A lodging tax is a percentage charge that state and local governments add to the price of short-term accommodations such as hotels, motels, and vacation rentals. The guest pays it as a line item on the bill, and the lodging provider collects it and sends it to the taxing authority. Combined rates run from around 4% in some areas to nearly 20% in the most heavily taxed cities.
The tax goes by many names depending on where you are: hotel tax, occupancy tax, transient occupancy tax, room tax, bed tax, or tourist tax. The concept is the same in each case. It generally applies to stays under 30 consecutive days, though the exact cutoff varies by jurisdiction.
Who Pays It and Who Sends It In
The guest pays. The tax appears on the hotel bill or rental receipt on top of the nightly rate, and in most jurisdictions there is no way to opt out.
The lodging provider collects the tax and remits it to the government. That applies whether the provider is a hotel chain, a boutique inn, or an individual renting out a spare bedroom. The provider is usually required to register with the taxing jurisdiction before collecting, file returns on a set schedule, and keep accurate records. Some jurisdictions require the registration certificate to be displayed where guests can see it.
What Platforms Like Airbnb and VRBO Handle
If you list a property on a marketplace platform, the platform itself may handle tax collection. Airbnb automatically collects and remits occupancy taxes on behalf of hosts in all 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands, though the specific taxes covered vary by jurisdiction.1Airbnb. Areas Where Tax Collection and Remittance by Airbnb Is Available Other platforms operate similarly under marketplace facilitator laws.
Platforms don’t always cover every layer. One might handle the state occupancy tax but not a county or city tourism assessment. Hosts should verify exactly which taxes their platform remits and whether any local obligations remain, because double-collecting is a real risk when a host doesn’t check.
How the Tax Is Calculated
Lodging tax is a percentage of the room rate. On a $150 nightly room with a combined lodging tax of 12%, the tax is $18 per night. Most jurisdictions apply the lodging tax before layering on general sales tax, though some roll both into a single calculation.
The harder question is what counts as the room rate. Mandatory fees that are a condition of your stay, such as resort fees, cleaning fees, and service charges, are usually taxable as part of the rent. If the hotel bundles everything into one lump-sum price, like a bed-and-breakfast package, the entire amount is generally taxable. When the bill separately lists the room charge from items like parking or meals, only the room charge is typically subject to the lodging tax.
Refundable security deposits are usually not taxable, since they aren’t payment for occupancy. If the deposit is applied toward damages or cleaning and not returned in full, the retained portion may become taxable in some jurisdictions.
Why Rates Vary So Much by Location
There is no single national lodging tax rate. The tax is imposed at the state, county, and city levels, sometimes all three at once, creating a patchwork where the same hotel room can cost significantly more depending on which side of a county line it sits on.
Roughly half of all states impose a statewide lodging tax, with rates ranging from under 1% to 15%. A handful of states, including Alaska, California, and Nevada, impose no state-level lodging tax and leave it entirely to local governments. That doesn’t mean low overall rates. Cities in those states often levy their own substantial occupancy taxes.
The combined burden is what hits the bill. Some smaller cities charge a combined 5% or 6%. Major tourist destinations routinely exceed 14% or 15%, and Chicago’s combined hotel tax recently climbed to 19% within its tourism district, one of the highest in the country. When comparing hotels in different cities, the tax rate alone can shift the total by $20 to $40 per night on a mid-range room.
Property type also matters. Hotels, bed-and-breakfasts, short-term rental homes, RV parks, and campgrounds may face different rates or different rules within the same city or county. Some jurisdictions exempt small operators who rent only a few times a year; others apply the tax to any rental regardless of frequency.
When Lodging Tax Doesn’t Apply
Not every stay triggers the tax. A few exemptions come up often enough to be worth knowing.
Stays of 30 Days or More
The most universal exemption is for extended stays. In most jurisdictions, once a guest occupies a room for 30 or more consecutive days, the stay is treated as a long-term rental rather than transient lodging, and the tax no longer applies. Some jurisdictions set the threshold higher: 90 days in a few states, and as long as six months in others. Where the exemption is available, guests who notify the property upfront of their intent to stay long-term can sometimes avoid paying the tax from day one rather than paying for the first 30 days and then claiming a refund.
Federal Government Travel
Federal employees traveling on official business can be exempt from state sales and lodging taxes, but the exemption depends on how the room is paid for. When the government pays directly through a centrally billed account, all states must honor the sales tax exemption.2GSA SmartPay. Frequently Asked Questions When employees pay with their individual government travel charge card, only certain states extend the exemption.3Defense Travel Management Office. Save on Lodging Taxes in Exempt Locations Federal employment alone doesn’t qualify you; the travel must be official, and personal trips are always fully taxable.
State Governments, Diplomats, and Nonprofits
Many jurisdictions also exempt state government travelers, diplomatic personnel, and certain nonprofit organizations, though the specifics vary enormously. Some states exempt any 501(c)(3) organization; others limit the exemption to specific types of nonprofits or require pre-approval documentation. Exemption in one city or state doesn’t guarantee exemption in another, so check the rules for the location where you’re staying.
What Hosts and Providers Have to Do
If you rent out property on a short-term basis, your obligations go beyond adding a percentage to the bill.
Most jurisdictions require you to register with the taxing authority before you start collecting. Depending on the location, that might mean a sales tax license, a lodging tax permit, or a certificate of authority. Some places require separate registration for each property you operate.
How often you file depends on the jurisdiction and usually on the volume of tax you collect. Larger operations typically file monthly; smaller hosts may file quarterly or annually. Monthly filers commonly must remit by the 20th of the following month. Missing a deadline triggers penalties and interest.
Keep detailed records of every rental transaction: dates of stay, amounts charged, taxes collected, and any exemption certificates guests provide. The IRS requires you to keep records supporting your income and deductions for at least three years from the date you file the return, and for six years if you underreport income by more than 25% of gross income.4Internal Revenue Service. How Long Should I Keep Records State and local auditors may go back further under their own rules.
Lodging taxes you collect and remit generally aren’t counted as your income; they’re pass-through amounts. The rental income itself is taxable on your federal return, typically on Schedule E for rental properties or Schedule C if you provide substantial services like daily maid service or meals. Expenses tied to the rental, including property management fees, cleaning costs, and platform commissions, are generally deductible against that rental income.
What Non-Compliance Costs
Failing to register, collect, file, or remit on time carries real consequences. Late-payment penalties commonly range from 5% to 25% of the tax owed, and some jurisdictions impose penalties as high as 50% for extended delinquency or fraud. Interest accrues on top of that.
The less obvious risk is personal liability. In many jurisdictions, lodging tax is considered a trust tax, meaning the government views the money as belonging to the taxing authority from the moment you collect it from the guest. If you collect the tax and don’t remit it, some jurisdictions can hold the business owner personally liable even if the business itself goes under. That’s where many short-term rental hosts get into trouble: they collect through a platform or on their own, switch bank accounts or forget a filing, and end up owing penalties that dwarf the original tax.
Where the Revenue Goes
Most jurisdictions earmark at least part of lodging tax revenue for tourism-related purposes. Common uses are destination marketing, convention center construction and operations, and maintenance of cultural venues and public attractions. Some areas direct funds toward transportation infrastructure that serves visitors, such as airport improvements and transit to tourist districts.
Not all the money stays in the tourism lane. Some jurisdictions send a share to the general fund, where it supports schools, public safety, and parks. A growing number of cities direct lodging tax revenue toward affordable housing, particularly in markets where short-term rentals have tightened the housing supply. The split is set by local ordinances and state law, and it varies widely from one place to the next.