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Hotel Motel Tax Presented By: Georgia Department of Community Affairs Office of Research and Surveys 1.

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1 Hotel Motel Tax Presented By: Georgia Department of Community Affairs Office of Research and Surveys 1

2 Hotel Motel Tax Article 3 Title 48, Chapter 13 O.C.G.A … Excise Tax on Rooms Lodging and Accommodations Enacted in

3 Hotel Motel Tax O.C.G.A (a) and O.C.G.A (b) Currently there are 24 different tax authorizations included in O.C.G.A (a) H.B (discussed later in this presentation) added a general authorization under O.C.G.A (b) Allowable tax rates vary from 3% or less to 8%* Each authorization has a unique set of expenditure requirements for a restricted portion of revenue * paragraph (a)(1) provides for a tax rate of 3% or less paragraph (b) provides for a tax rate between 6% - 8% all other authorization paragraphs provide for a set tax rate 3

4 Hotel Motel Tax Q. Must a Bed and Breakfast Collect the Tax? What about other short-term rentals of condos, apartments ? Local governments have some flexibility on how to apply this as long as their ordinances do not conflict with state law. (i.e. if the local governments ordinance requires the operator of a bed and breakfast to obtain a business or an occupational tax license then the operator would be required to collect the tax.) General provision of Title 48, Chapter 13 ( ) states that the... governing authority of each county/municipal corporation is authorized to classify businesses and practitioners of professions and occupations and to assess different taxes on different classes of businesses and practitioners. 4

5 Hotel Motel Tax (a) (1) (A) Local governments may levy and collect an excise tax upon the furnishing for value to the public of any room or rooms, lodgings, or accommodations furnished by any person or legal entity licensed by, or required to pay business or occupation taxes to, the municipality for operating a hotel, motel, inn, lodge, tourist camp, tourist cabin, campground, or any other place in which rooms, lodgings, or accommodations are regularly furnished for value. 5

6 Hotel Motel Tax Requirement to Collect the Tax O.C.G.A (h)(4) Does not apply to charges imposed for any continuous occupancy after the first thirty days of continuous occupancy O.C.G.A (h)(1) Does not apply to persons who certify that they are staying in such room, lodging, or accommodation as a result of the destruction of their home or residence by fire or other casualty 6

7 Hotel Motel Tax Requirement to Collect the Tax O.C.G.A (h)(3) Does not apply to Georgia state or local government officials or employees when traveling on official business 7

8 Hotel Motel Tax Inn Keepers Records and Books O.C.G.A Each innkeeper is required to file a return and pay taxes to the local taxing jurisdiction under this article and must keep: Suitable records of the charges taxable under this article; and Other books of account which are necessary to determine the amount of tax due. 8

9 Hotel Motel Tax Auditing of Innkeepers Records O.C.G.A All books, invoices, and other records must be open to examination at all reasonable hours by the local taxing jurisdiction. 9

10 Hotel Motel Tax Generally the restricted portion of tax revenue must be used for: Promoting, attracting, stimulating, and developing conventions and tourism 10

11 Hotel Motel Tax Basic 3% Tax O.C.G.A (a)(1) thru (a)(2) How much is restricted ? It Depends Year 1-none of the tax is restricted. The proceeds can be used for any legal general fund purpose Year 2-The percentage of hotel tax expended to promote tourism (if any) in year 1 is now restricted for the purpose of promoting tourism and will be the percentage of restricted tax until a larger percentage is expended. In other words, the largest percentage of tax expended to promote tourism becomes the new restricted percentage. Paragraph (a) (1) and (a)(2) are the only paragraphs with this sliding scale restriction. 11

12 Hotel Motel Tax The expenditure requirements for the other authorizations vary greatly The first 3% of tax collected under all authorizations except paragraph (a) (1) may be expended for any legal general fund purpose 5% tax -- 40% of revenue restricted 6% tax -- 50% of revenue restricted 7% tax % of revenue restricted 8% tax % of revenue restricted 12

13 Hotel Motel Tax Promotion of tourism, conventions and trade shows What does this mean? 13

14 Hotel Motel Tax O.C.G.A (4) Promoting tourism, conventions, and trade shows is defined as: Planning, conducting, or participating in programs of information and publicity designed to attract or advertise tourism, conventions, or trade shows 14

