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Using Lodging Taxes for Staff Support of LTAC


July 29, 2014 by Toni Nelson
Category: Lodging Tax (Hotel-Motel Tax)

Using Lodging Taxes for Staff Support of LTAC

Can you use lodging tax revenues to pay for staff support of the Lodging Tax Advisory Committee (LTAC)? It’s a good question that we’ve been getting lately. After conferring with the State Auditor’s Office, we’ve concluded that this is an allowed use of the lodging tax, as long as important requirements are met. [For an update to this post, see "UPDATE to - Using Lodging Taxes for Staff Support of LTAC," posted 8/20/2014.]

First and foremost, provided that your jurisdiction meets the requirements of state law related to lodging tax revenues, the direct costs of administration would be an allowed use of those funds. Specifically, the jurisdiction would have to submit an application for use of lodging tax funds, just as any other applicant for funds would. In addition, the allocation of administrative costs will need to be documented for audit review.

OK, but the lodging tax statutes never specifically mention support for the lodging tax committee as a permitted use of funds. So, how do we get there? Well first, the lodging tax statutes establish that the taxes must be used for activities designed to increase tourism, including tourism marketing. In addition, RCW 67.28.1815 states:
Except as provided in RCW 67.28.180, all revenue from taxes imposed under this chapter shall be credited to a special fund in the treasury of the municipality imposing such tax and used solely for the purpose of paying all or any part of the cost of tourism promotion, acquisition of tourism-related facilities, or operation of tourism-related facilities…. (emphasis added.)

So, the lodging tax revenues can be used for all or any part of the cost of tourist promotion.  RCW 67.28.1816(2)(b)(i) requires the creation of the local LTAC for those municipalities with populations of 5,000 or more.  It is our opinion that LTAC’s primary function is to promote and market tourism. As such "all or any part of the costs" of tourism promotion and marketing are provided for under RCW 67.28.1815. The role of the LTAC to “select the candidates” applying for revenues and provide a list of such candidates, along with recommended amounts of funds to be distributed to the municipality for final determination, is an required component of the distribution of these restricted resources. It is appropriate that administrative support be provided to LTAC to meet these requirements.

City or county staff specifically assigned to this function would be considered a direct allocation of costs for tourism promotion and marketing. It is important to note that the jurisdiction will be required to submit a request for fund disbursement along with the other applicants. As part of the application process, the jurisdiction will have to submit expected increases in three specific categories of travelers that have been identified as follows (RCW 67.28.1816(2)(a)(i), (ii), (iii)) :
  • Staying overnight in paid accommodations away from their place of residence or business;
  • Staying overnight in unpaid accommodations (e.g., with friends and family) and traveling more than 50 miles; or
  • Staying for the day only and traveling more than 50 miles.

All entities that use lodging tax funds must report on these measures to the State’s Joint Legislative Audit Committee (JLARC). JLARC has stated that “In cases where obtaining actual attendance by traveler category is not practical, a good faith best-estimate will suffice.” One approach may be to attribute a proportionate share of the tourists associated with the events supported by LTAC and lodging tax revenues to the administrative staff support.  However, this would have to be done in such a way as to avoid double-counting of tourists. Another approach would be to note that the administrative support would not be expected to directly increase tourists in these three categories, but rather it promotes tourism by increasing the capacity of the LTAC to support organizations that are directly sponsoring tourist activities.

What if staff support for LTAC is only part of someone’s job, or is spread amongst two or three staff members whom each have other responsibilities? Then you’ve got to allocate actual staff costs to the lodging tax fund as accurately as possible. Due to the restrictive nature of these revenues, the Auditor’s Office will expect that all cost allocations are documented and well supported for the audit review. They will be specifically looking for compliance with RCW 43.09.210 – which in part states that “one fund shall not benefit from another.” If the jurisdiction allocates too much of its administrative costs or overstates the costs of administrative services to the LTAC, it would be in violation of this statute.

For additional information on the lodging tax, see MRSC's webpage, Lodging Tax (Hotel-Motel Tax).

MRSC is a private nonprofit organization serving local governments in Washington State. Eligible government agencies in Washington State may use our free, one-on-one Ask MRSC service to get answers to legal, policy, or financial questions.

About Toni Nelson

Toni has over 24 years of experience with Local Government finance and budgeting. Toni's area of expertise include "Cash Basis" accounting and reporting, budgeting, audit prep and the financial issues impacting small local government.

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