Hotel Occupancy Tax: Complete Guide For US Hotels

If you’re a hotelier, you might be asking yourself what hotel occupancy tax actually means for you. The answer depends on where your property is located and which local rules apply. 

In many areas, hotel taxes collected go back into the community. It often helps improve infrastructure, boost tourism, and support local projects. On top of sales tax, most hotels also need to collect occupancy tax, which shows up as an additional charge on a guest’s final bill.

In this guide, we’ll discuss everything you need to know, from what the hotel occupancy tax is and how it’s calculated to compliance, exemptions, and real-world examples from around the United States. We’ll also explain state hotel occupancy tax, hotel tax rates, occupancy tax revenue, and transient occupancy tax, so you always know how they fit into your business. 

Let’s get started.

What is Hotel Occupancy Tax?

A hotel occupancy tax is a levy charged on the rental of a hotel room or other sleeping accommodations for short stays. Hotels apply this tax to the room charge and typically add it to the room rate, along with sales tax and other fees. 

It’s sometimes called a transient occupancy tax (TOT) or bed tax because it applies specifically to room occupancies for “transient” guests, typically those staying less than 30 days. The tax applies to the gross charge for the room only. Local rules determine whether other charges, like food or packages, are taxed separately. 

In many cities, hotels send this tax in separately from other taxes, and local governments use it for things like promoting tourism or funding local projects. For example, if someone pays $200 for a night’s stay and the occupancy tax rate is 10%, the hotel must collect $20 in occupancy tax from the guest and pay it to the appropriate authority.

‍

What Can Hotel Occupancy Tax Be Used For?

One of the biggest questions operators ask is, “What can hotel occupancy tax be used for?”

While sales taxes flow into general government budgets, most hotels collect taxes that local governments dedicate to specific projects that benefit the community and the tourism economy. That’s why so many cities count on this revenue.

Here’s how they often use the money:

• Promote tourism with marketing campaigns and destination branding
• Fund convention centers and expand event venues
• Support cultural events and arts festivals that attract visitors
• Improve public transportation and infrastructure that tourists use
• Pay for emergency services and public safety related to tourism
• Maintain parks, trails, and local attractions that enhance the visitor experience

In many U.S. cities, most occupancy tax revenue goes to tourism promotion and visitor services instead of general municipal needs.

For example, new legislation in Hawaii raised taxes on tourist stays and vacation rentals. The state expects to generate about $100 million annually to support climate resilience, fire prevention, and beach restoration projects that protect the islands in the long term.

Hotel Occupancy Tax Rates by State

One of the most confusing aspects of hotel tax compliance is the fact that rates vary widely across the United States. However, there is no universal tax. 

Some states impose a statewide hotel occupancy tax, while others leave it entirely to local jurisdictions. 

1. States with statewide taxes

Let’s start with states that set a uniform hotel tax across the entire state, so you know the baseline before we look at places that leave it to local governments.

- Hawaii

Hawaii imposes a statewide transient accommodations tax that is among the highest in the country. As of 2026, the base rate rises to 11%, and combined local levies can push total taxes on a hotel stay to nearly 19%. 

This makes Hawaii one of the most expensive states for lodging taxes and shows how these taxes fund major state priorities, like environmental protection and tourism support.

‍

- Texas

Texas imposes a 6% statewide tax on hotel stays. But cities and counties can add their own levies. 

For example, in some parts of Texas, the total tax on a hotel room can exceed 15% when local tourism district taxes and county surcharges are added.

‍

- Pennsylvania

Pennsylvania charges a 6% statewide hotel occupancy tax. Local governments can add up to 1% in additional hotel taxes. 

Combined rates in cities like Philadelphia and Pittsburgh help fund local tourism initiatives and community projects.

‍

2. States without a uniform statewide hotel tax

In other states, the power to levy occupancy taxes sits primarily with counties and cities. These local taxes can vary significantly.

- California

California does not have a statewide occupancy tax, but local governments are authorized to impose their own transient occupancy taxes. 

Combined hotel taxes in cities like Los Angeles often exceed 12% or higher when local charges are included. The California Department of Tax and Fee Administration (CDTFA) oversees the tax, making sure hotel operators comply and send the collected taxes on time.

‍

- New York

New York also leaves lodging taxes to local jurisdictions. In New York City, hotels charge a combined state and city sales tax of 8.875%, a city hotel room occupancy tax of 5.875%, and per-night fees of $2 (city) and $1.50 (state unit fee). 

