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Lodging Tax (Hotel-Motel Tax)

This page provides an overview of the lodging tax, also known as the hotel-motel tax, that cities and counties in Washington State may charge to benefit tourism, including applicable tax rates, use of revenues, lodging tax advisory committees (LTACs), and sample documents.

The information on this page applies only to cities and counties. For further guidance on lodging taxes and other local revenue options, see MRSC’s City Revenue Guide and County Revenue Guide.


Overview

Any city, town, or county has the authority to levy lodging taxes, also known as “hotel/motel taxes,” on all charges for furnishing lodging at hotels, motels, and short-term rentals – including such activities as Airbnb, bed and breakfasts (B&Bs), RV parks, and other housing and lodging accommodations for periods of time less than 30 days.

The tax is collected as a sales tax and paid by the customer at the time of the transaction, and the revenues must be used for eligible tourism promotion activities or tourism-related facilities.

There are two lodging tax options:

  • A “basic” or “state-shared” lodging tax up to 2% that is taken as a credit against the 6.5% state sales tax rate, so that the lodging patron does not see any tax increase (RCW 67.28.180-.1801). The state also sometimes refers to this as the “transient rental tax.”
  • An “additional” or “special” lodging tax up to 2% on top of the other state and local retail sales taxes, resulting in a higher tax bill for the patron (RCW 67.28.181).

If a jurisdiction imposes both options at the maximum rate, that would bring the total lodging tax rate to 4%. However, a few specific jurisdictions are not authorized to collect certain lodging taxes while others have additional authority, as discussed below.

Lodging taxes are different from (and may be imposed in addition to) tourism promotion area fees. For more information on tourism promotion areas, see our page Tourism and Local Governments.

Certain public facilities districts also have separate lodging tax authority which is not discussed on this page. For more information, see our Public Facilities Districts (PFDs) page.


"Basic" or "State-Shared" Lodging Tax

Any county has the authority to levy the “basic” or “state-shared” lodging tax up to 2% (RCW 67.28.180), which is taken as a credit against the 6.5% state sales tax (RCW 67.28.1801). This means that there is no tax increase, and the total tax paid by the patron is equal to the retail sales tax in the jurisdiction in which the lodging is located. The state’s portion of the sales tax rate on lodging effectively drops from 6.5% to 4.5% within those jurisdictions. The state sometimes refers to this as the “transient rental tax.”

Most cities and towns have similar “basic” lodging tax authority. The city’s basic rate is credited against the county’s basic rate (RCW 67.28.180(2)). For instance, if both the city and the county impose the full 2% basic lodging tax, the total rate will be 2% countywide, but the county will not receive revenues from the incorporated area because it must credit those revenues back to the city.

The basic lodging tax has a few exceptions:

  • No city located within King County may impose the basic lodging tax (see RCW 67.28.180(2)(c)(ii)), except for Bellevue which has legislation allowing it to collect a rate up to 2% until its related debt is retired (subsection (2)(c)(iii).
  • No city that is located within a county that is exempt under RCW 67.28.180(2)(b) may impose the basic lodging tax so long as the county remains exempt. Currently, Yakima County is the only county exempt under that subsection, so no city within Yakima County may impose this tax. However, there is also an exception that grandfathers in the City of Yakima and allows it to collect a basic lodging tax up to 2% until its related debt is retired (subsection (2)(c)(iii)).
  • For Bellevue/King County and City of Yakima/Yakima County, the statutory exemptions allow the jurisdictions to “double-dip,” meaning that the city lodging tax is not taken as a credit against the county rate. Instead, the city and county rates are added together, resulting in a credit of up to 4% against the state sales tax rate within Bellevue and the City of Yakima. This means the state only receives a 2.5% sales tax on lodging in those two cities.

"Additional" or "Special" Lodging Tax

In addition to the “basic” 2% lodging tax, any county may impose an “additional” or “special” lodging tax up to 2% in increments no smaller than 0.1% (RCW 67.28.181). Unlike the basic lodging tax, the additional lodging tax is not a credit against the state sales tax and results in a tax increase for the lodging patron.

If the basic and additional lodging tax are each levied at a rate of 2%, the combined lodging tax rate would be 4% and the total tax paid by the patron would equal the retail sales tax in the jurisdiction plus the additional/special lodging tax of 2%.

Most cities and towns also have similar authority, and just like the basic lodging tax the city’s additional lodging tax must be taken as a credit against the county’s additional rate (RCW 67.28.181(3)). For instance, if both the city and the county impose the full 2% additional lodging tax, the total additional rate will be 2% countywide, but the county will not receive revenues from the incorporated area because it must credit those revenues back to the city.

