Hotel/Motel Tax

A hotel/motel tax is a tax on the privilege of occupancy of hotel rooms. Under T.C.A. § 67-4-1401(2), the term hotel includes private, public, and government owned hotels, inns, tourist camps, tourist courts, tourist cabins, motels, short-term rental units, primitive and recreational vehicle campsites and campgrounds, or any place in which rooms, lodgings, or accommodations are furnished to transients for consideration.  Prior to July 1, 2021, counties levied the hotel/motel tax by private act (with the exception of counties with a metropolitan form of government, which use a general law, T.C.A. § 7-4-101 et seq.)

Modifying, Levying, and Repealing Hotel/Motel Tax —Public Chapter 496 became effective on July 1, 2021.  The law allows a county (except for those with a metropolitan form of government) to levy, modify, or repeal a privilege tax by resolution (rather than by private act) subject to the following restrictions: (i) the tax must not exceed 4% of consideration charged to the occupant of the hotel; (ii) subject to other provisions discussed below, a hotel/motel tax authorized before the effective date of this act that exceeds the limit remains in full force and effect; and (iii) this does not void or modify a private act, ordinance, or resolution authorizing the levy of the privilege tax. T.C.A. § 67-4-1402. 

Under T.C.A. § 67-4-1403, revenue received by the county from the tax must be used for tourism purposes.  However, revenue from a tax levied before July 1, 2021, may continue to be used in the same manner described in the private act or resolution. Counties are not authorized to change the use of revenue of a preexisting tax except for tourism purposes.  See Title 67, Chapter 4, Part 14 of the Tennessee Code Annotated. 

Short-Term Rentals —Short-term rentals are residential dwellings that are rented wholly or partially for a fee for less than 30 continuous days but do not include a hotel defined in T.C.A. § 68-14-302 or a bed and breakfast as defined in T.C.A. § 68-14-502.  See T.C.A. § 67-4-1501(5). 

Title 7, Chapter 4 and Title 67, Chapter 4 of the Tennessee Code Annotated define a short-term rental marketplace as a person or entity, (excluding vacation lodging services), that provides a platform for compensation, between a third-party who offers to rent a short-term rental to an occupant.  Examples of short-term rental marketplaces are Airbnb and VRBO.  Vacation lodging services are engaged in the business of providing management, marketing, booking, and rental or short-term rental units. One example of a vacation lodging service is a cabin rental company.   

Hotel/motel taxes on short-term rental units secured through a short-term rental marketplace must be collected and remitted by the short-term rental marketplace to the department of revenue for distribution to the local government levying the tax, in accordance with Title 67, Chapter 4, Part 33, of the Tennessee Code Annotated.  Vacation lodging services are not responsible for collecting and remitting hotel/motel taxes to the department of revenue but may be responsible for remitting such taxes to the county if required by private act or resolution.  

Hotel/Motel Tax in Metropolitan Counties – Metropolitan Counties follow the general law found at T.C.A. § 7-4-101 et seq. These counties are authorized to impose a hotel/motel tax in an amount not to exceed 3% of the consideration charged by the operator. The privilege tax shall be approved by ordinance of the metropolitan council. T. C. A. § 7-4-102.

In addition to tax described above, metropolitan counties having population of less than 25,000 according to the 2020 federal census or subsequent federal census are authorized to impose an additional hotel/motel tax not to exceed 3% of the consideration charged by the operator. The additional tax shall be approved by ordinance of the metropolitan council. T. C. A. § 7-4-102.