Many guides summarize this as about 14.75% plus $3.50 per night.

‍

- Florida

Florida counties and cities impose their own tourism and bed taxes. Counties can levy a tourist development tax (TDT) of up to 6% on hotel stays and vacation rentals.

Orlando’s Orange County, for example, collected a record $35.48 million in TDT revenue, a 4.2% year-over-year increase and the highest monthly total ever. Hotel occupancy reached 80.4%, and the average daily rate hit $225.50, highlighting a strong tourism rebound.

‍

How to Calculate Hotel Occupancy Tax

Calculating hotel tax correctly is essential both for financial reporting and guest billing.

The basic formula is:

Hotel Occupancy Tax = Room Rate × Hotel Tax Rate

For example, if you charge $150 per night and the occupancy tax rate is 12%, you must collect $18 in hotel tax.

But things get tricky when:

• Multiple tax layers apply (state + city + county)
• Local governments sometimes add flat per-night fees
• Taxes usually apply only to the room rate, not service fees or add-ons
• Certain exemptions might apply depending on local rules

For instance, let’s break down a straightforward example:

• Room Rate: $200 per night
• Occupancy Tax: 7% state + 3% city = 10%
• Tax Calculation: $200 × 0.10 = $20
• Total Guest Cost: $200 + $20 = $220 per night

Now imagine more complex situations. In Washington, D.C., hotels charge a combined transient accommodations tax of about 15.95%, one of the highest hotel tax rates in the country. In New York City, the city occupancy tax of 5.875% combines with state and city sales taxes for a total of roughly 14.75%, plus per-night unit fees of $3.50. 

These layered taxes can easily push a guest’s bill well above the base room rate. Your billing system must calculate these correctly so your guests see accurate pricing and your reporting reflects the taxes collected.

Now, the more rooms you sell, the more taxes you collect. 

That’s why tracking the occupancy rate is key. Occupancy rate measures the percentage of available rooms you actually fill over a period:

Occupancy Rate = (Rooms Sold ÷ Total Rooms Available) × 100%

Understanding your occupancy helps you forecast tax obligations, optimize pricing, and plan operations. When occupancy is high, you know guest demand is strong, and tax revenue will rise. If it’s low, it might signal a need for marketing or promotions. 

A modern, fully upgraded, all-in-one property management system (PMS) like roommaster PMS provides a hotel occupancy rate calculator to help you track performance, optimize bookings, adjust pricing dynamically, and ultimately increase revenue.

When you combine occupancy insights with accurate tax calculations, you charge correctly and plan confidently.

{{pms-four}}

‍

Who Must Collect Hotel Occupancy Tax

If you provide paid overnight accommodations, you are generally required to collect occupancy tax. This includes:

• Traditional hotels and motels
• Inns, bed and breakfasts, and boutique lodging
• Vacation rentals and Airbnbs
• Short-term rental properties booked through online platforms

For example, a recent ordinance in Plainview, Texas, requires all short-term rentals to get permits and collect occupancy tax, just like hotels do. This reflects a national trend, with municipalities increasingly treating short-term rentals like hotels for tax purposes.

Sometimes, local rules make online travel agencies (OTAs) responsible for collecting and remitting tax on bookings. Other times, the hotel must collect the tax and remit it itself. Always check local guidance to make sure you comply.

Hotel Occupancy Tax Exemptions

Not every stay is taxable. Common exemptions include:

1. Permanent residents

Guests staying beyond the prescribed transient period, usually 30 days or more, are often exempt because they are not considered transient visitors. 

For example, in Austin, Texas, the city lets guests who stay 30 consecutive days or more avoid the hotel occupancy tax if they notify the hotel at check-in. 

‍

2. Certain government or nonprofit stays

Depending on local laws, these groups may qualify for exemptions. Federal government employees traveling on official business and certain diplomatic personnel can also be exempt when they present the proper exemption certificate. 

In New York, certain exempt organizations, such as religious groups, youth sports groups, charitable organizations, and veterans posts, can avoid occupancy tax by providing the correct exemption form (for example, Form ST-119 for general exempt organizations or ST-119.5 for veterans organizations) and paying directly from the organization’s funds.

‍

3. Medical patients staying in certain accommodations

Some jurisdictions exempt patients receiving treatment away from home. 

For instance, in Connecticut, the room occupancy tax doesn’t apply to stays by hospital patients, their families, medical personnel, and recruitment candidates because these stays support the nonprofit hospital’s mission.