The additional lodging tax also has a few exceptions:

  • Counties and cities that imposed a combined lodging tax greater than 4% before July 27, 1997 were grandfathered in under RCW 67.28.181(2)(a). This includes Grays Harbor and Pierce counties (and the cities within them), plus the cities of Airway Heights, Bellevue, Chelan, Leavenworth, Long Beach, Winthrop, and Yakima.
  • Any city located within a county that had the authority to levy a countywide 4% lodging tax before January 1, 1997 may not impose the additional 2% (RCW 67.28.181(2)(b)). This applies to all cities in Cowlitz and Snohomish counties.
  • Cities that imposed a combined lodging tax rate of 6% before January 1, 1998 are grandfathered in under RCW 67.28.181(2)(d). This occurred due to a unique set of circumstances and only applies to the cities of Wenatchee and East Wenatchee.

Use of Revenues

City and county lodging tax revenues – including both the “basic” and “additional” lodging taxes – must generally be used for tourism promotion, acquisition of tourism-related facilities, or operation of tourism-related facilities (RCW 67.28.1815-.1816), including:

  • Tourism marketing;
  • Marketing and operations of special events and festivals designed to attract tourists;
  • Operations and capital expenditures of tourism-related facilities owned or operated by a municipality or a public facilities district, including repayment of general obligation bonds (RCW 67.28.150) or revenue bonds (RCW 67.28.160) for eligible capital projects; or
  • Operations of tourism-related facilities owned or operated by nonprofit organizations (but not capital expenditures).

(King County has separate provisions and requirements for how to spend the revenues.)

Definitions of “tourism,” “tourism promotion,” and “tourism-related facility” are provided in RCW 67.28.080. Cities and counties may use the funds either directly, or indirectly through a convention and visitor’s bureau or destination marketing organization. The funds may be awarded to nonprofits, tourism organizations, and to the city or county for eligible expenses.

Practice Tip: The guiding principle is that these facilities should be used by tourists. So for example, a municipal golf course would likely be a permitted lodging tax expenditure in Chelan, while it probably would not be if it were in a residential neighborhood in Spokane. Each situation is unique and requires careful assessment.

After conferring with the State Auditor’s Office, we have also concluded that lodging tax revenues may be used to pay for staff support of the lodging tax advisory committee (LTAC, described in further detail below), provided that proper application and reporting requirements are followed. Our conclusion comes from RCW 67.28.1815, which states that the revenues must be used “solely for the purpose of paying all or any part of the cost of tourism promotion…” It is our opinion that the primary function of an LTAC is to promote and market tourism.

Beginning in 2015, cities and counties may also use lodging tax revenues to repay general obligation bonds (RCW 67.28.150) or revenue bonds (RCW 67.28.160) issued for affordable workforce housing within a half-mile of a transit station. While these two statutes do not specifically define "transit station," a definition is provided in RCW 67.28.180(3)(d)(ii)(A) discussing the requirements for King County. The definition references RCW 9.91.025, which is very broad and includes any bus stops or zones.


Application and Award Process

All prospective lodging tax recipients must apply to the city/county for funding. The entities that may apply for lodging tax funding are:

  • Convention and visitors’ bureaus;
  • Destination marketing organizations;
  • Nonprofits, including main street organizations, lodging associations, or chambers of commerce; and
  • Municipalities (defined as any city, town, or county).

Any city or county with a population of 5,000 or more that imposes any lodging tax must also establish a lodging tax advisory committee (LTAC), described in the next section, to review the applications and make funding recommendations.

Jurisdictions with a population of less than 5,000 are not required to establish an LTAC, although they may do so if desired. If the jurisdiction does not have an LTAC, prospective applicants must apply directly to the legislative body (city council or county commission) for consideration and funding.

All applications must include estimates of how funding the activity will result in increases to the number of people staying overnight, traveling 50 miles or more, or coming from another state or country. To ensure that the applicants are compliant with this statutory requirement, this information should be included in the lodging tax application form that will be filed with the city/county or the LTAC.

There is no requirement that priority for funding be given to applicants expected to generate the largest number of tourists, and lodging tax revenue may still be awarded to recipients who provide services that indirectly increase tourism such as destination marketing organizations.

The law is silent on the frequency of the awards. Some jurisdictions choose to make the award process a part of their annual budget cycle while others may incorporate a mid-year awards procedure to account for unexpected increases or decreases in lodging tax revenues.

Practice Tips:

  • The State Auditor’s Office interprets the law to mean that all users of lodging tax funds, including municipalities, are considered applicants and must follow the relevant application procedures. So, if cities or counties are seeking to use the funds directly, the city/county should submit applications for their own projects to the legislative body or LTAC for consideration.
  • To avoid any concerns regarding gifting of public funds, the city or county awarding the funds should enter into a contract with the recipient organization(s). The contract should spell out the tourism-related services to be provided in exchange for the funding, as well as the required reports that must be filed by the recipient that quantifies the services in terms of the number or tourists generated as a result of the funding.

Lodging Tax Advisory Committees (LTACs)

Any city or county with a population of 5,000 or more that imposes any lodging tax is required to establish a lodging tax advisory committee (LTAC) to review the applications and make funding recommendations to the legislative body.

