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Cashing In: How Major Tourism Affects Sales Taxes in the U.S. by Offiong Ekah

Cashing In: How Major Tourism Affects Sales Taxes in the U.S.

by Offiong Ekah

They say everything is bigger in Texas, and sales taxes associated with the tourism industry are no exception. The Hotel Occupancy Tax (“HOT”) collects sales tax from out-of-towners who flock to Texas for major sporting events, conferences, or other business travel. Texas is home to major venues like Kyle Field with a capacity of approximately 102,995 making it the fourth largest arena in the U.S., and AT&T Stadium —where the Dallas Cowboys play their home games.

Texas hotel owners must, “collect state hotel occupancy tax from their guests who rent a room or space in a hotel costing $15 or more per day . . . [and] the state hotel occupancy tax rate is 6[%] the cost of a room.”  These taxes are due to the state by the 20th day of each month following the end of each calendar month.

According to the U.S. Travel Association, domestic travel generated $2.1 trillion for the U.S. economy, and for the most traveled cities, “the combined tax bill for travelers was 58[%] higher than what residents would pay in normal sales taxes. Boston, Baltimore and San Jose increased them in recent years as did Connecticut and Minnesota.” 

Vice president of research for the Global Business Travel Association, John Bates, is on the pro-tourist side and believes travelers should not be punished by having to pay higher sales taxes for goods and services just because they are passing through a given city. Since tourists and business travelers do so much for local economies, “why would you want to assess taxes especially in a discriminatory way? When you have a daily fee on rental cars or a resort tax, it’s absolutely not fair . . . [and] these are hidden taxes and in many cases they are not advertised up front.” 

Hawaii—a state synonymous with mainland vacationers dropping in for a getaway—passed House Bill 862 which, “removes the allocation of the state’s Transient Accommodation Tax to counties, but allows each jurisdiction to add its own tax up to 3% on tourist lodging.” This bill increases taxes on accommodations by 3%, and Hawaii currently taxes lodging at 10.25% which generates $640 million in sales tax each year according to the Department of Business, Economic Development and Tourism

There are tax deduction benefits that offer promising solutions for those traveling from abroad wanting to enjoy an American vacation, and write-off tax expenses later. According to the Sales Tax Institute, there are tax deductions that can be made when tourists return to their home countries. For example, “individuals traveling in the U.S. for less than 90 days and who hold a foreign passport . . . can apply for a refund on sales tax paid at a few qualifying retailers.” 

As for Texas—who does everything a bit bigger—“some private companies . . . will refund the sales tax paid by international visitors who shop at certain stores.”

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