Customer Taxes on Hotel Rooms

Requirements for paying hotel taxes vary based on each state's guidelines. In Texas, for instance, anyone staying at a multi-resident complex (like a hotel, motel, apartment building or condo) for less than 30 days at a rate of at least $15 per day must pay all hotel taxes. In New York City, anyone staying in this type of facility shorter than 180 days must pay local hotel taxes, which are established incrementally based on room cost. The minimum room cost that incurs taxes is $10 per day.

Sales tax rates on hotel rooms are the same as those paid for other products and services. Most states and cities have their own sales tax rates applied to most purchases. Some counties also add their own taxes to cover county building and repair projects. Some places also add special bond taxes to hotel sales to cover costs to subsidize new hotel construction. Total sales tax varies greatly from a few percent to 10 to 15 percent in some markets.

Hotel occupancy tax is the standard name for the tax paid specifically for the use of a hotel room. This tax often equals or exceeds sales tax amounts. The Texas state hotel tax rate is 6 percent, according to the Comptroller's office website. However, a stay in Houston would involve a raw total of 19 percent in taxes. Along with the state rate, you pay 7 percent for the city of Houston tax, 2 percent to Harris County and another 2 percent to the local sports authority. In New York City, a room of $40 or more incurs a city tax of $2 per day plus 5.875% of the rate, according to the New York City Finance office website.

It is not uncommon for a $60 to $100 hotel room to cost you anywhere from $10 to $20 in sales and hotel occupancy taxes, depending on where you stay. You should ask hotels for a quote that includes taxes before you reserve a room so you aren't caught off guard. In his February 2009 USAToday.com article "Hotel Taxes Make Online Comparison Shopping Tricky," Bill McGee points out that online travel shopping sites like Orbitz, Expedia and Travelocity have faced lawsuits from some states and cities because of their practices for collecting and paying hotel taxes. McGee indicates these sites have routinely collected standard hotel retail rate taxes from customers, but paid taxes based on discount rates charged through their websites. This leads to different total costs for different customers, even if each site offers the same sticker price.