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How governments put STR lodging taxes to work

  • Aug 29, 2023 | Jennifer Sokolowsky

How do governments put STR lodging taxes to work?

Short-term rentals (STRs) may be controversial in many communities, with residents often divided over their effects on neighborhoods and housing prices. However, there’s no question short-term rentals can be a boon to local communities in terms of tax revenues. State and local governments are increasingly looking to tap this revenue source by imposing lodging taxes on short-term rentals — and making sure those taxes get collected.

So what do governments use short-term rental lodging tax revenue for? The answer varies widely — and governments often don’t designate STR lodging tax money for specific expenditures. But there are some common threads in the ways communities spend lodging tax income.

Hospitality and tourism promotion

Many communities have spent decades using lodging taxes to promote the local tourism and hospitality industry, and that hasn’t changed with the recent popularity of STRs. Tourism promotion is still one of the most common uses for STR lodging taxes.

For example, in Richmond, Virginia, city leaders recently passed a law making STRs subject to the same 8% lodging tax as hotels. The new tax revenues will benefit the Greater Richmond Convention Center (GRCCA), which includes Richmond and Chesterfield, Hanover, and Henrico counties. The tax will generate additional revenue of more than $3.2 million, according to city officials.

Kansas City, Missouri, recently passed a similar law that subjects STRs to lodging taxes for the first time. Proceeds from the new transient boarding and accommodation tax on STRs will go to fund advertising and promotion of convention and tourism business. Kansas City missed out on $2.28 million between July 2021 and August 2022 from not levying the convention and tourism tax on STRs, an audit showed.

Affordable housing

The effect of STRs on affordable housing is a big part of the debate in the industry, and more communities are using STR tax revenues for housing needs.

In the November 2022 elections, several Colorado communities voted to raise lodging taxes on STRs. Many of those governments are using at least part of the extra revenue for affordable-housing initiatives.

  • In Aspen, at least 70% of STR lodging taxes are spent on affordable-housing projects, with the rest earmarked for infrastructure maintenance and environmental protection.
  • In Carbondale, voters approved a new 6% lodging tax on short-term rentals to support affordable-housing projects.
  • Dillon voters approved a measure to create a 5% tax on short-term rentals and increase its lodging tax from 2% to 6%. These revenues will help fund street and parking improvements, redeveloping the town center, and marina and workforce housing upgrades.
  •  In Steamboat Springs, voters approved a 9% tax on STRs expected to generate $11 million per year for the next 20 years that will go toward affordable housing.
  • Summit County voters passed a 2% short-term rental lodging tax. Revenue will fund affordable housing and childcare, among other projects.


Another way governments use STR tax revenues is to support infrastructure. In 2020, New Orleans implemented a new voter-approved 6.75% tax on STRs. The tax was part of Mayor LaToya Cantrell’s “fair share” deal with the state to raise funds for improving city infrastructure, including roads, water, and sewage systems. The tourism industry got a boost as well, with 25% of the tax earmarked for tourism promotion efforts.


Local communities also designate STR lodging tax revenues to help with conservation and restoration projects. 

In Santa Barbara, California, 2% of the 12% transient occupancy tax funds the city’s Creeks Restoration & Water Quality Improvement project, as approved by voters.

In Sarasota County, Florida, tourist tax revenues are used for beach maintenance and re-nourishment as well as tourism promotion and arts and entertainment facilities.

Help with lodging tax compliance

No matter what lodging taxes are used for in your community, tax compliance is an important part of STR operation. MyLodgeTax can assist STR hosts with state and local tax registration, collection, and filing requirements. For more on lodging taxes in your state, see our state Vacation Rental Tax Guides. If you have tax questions related to vacation rental properties, drop us a line and we’ll get back to you with answers.

Lodging tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Avalara Author
Jennifer Sokolowsky
Avalara Author Jennifer Sokolowsky
Jennifer Sokolowsky writes about tax, legal, and tech topics. She has an extensive international background in journalism and marketing, including work with The Seattle Times, The Prague Post, Avvo, and Marriott.
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