Ever wonder what that double-digit tax is that is added on to your hotel bill when you check out?
In November, Sonoma County elected to raise the hotel tax in unincorporated areas, bringing them more in line with neighboring cities in the North Bay. That left the Business Journal wondering about what makes up the tax, where the money goes and how much hotel tax is too much?
Very simply put, hotel taxes go to pay for things like roads, police and fire departments, and to promote tourism in the area.
The detailed explanation, however, is not for the faint of heart. What constitutes the amount of hotel tax, or transient occupancy tax (TOT), how much you’ll pay, and where that revenue goes, varies by location and lodging establishment.
Local experts in the tourism industry agree that it is a convoluted system, but it works both politically and practically.
“It’s a tax that doesn’t strain municipal coffers or local residents,” said Tim Zahner, chief marketing officer at Sonoma County Tourism.
Complicated case of Sonoma County
The TOT in the unincorporated areas of Sonoma County had been holding at 9 percent since 1992 until the November election when voters overwhelmingly approved Measure L, raising the TOT from 9 percent to 12 percent. Those areas include the rural areas of Petaluma, Cloverdale, Sebastopol and Guerneville.
A quarter of the tax collected helps offset the costs associated with high visitor numbers like fire and police.
Three-quarters of that tax revenue goes towards county tourism promotion.
The passage of Measure L is expected to generate an estimated additional $4 million a year going in to the general fund.
In addition to the TOT rate, however, hotels in Sonoma, like most other places, also tack on another 2 percent business improvement area (BIA) tax that goes specifically towards tourism marketing. Only those lodging establishments with revenue of $350,000 or more per year collect that tax, however.
Why is there a separate tax for marketing?
Historically speaking, taxes collected on hotel stays go into a city’s general fund, with a portion going towards tourism marketing.
However, “in most cases the majority of the TOT revenue in the municipality is earmarked for the general fund and there is not enough for marketing,” said Lowell Johnson, president of the Sonoma County Lodging Association, which promotes and advocates for that industry.
As that funding declined, tourism industry leaders began to point out that some of that money needed to be used to promote the area, and distinguish it from somewhere else.
“Over time the marketing portion decreased. It took time for leaders to realize we need people to come here and spend money, and need a marketing program to differentiate ourselves. People at the government level need to be reminded of that,” Johnson said.
On top of the 9 percent TOT and 2 percent BIA, the city of Santa Rosa also tacks on another 3.5 percent tax, which goes to the Santa Rosa Convention & Visitors Bureau to promote the city, and to the city for economic development to help local businesses.
Napa County TOT
The TOT rate in each of the five incorporated towns within Napa County is 12 percent. No matter if you stay in a large, upscale resort like Solage in Calistoga or an economy inn in American Canyon, guests pay the 12 percent TOT tax plus a 2 percent tourism improvement district (TID) tax, Napa’s version of Sonoma’s BIA.
Sonoma County TOT rates by city
Santa Rosa: 9%
Rohnert Park: 12%