burdened by high taxes. Both leisure and business travelers can easily cross taxing jurisdictions to avoid taxes which has a negative impact on the lodging industry in addition to all other industries supplying traveler services. This research also provides the most comprehensive data available on current lodging tax rates and trends in taxing jurisdictions and potential impacts on consumer behavior. The notion that lodging taxes are mostly exported is brought into question and the implications for fiscal policy are addressed.