These exemptions require proper documentation and accurate record-keeping. Even one missed exemption or misapplied rule can trigger costly audits and back taxes.

‍

How to Comply with Hotel Occupancy Tax Requirements

To comply with hotel occupancy tax rules, you must follow legal requirements for registration, collection, reporting, remittance, documentation, and audits to avoid penalties and protect your business. 

An all-in-one PMS like roommaster PMS can simplify compliance by centralizing tax settings, automating calculations, and maintaining accurate records across all bookings.

Step #1: Register with the appropriate authorities

Before you start collecting, make sure you register with all relevant tax authorities. Some states and cities require a specific hotel occupancy tax permit or registration. For example, in California, you must register with the Department of Tax and Fee Administration if you have a taxable presence in the state.

roommaster PMS lets you configure tax jurisdictions at the property, city, and state level, automatically applying the correct rates to every reservation. Its Operations Suite ensures that every room, rate plan, and channel automatically respects the local tax rules, eliminating manual setup errors.

‍

Step #2: Collect the right taxes at the right time

Once registered, you must set up your billing to clearly separate and itemize occupancy taxes on guest invoices. Guests must see the base room rate and the tax amount as a separate line item, not bundled into another charge. This transparency supports compliance and can simplify audits.

roommaster’s Folio, Accounts Receivable, and Front Desk Management tools automate tax calculation for every stay, including multiple rooms or group bookings, and display taxes clearly on invoices. When you handle this automatically, your team can focus on delivering great guest experiences.

‍

Step #3: Know what you’re responsible for

If you use third‑party platforms (like Airbnb or HotelTonight), check which taxes they collect and remit on your behalf and which you still owe. Platforms may collect some state taxes but not local or county taxes, and you remain responsible for any taxes they do not remit for you.

roommaster’s Channel Manager and Booking Engine integrations synchronize all reservations in real time, showing exactly which taxes apply to each booking. As a result, your staff can easily reconcile OTA bookings with direct bookings, maintaining full compliance across all channels.

‍

Step #4: Track filing and payment deadlines

Most jurisdictions require you to file periodic tax returns (monthly, quarterly, or annually) and remit the tax collected by a specific due date. For example, some cities (like the City of San Antonio) require occupancy tax reports and payments to be received by the 20th of the month following the reporting period.

The roommaster Reporting & Analytics Suite includes pre-built occupancy tax reports and dashboards, giving you instant access to total tax collected by jurisdiction. You can schedule automated reminders and exports for filing, reducing missed deadlines and late-payment penalties.

‍

Step #5: Maintain accurate records and documentation

Good record‑keeping is foundational to compliance. Hence, you should keep detailed records of room rates, taxes collected, guest stays, exemptions claimed, and tax filings. Many laws require retaining records for several years so authorities can verify your compliance if audited.

roommaster centralizes all guest, reservation, and financial data in one system, eliminating manual reconciliation and keeping your records organized and accessible. With a single source of truth, internal reviews and audits run more smoothly, and your team can quickly retrieve documentation whenever needed.

‍

Step #6: Prepare for audits and inspections

Tax authorities can audit your books and inspect records to confirm correct tax collection and remittance. Regular internal reviews and organized records make audits smoother and reduce the risk of costly penalties.

The roommaster night audit reconciles all guest activity, revenue, and payments before the business day closes. It verifies room activity, auto-posts transactions, reconciles payments from multiple revenue centers, and completes the day-end close. 

This updates availability, resets rates, and carefully logs all bookings, folios, and tax calculations.

‍

Step #7: Understand penalties for non‑compliance

Failing to comply can lead to financial penalties, interest on unpaid taxes, legal action, and in some cases, criminal consequences. States like California and Michigan impose fines, interest, and even potential legal measures for repeated non-compliance.

roommaster reduces this risk by automating tax calculation and collection consistently across all bookings, including high-volume periods or last-minute reservations. With clear reporting, your team can identify potential compliance gaps before authorities do.

‍

Step #8: Train your staff on tax rules

Even the best systems fail if staff don’t understand tax rules. Team members who manage reservations, billing, and reporting need training on taxable versus exempt stays and on correctly coding taxes in the PMS. 

roommaster’s intuitive interface, role-based permissions, and automated workflows guide staff through proper tax handling. The platform’s training resources, combined with 24/7 hospitality expert support, help your team operate confidently and consistently.

