Study Says Excessive Taxes on Travel Can Deter Visitors, Meetings

Excessive local travel-related taxes can be a deterrent to meetings and travelers and damage local economies, according to an annual study of car-rental, hotel and meal taxes in the top 50 U.S. travel destination cities, sponsored by the education and research foundation of the National Business Travel Association in tandem with Concur, an on-demand Employee Spend Management service.

The study revealed that the discriminatory travel taxes and fees enacted on travel-related services — often to fund unrelated local projects — impose an average increased cost on visitors of 56% over general sales-tax levels.

NBTA Executive Director and COO Michael McCormick said: “The business and travel communities are increasingly concerned about the negative impact that taxes targeting travelers have on the greater travel industry and local economies. It is unacceptable that visitors, whose general tax dollars can help to keep a community afloat in difficult economic times, are forced to pay so much more taxes and fees to fund projects unrelated to the services they purchase.”

McCormick added: “On average, the fees targeting travel services increase the tax burden by more than half, and in the worst cases, by up to 144%. Rest assured, companies are taking notice of these unfair burdens when determining how and where to spend their business travel, meetings and events dollars.”

The study incorporates a host of different views of travel taxes, with the top 50 markets ranked by overall travel tax burden including general sales tax and discriminatory travel taxes, and by discriminatory travel tax burden excluding general sales taxes, to count only taxes that target car-rentals, hotel stays and meals. Separate data are offered for central city and airport locations, as the tax regimes are often seen as being distinct.

According to the research, the five U.S. cities where travelers incur the lowest total tax burden (factoring in general sales taxes and discriminatory travel taxes) are Fort Lauderdale, Fort Myers, Portland (OR), Detroit and Honolulu; the cities with the highest total taxes on travelers are Chicago, New York, Boston, Seattle and Minneapolis.

Looking only at discriminatory travel taxes, the five U.S. cities or municipalities with the lowest travel tax rates in central-city locations are all California locales: Orange County, San Jose, Burbank, San Diego and Ontario. On the other side of the ledger, the five cities imposing the highest discriminatory travel taxes are Portland Oregon; Boston; Minneapolis; Indianapolis; and New York.

McCormick said: “What many cities don’t realize is that these taxes are not only burdening business travelers, but local businesses pay the price as well. In fact, most companies spend the majority of their car-rental and hotel budgets in the communities in which they have offices. Ultimately, cities are hurting their economies two-fold, with hidden costs to local businesses and taxes out-of-town visitors will try to avoid.”