Practice Tip: Jurisdictions with a population of less than 5,000 are not required to establish an LTAC, although they may do so voluntarily. If a jurisdiction voluntarily establishes an LTAC, it is not required to follow these rules and may adopt its own processes and requirements.

For jurisdictions of at least 5,000 population, the LTAC must be appointed by the legislative body (city council or county commission) and must contain at least five members, including at least two representatives of businesses that are required to collect the lodging tax, at least two people who are involved in activities that are authorized to be funded by the lodging tax, and one elected official from the jurisdiction who serves as chair (RCW 67.28.1817).

The number of committee members from organizations representing hotels/motels collecting the tax and the number from organizations involved in activities that can be funded must be equal. Organizations representing hotels and motels and organizations involved in activities that can be funded by this tax may recommend people for membership.

The statute also provides that a person who is eligible under the first category (lodging businesses) is not eligible for appointment under the second category (funding organizations), and vice versa.

The legislative body must review the committee’s membership annually and makes changes as appropriate. A city's committee may include a non-voting elected county official and vice versa.

The LTAC receives all applications for lodging tax revenue and recommends a list of candidates and funding levels to city or county legislative body for final determination. The statute says that the legislative body “may choose only recipients from the list of candidates and recommended amounts provided by the local lodging tax advisory committee” (RCW 67.28.1816(2)(b)(ii), emphasis added).

Practice Tip: The legislative body is not required to fund the full list of recommended recipients and may choose to make awards to only some or even none of the recommended recipients, but the legislative body may not award funds to any recipient that was not recommended by LTAC.

However, an informal opinion from the Attorney General’s Office in 2016 states that the legislative body may award amounts different from the LTAC’s recommended amounts, but only after satisfying the procedural requirements of RCW 67.28.1817(2). This requires the municipality to submit its proposed change(s) to the LTAC for review and comment at least 45 days before final action is taken.

Any proposal to impose a new lodging tax, raise the rate of an existing tax, repeal an exemption from the lodging tax, or change the use of the tax proceeds, must be submitted to the lodging tax advisory committee for review and comment at least 45 days before final action will be taken on the proposal by the legislative body (RCW 67.28.1817(2)).


Reporting Requirements

All cities and counties receiving lodging tax revenues must file an annual report with the Joint Legislative Audit & Review Committee (JLARC) by May 15 for the prior calendar year (RCW 67.28.1816). If a jurisdiction received lodging tax revenues but did not have any distributions or expenses during the calendar year, the JLARC report must still be completed and filed by the deadline indicating no activity.

JLARC has established an online reporting system – see the reporting instructions, data field descriptions, and FAQs at the top of the JLARC page. The reporting requirements include:

  • All lodging tax revenues received;
  • All lodging tax revenues distributed and/or expended;
  • All recipients of lodging tax monies, including the city itself, that may have directly used lodging tax funds for qualifying facilities, tourist events, or tourism administration; and
  • For all recipients, the actual number of people traveling for business or pleasure on an overnight trip in paid accommodations, traveling 50 or more miles away from their business or place of residence for the day or overnight, or traveling from another country or state.

Practice Tip: The deadline to submit the annual lodging tax data to JLARC is May 15 for the year ending December 31 of the prior fiscal period. However, the JLARC online filing system can record and store lodging tax activity throughout the calendar year, so as part of your contract with recipients, we recommend that you require the recipient to file the actual number of attendees, overnight stays, and/or other associated tourism data as soon as the event or activity has been completed to ensure the city’s full compliance with JLARC.


Maximum Combined Sales & Lodging Tax Rate

For cities and counties, the maximum combined sales and lodging tax rate upon sales of lodging may not exceed 12% (RCW 67.28.181(1)), except for Seattle which has a maximum combined rate of 15.2%. The statutes included within the 12% cap are:

However, affordable housing sales taxes (see RCW 67.28.181(4)) and the first 0.4% of the Sound Transit high-capacity transit sales tax (adopted prior to December 1, 2000 – see RCW 82.14.410(2)(c)) are not included within the 12% cap.

Most counties and cities are not that close to the 12% cap, and the cap does not affect the ability of any jurisdiction to impose the maximum “basic” lodging tax allowed by law since it is taken as a credit against the state sales tax and does not increase the sales tax rate. However, the 12% cap may limit the “additional” lodging tax rate that some jurisdictions may impose.

RCW 82.14.410 provides that any local sales and use tax increase adopted after December 1, 2000 must exempt lodging sales if the increase would cause the total combined lodging/sales tax rate to exceed the greater of the 12% cap or the actual combined lodging/sales tax rate in effect on December 1, 2000.


Examples of Lodging Tax Documents

Below are selected examples of lodging tax ordinances, code provisions, application forms, and contracts.

Code Provisions/Ordinances

RFPs, Applications, and Guidelines

Contracts with Lodging Tax Recipients


Last Modified: October 22, 2020