‍

Step #9: Stay updated on local law changes

Hotel tax laws evolve. Cities may change rates, reporting procedures, or remittance platforms. Monitor updates from local tax authorities or consult a tax professional to quickly adjust your compliance processes.

roommaster’s cloud-based platform allows instant updates to tax rules and rates across all properties and devices, keeping your operations compliant without manual adjustments. With real-time updates, your hotel can respond to regulatory changes immediately, ensuring smooth, uninterrupted compliance.

‍

Penalties for Non-Compliance

Hotels that fail to comply face significant consequences, including:

• Fines and interest on late or unpaid taxes
• Being considered delinquent on owed amounts
• Legal action and reputational damage
• In extreme cases, loss of business licenses or other enforcement actions

Some jurisdictions impose escalating penalties based on how late the tax is remitted, and audits can uncover liabilities years after the fact.

‍

How Hotel Technology Simplifies Tax Compliance

Modern hotel technology, such as roommaster PMS, makes tax compliance easier and more reliable by automating many manual tasks that often lead to errors. By centralizing reservations, billing, and payments on a single platform, roommaster accurately calculates occupancy taxes for every booking, whether direct or through OTAs.

{{pms-five}}

‍

With real-time synchronization across all channels, roommaster eliminates the need to manually reconcile taxes from multiple systems. Its intuitive reporting tools generate audit-ready tax statements, helping management stay on top of filing deadlines and maintain accurate documentation for authorities. Automated alerts and configurable tax settings reduce the risk of missed charges or incorrect remittance, while cloud access allows hotel managers to monitor compliance from anywhere, at any time.

In this way, independent hotels save time, reduce errors, and gain confidence that their tax obligations are consistently met. This allows teams to focus more on guest experiences and less on administrative complexity.

‍

Gain More Control of Hotel Occupancy Tax 

The hotel occupancy tax is a critical part of operating lodging properties in the U.S. It shapes your pricing, affects the guest experience, and funds community and tourism initiatives that benefit both residents and visitors.

With roommaster PMS, hotels can automate tax calculations, maintain accurate records, and generate audit-ready reports with ease. Its unified platform applies occupancy taxes consistently across all bookings and includes an occupancy rate calculator, giving hoteliers confidence that they maintain compliance at all times.

In the end, it is part of your responsibility as a hospitality management software provider and a valuable way to support the destinations your guests enjoy. 

Learn how the right hotel PMS can simplify billing, manage taxes, and streamline daily hotel operations. Book a demo today!

{{cta-strip}}

‍

FAQs

What is the difference between hotel tax and sales tax?

Hotel tax applies to lodging charges, while sales tax applies to general goods and services. Hotel tax targets transient stays specifically, and sales tax covers things like food, beverages, and retail purchases.

Do I need to file if I had zero taxable receipts?

Yes, many jurisdictions require you to file a zero return when you have no taxable receipts. Filing shows you remain compliant and avoids late filing penalties for missing required returns.

How do I handle taxes when guests book through OTAs?

You must collect and remit taxes for OTA bookings that you control. Clarify with the OTA which taxes they collect and which you owe. A modern, all-in-one cloud-based PMS like roommaster PMS helps you reconcile OTA and direct bookings.

Can I claim a discount for filing on time?

Some localities offer early-filing incentives or reduced penalties, but most do not offer traditional discounts. Always check with your tax authority to confirm whether benefits apply for on-time filing.

What records must I keep and for how long?

Keep detailed records of reservations, folios, tax calculations, exemptions, and filings. Most jurisdictions require retention for 3 to 5 years, and some require longer retention periods based on audit or legal standards.

How do I handle guests who claim exemption?

Verify exemption eligibility, collect required documentation, and record it with the reservation. Apply the exemption only after confirming its validity. Maintain supporting paperwork in your records in case of an audit.

What happens if I change ownership of my hotel?

You must notify local and state tax authorities of the ownership change. Transfer or reissue tax accounts and update registrations. Failure to report changes can lead to compliance issues and unexpected liabilities.

Are meeting rooms and banquet spaces taxable?

Tax rules vary by jurisdiction. Many areas tax meeting rooms and banquet space rentals if they qualify as lodging or taxable services. Check local tax codes to determine whether you must apply occupancy or sales tax.

How do I find my local tax rates?

Contact your city or county tax office or visit their official website for current hotel tax rates. State revenue departments also publish rate schedules that show statewide and local occupancy tax requirements.

What is a permanent resident exemption?

A permanent resident exemption applies when a guest stays beyond the transient period defined by law, often 30 days or more. Long‑term stays may no longer qualify as taxable lodging after the exemption period ends.