Hotel Occupancy Privilege Tax
"Hotel" means any structure, or any portion of any structure, which is occupied or intended or designed for occupancy by transients for dwelling, lodging or sleeping purposes within the area of the jurisdiction of the metropolitan government, and includes any hotel, inn, tourist court, tourist camp, tourist cabin, motel or any place in which rooms, lodgings or accommodations are furnished to transients for a consideration.
"Consideration" means the consideration charged, whether or not received, for the occupancy in a hotel valued in money whether to be received in money, goods, labor or otherwise, including all receipts, cash, credits, property and services of any kind or nature without any deduction therefrom whatsoever. Nothing in this definition shall be construed to imply that consideration is charged when the space provided to the person is complimentary from the operator and no consideration is charged to or received from any person.
"Occupancy" means the use or possession or the right to the use or possession, of any room, lodgings or accommodations in a hotel for a period of less than thirty continuous days.
"Transient" means any person who exercises occupancy or is entitled to occupancy for any rooms, lodgings or accommodations in a hotel for a period of less than thirty days. (Code of Ordinance 5.12.010)
"Short Term Rental Property (STRP)" means a residential dwelling unit containing not more than four sleeping rooms that is used and/or advertised for rent for transient occupancy by guests as those terms are defined in Section 5.12.010 of the metropolitan code. Residential dwelling units rented to the same occupant for more than 30 continuous days, Bed and breakfast establishments, boarding houses, hotels, and motels shall not be considered Short Term Rental Property. (Ordinance No. BL2014-951)
Legal Basis of Tax
There is levied a privilege tax upon the privilege of occupancy in any hotel of each transient in an amount of six percent of the consideration charged by the operator. The tax so imposed is a privilege tax upon the transient occupying such room and is to be collected and distributed as provided in this chapter. The proceeds from such tax shall be retained by the metropolitan government and distributed in accordance with T.C.A. § 7-4-110(b). The tax so imposed is a privilege tax upon the transient occupying the room of a hotel located within the territory of the metropolitan government. (Code of Ordinance 5.12.020)
In addition to any other tax or fee imposed pursuant to this chapter on the occupancy of the hotel room, there is hereby authorized an additional privilege tax of two dollars and fifty cents upon the occupancy of each hotel room within the territory of the metropolitan government. The tax so imposed is a privilege tax upon each occupied room for each night of occupancy and needs to be collected and distributed as provided in this article. (Code of Ordinance 5.12.120)
The occupancy privilege tax shall be added by each and every operator in each invoice prepared by the operator for occupancy of his hotel, such invoice to be given directly or transmitted to the transient, and shall be collected by such operator from the transient and remitted to the metropolitan department of finance. (Code of Ordinance 5.12.040)
Taxes collected by an operator which are not remitted to the tax collection official on or before the due dates are delinquent. An operator shall be liable for interest on such delinquent taxes from the due date at the rate of eight percent per year, and in addition, a penalty of one percent for each month or fraction thereof such taxes are delinquent. Such interest and penalty shall become a part of the tax required in this chapter to be remitted. Willful refusal of an operator to collect or remit the tax or willful refusal of a transient to pay the tax imposed is unlawful and shall constitute a misdemeanor. Any fine levied herein shall be applicable to each individual transaction involving lodging services paid by a customer to the operator in those cases when the operator fails or refuses to pay the tax payable. (Code of Ordinance 5.12.090)
The law provides for only two classes of exemptions. (1) A tenant who has occupied room space for thirty or more continuous days is not required to pay the tax after the thirtieth day. (2) Local, state or federal governmental agencies, when fees are paid by those agencies.
However, the law does NOT exempt private schools, corporations, fraternal organizations, religious groups, hospitals, private universities, members of military or representatives of foreign governments.
Hotel Occupancy Tax Audits
Based on a review of Hotel Occupancy Tax audits conducted from July 2013 thru June 2014, hotel operators are encouraged to implement the following recommendations.
- Documentation for room revenue, number of rooms rented, adjustments to revenue, justification for out of service rooms, and exemption claims should be retained for 36 months.
- Solicit independent Service Organization Control 1 Reports from computer lodging system service providers. This will help ensure the accuracy of financial and statics reports used to prepare hotel occupancy tax returns.
Both recommendations will assist in ensuring accuracy of information used to calculate and verify tax filings. (Hotel Occupancy Tax Audit Summary FY2016)