15 Hotel Motel Tax Most authorizations require all or part of the restricted funds to be expended through a contract or contracts with the state, a department of state government, a state authority, or a private sector nonprofit organization Or as provided in 5% authorization provided by (a)(3) a Convention Visitors Bureau Authority created by a local Act of the General Assembly 15

16 O.C.G.A (3) A Private sector nonprofit defined: A chamber of commerce, convention and visitors bureau, regional travel association, or any other private group organized for similar purposes which is exempt from federal income tax under Section 501(c)(6) of the Internal Revenue Code of 1986 Exception to the Rule A county or municipality which has prior to April 1, 1990, contracted for a required expenditure under this Code section with a private group which is exempt from federal income tax under provisions of Section 501(c) of the Internal Revenue Code other than Section 501(c)(6) may continue to contract for required expenditures with such a private group 16 Hotel Motel Tax

17 State Authority - Defined O.C.G.A (5) An authority created by state law which serves a state- wide function including, but not limited to, the Georgia World Congress Center Authority Does not include authorities created for support of a local government or a local purpose or function Does not include authorities such as regional commissions and any organizational entities they may create, or local water and sewer authorities, etc. 17

18 Hotel Motel Tax Budgeting O.C.G.A (a)(9)(A) Local governments must adopt budget plan specifying how restricted funds will be expended Contractor (CVBs, Chambers, etc.) budgets must be incorporated into local governments tax budget plan When contracting with other entities, must require them to provide expenditure budget Cost Allocation Plan might be necessary (see Handout 1) 18

19 Hotel Motel Tax DCA Reporting O.C.G.A Each city and county as a condition of continuing authorization to impose the tax, must file annual Hotel Tax Report with DCA within 180 days of the end of their fiscal year Form numbers correspond to the specific authorizing paragraphs 19

20 Hotel Motel Tax DCA Reporting - Continued O.C.G.A Report must specify the rate of taxation and amounts collected and expended pursuant to this article To assist with both the budgeting and reporting requirements, the Uniform Chart of Accounts (UCOA) provides a Special Revenue Fund to account for H/M tax expenditures (Fund #275) 20

21 Hotel Motel Tax DCA Reporting - Continued DCA Hotel/Motel Tax Report must include a Project/Contractor Information Schedule (see Handout 2) Must identify both the projects and the contracting entity. 21

22 Hotel Motel Tax DCA Reporting - Continued DCA Administrative Rule Must file with DCA a copy of most current hotel/motel tax ordinance Ordinance should cite authorizing paragraph Ordinance should contain all provisions necessary for proper administration of tax (both on local level and state compliance) (see Handout 3) 22

23 Hotel Motel Tax Local Government Audit Reporting Requirements O.C.G.A (a)(9)(B)(i) A compliance determination must be made by the auditor each fiscal year and be prominently reflected in the audited financial statements 23

24 Hotel Motel Tax Auditors Compliance determination must disclose: The amount of tax receipts, and expenditures as a percentage of tax receipts If the audit identifies noncompliance with the expenditure requirements, noncompliance finding must be included in audited financial statements 24

25 Hotel Motel Tax Performance Review Board DCA Office of Research and Surveys is required to investigate bona fide complaints and present preliminary reports to the Hotel Motel Tax Performance Review Board. The Hotel Motel Tax Performance Review Board (eleven members) meets between September 1 and December 1 to review preliminary reports and to hear from interested parties. The Review Board may make changes to the preliminary reports. The final reports (as approved by the Board) are submitted to the Commissioner of DCA. Upon the DCA Commissioners approval the final reports (that include required corrective actions) are provided to the local government. 25

26 Hotel Motel Tax Performance Review Board - continued The local government is responsible for working with CVBs, Chambers, or other contractors as might be necessary to ensure appropriate implementation of required corrective measures. The local government is required to provide a specific implementation plan for the required corrective actions to the DCA Commissioner within 90 days of receiving the final report.* *Ideally, this plan would be adopted by the local government at an official meeting 26

