Article By Stacy Ross
How are new and increasing taxes affecting the hotel industry? How does one make sense of the Byzantine sales tax systems, especially in St. Louis and Kansas City? Are tourism tax dollars being spent wisely?
Let’s take a look.
Last year, Kansas City passed a one-eighth cent increase to its sales tax for children’s services. When combined with the state sales tax, it brought its overall sales tax rate to nearly a dime per dollar. Including the lodging tax, the total is nearly 17 percent. Add the $1.75 per night flat room fee and the cost of a $125 per
night hotel room becomes $148.
“People grumble about it, but there are a lot of cities that are just as high,” said Kurt Mayo, executive director of the Hotel & Lodging Association of Greater Kansas City. “I think we need to be cautious about it. It’s getting to the point where (sales taxes) shouldn’t be raised anymore. We can’t keep adding and adding.”
Sales taxes are just one of many taxes that affect hotels. Larger cities and counties levy hotel/motel taxes which generally go to promote the city and pay for convention centers and stadiums that bring tourists in. Then there are property taxes, room fees, and in some cases multiple levies from more than one special taxing district.
(More on that later.)
It’s difficult to find comprehensive listings of lodging tax rates to compare, but across the state they range from 2.5 percent in Warrenton to 7.5 percent in Kansas City. While most lodging tax rates have remained steady, occasionally a city votes to levy a new tax, said Marci Bennett of the Missouri Association of Convention & Visitors Bureaus. Maryville, home to Northwest State University, passed a 5 percent transient guest tax in 2016 to fund a new multipurpose athletic facility on campus.
Many in the industry feel the taxes charged in their area are a good value. “We have a lot of amenities,” said Toni Alexander, Communications Manager for Visit KC, Kansas City’s convention and visitors bureau. “We offer a great value. We’ve heard that feedback.”
“I haven’t heard that people aren’t going to come because of high taxes. We’re a very affordable destination.”
Sales and lodging taxes are relatively straightforward. Then there’s economic development districts such as Community Improvement Districts (CID) and Transportation Development Districts (TDD) that pay for improvements in specific areas. These represent the largest growth in local retail taxes. There are more than 250 economic development tax districts in the St. Louis metropolitan area, though not all apply to hotels. The Kansas City metro area has about 40. In addition, there are other districts that raise funds through property taxes.
The CIDs and TDDs pay for safety, maintenance, streetscaping and transportation upgrades. Businesses in areas that are in both a CID and a TDD may be subject to an additional 2 percent sales tax. The districts must be approved by property owners and residents within their boundaries. Because special tax districts are hard to track, there are efforts in Jefferson City to create a statewide public database listing all the districts.
Last year, St. Louis City and County each passed half-cent sales tax increases to fund police. Including the state’s share, St. Louis city sales taxes now range from 9.2 percent to 11.2 percent depending depending on whether an area is in a special taxing district. Add on the city’s 7.25 percent hotel tax and the grand total is about 16.5 percent, still slightly less than Kansas City’s.
The state of Missouri reportedly has some of the highest sales tax rates in the country. A 2017 publication listed St. Louis as having the highest combined sales and lodging taxes. But as noted above, Kansas City is slightly higher. The discrepancy can probably be explained by recent tax rate increases and the tangle of sales taxes at each level of government across Missouri, with some businesses subject to higher sales taxes than the one next door. It’s impossible to give one sales tax rate for an entire city.
Others aren’t so much concerned about the tax rates, but whether they are being used properly.
In Columbia and St. Joe, the hotel industry is battling city officials over whether hotel taxes can be used for tourism- related infrastructure such as an airport or marina, rather than tourism promotion, said Trey Propes, President of the Missouri Hotel & Lodging Association.
“To me that’s not for the purpose of a apply to lodging tourism tax,” Propes said. “To me it’s to bring people into the community.”
In 2011, the city of St. Joseph voted to double its lodging tax to 6 percent. But even seven years later, little if any of the additional money has been spent, said Travis Perkins, General Manager of the Fairfield Inn and Suites and a member of the tourism tax commission that oversees the funds.
Like many jurisdictions, St. Joseph earmarks part of its hotel tax for to support tourism-related venues, including a theater and civic center, in the hope they will draw new visitors.
However, disbursement of the funds from the tax increase have come to a standstill, Perkins said, in part because members of the tourism commission can’t agree on whether the money should be spent on capital improvements such as a new marina on the Missouri River or strictly tourism promotion.
“How much is (the marina) going to benefit tourism in this area?” Perkins asked. “Or is it going to be a lot of locals using it? A lot of us in the hotel and lodging industry are skeptical about how that would benefit us as a town.” “Bring those room nights into town. You’re bringing money into the city, the restaurants, the shopping malls, golf course. They have more reach, more than a marina.”
Marci Bennett shares Perkins’ skepticism. She is Executive Director of both the Missouri Association of Convention & Visitor Bureaus and the Buchanan County Tourism Board, based in St. Joe.
“I have concerns as well, Bennett said. “Tax money should be spent to reach out beyond the borders of communities and the state and bring people in. We need to continue to educate people about what is tourism and what our marketing efforts do to enhance it.”