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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 certain requirements are met.

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.  In addition, the allocation of support services must demonstrate that it provides a benefit to the LTAC.  According to the State Auditor's Office, local governments are expected to document those services and the costs to ensure that they are fair and equitable.

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 the 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 the 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.

What if staff support for the 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. Allocations of cost for support services must not exceed the cost and level of service that the LTAC receives. For those local government entities with cost allocation plans, the governments must not allocate general government service costs, such as public safety, parks, law enforcement, community and economic development, or worker apprenticeship programs.  The restrictive nature of the lodging tax revenue prohibits the use of funds in this manner.

All entities that use lodging tax funds must report on these measures to the state’s Joint Legislative Audit Committee (JLARC). JLARC has not released the reporting format as of this blog posting.  It will be interesting to see whether they isolate the costs associated with administrative support for LTAC and this reporting requirement. The intent of the report is to determine the number of travelers outlined in three specific categories as defined by RCW 67.28.1816,2(a) (I), (ii), (iii).  JLARC has stated that “In cases where obtaining actual attendance by traveler category is not practical, a good faith best-estimate will suffice.” 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.  We will provide additional information on how these costs should or should not be reported as they are revealed by JLARC.

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.

Photo of Toni Nelson

About Toni Nelson

Toni worked with many local governments and authored numerous MRSC publications on budgeting, cash basis accounting and reporting, and the application of Washington State B.A.R.S. requirements. During her time at MRSC, she also conducted multiple trainings annually on similar subjects and was consider an expert in small city finance issues. She retired in 2020.