27 Hotel Motel Tax House Bill 1168 Created new authorizing code section (b) and some global changes to H/M Tax law Provides for tax rates up to 8% Governments are not required to switch from their current authorizing paragraph to this new authorizing code section 27

28 Hotel Motel Tax House Bill continued Prior to July 1, 2008 (the effective date of H.B. 1168) local governments electing to collect Hotel Motel Tax for the first time And Local governments opting to change paragraphs had 24 different authorization paragraph options from which to choose. 28

29 Hotel Motel Tax House Bill continued H.B reduced the options from twenty-four (24) to three (3) authorization paragraphs: > (a)(2) which is the basic 3% option* > (a) (3) which is the basic 5% option* > (b) which was newly created and provides for a tax rates of 6% to 8% *Local Governments can resolve to collect Hotel Motel tax under (a)(2) and (a)(3) without involvement from the General Assembly 29

30 Hotel Motel Tax House Bill continued A tax levy authorization pursuant to (b) requires a local Act of the General Assembly Which requires the following: 1)The local government must first adopt a resolution which specifies the tax rate (6% or 7% or 8%), and identifies the projects or tourism product development purposes, and how proceeds will be allocated. 2)After the local government adopts their resolution, a local Act by the General Assembly must be passed. 30

31 Hotel Motel Tax House Bill continued Expenditure Requirements of (b): The tax collected up to the amount that would have been collected at a 5% rate is controlled by the provisions of O.C.G.A (a)(3). Up to 100% BUT at least 50% of the tax collected above the rate of 5% must be expended for promoting tourism, conventions, and trade shows by the destination marketing organization (definition to follow) designated by the local government. The remainder of the tax collected above the rate of 5% that is not expended to promote tourism must be expended on Tourism Product Development (definition to follow) 31

32 Hotel Motel Tax House Bill continued Destination Marketing Organization means: O.C.G.A (1) A private sector nonprofit organization or other private entity which is exempt from federal income tax under section 501(c)(6) of the Internal Revenue Code of 1986 that is supported by the tax under this article, government budget allocations, private membership, or any combination thereof and the primary responsibilities of which are to encourage travelers to visit their destinations, encourage meetings and expositions in the area, and provide visitor assistance and support as needed 32

33 Hotel Motel Tax House Bill continued Exceptions to Expenditure Requirements O.C.G.A (e)(2) Governments may continue to expend the proceeds of the tax through a contract or contracts with the same entity or entities other than a destination marketing organization if, prior to each fiscal year in which the tax is imposed, the county or municipality adopts a budget plan specifying how the proceeds of such tax are to be expended. 33

34 Hotel Motel Tax House Bill continued Tourism Product Development means: O.C.G.A (6) The creation or expansion of physical attractions which are available and open to the public and which improve destination appeal to visitors, support visitors´ experience, and are used by visitors. Such expenditures may include capital costs and operating expenses (see Handout 4) 34

35 Hotel Motel Tax Suggestions/Tips Planning for Future Anticipate Revenue Based on Past Trends and New Hotels Provide a Regular Process for Reviewing the Revenue Source 35

36 Hotel Motel Tax GMAs Revenue Recovery Service Review existing ordinances to ensure it is up to date with current law. Provide suggested improvements for city attorney review. Two Phase Process Analysis and Compliance – review past 36 months of returns to determine if any hotels are not paying correctly Field Audits – only hotels that are suspected for noncompliance are subject to an on-site review. Written report including letters to notify hotels of any underpayments, assistance with any appeals or questions by hotel staff. Information on each hotel (# of rooms, etc.), 36 month payment history and graphic representation of revenue per hotel Information can be used by city for their own on-going compliance 36

37 Hotel Motel Tax GMAs Revenue Recovery Service Contact Information: Lou Comer, Director, Local Gvt. Services Phone:

38 Hotel Motel Tax DCAs Website Address Or go directly to the Office of Researchs main page for more information about hotel/motel tax Under Programs click on Local Government Surveys and then Hotel/Motel Tax Or go to the following link to access the forms 38

39 Hotel Motel Tax Need Help? DCA James StephensJonathan Sharpe Government Research AnalystManager, Office of Research (404) (404) GMA Mark BaggettLou Comer Governmental Relations AssociateDirector, Local Gvt. Services (678) (678)

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