U.S. Hotel Taxes: What Travel Agents must tell Clients

Introduction

Hotel pricing in the U.S. is notoriously confusing. A room rate rarely reflects the final price paid, because multiple layers of taxes and fees are added at check-out. For U.S. travelers this is frustrating; for international travelers it can feel misleading. Travel agents and advisors have an essential role in setting expectations. A client who thinks they’ve paid in full, only to be asked for another $40 per night at check-in, is unlikely to book through you again.

This guide explains what hotel taxes exist in the U.S., how they vary by state and city, and what travel advisors must communicate to clients in advance.

For more info, also refer to U.S. Sales Tax Rules for International Travel Agents

And for greater detail our Paper on Tax

1. The Core Hotel Taxes in the U.S.

Hotel stays attract several categories of tax. These differ by location but typically include:

• State sales tax – levied in most states (rates from 2.9% in Colorado to over 7% in Mississippi). This is often the first layer of tax applied to the room rate.

• City or county occupancy tax – sometimes called “lodging tax,” “room tax,” or “transient occupancy tax.” For example, New York City adds 5.875% plus a flat $2–$3.50 per room per night. Local jurisdictions impose this tax to fund public services or tourism initiatives.

• Tourism or convention taxes – added in cities that host large events or rely on tourism. Orlando and Las Vegas have some of the highest rates in the country.

• Special district assessments – e.g., hotel improvement districts in California. These are taxes levied by localized entities, such as Hotel Improvement Districts (HIDs) in parts of California, to fund projects that directly benefit the hotel area.

  
  

📌 Example: A $200 hotel room in New York City can have over $35 in combined taxes and fees per night once state sales tax, occupancy tax, and local surcharges are included.

2. Resort Fees, Facility Fees, and “Hidden” Charges

Taxes are only half the story. Many hotels, particularly in tourist-heavy cities, charge mandatory fees that are not always included in quoted rates:

• Resort fees – common in Las Vegas, Florida, and Hawaii. Can range from $20–$50 per night, covering gym use, pool towels, or Wi-Fi.

• Urban or facility fees – increasingly charged in New York, San Francisco, and Chicago, even in non-resort properties.

• Destination fees – a newer label used to justify nightly surcharges. Often claiming to cover local experiences or credits, though they remain mandatory.

These fees are usually taxable. A $35 resort fee in Las Vegas is taxed at the same 13.38% hotel room rate, making the effective cost closer to $40.

Agents must flag these clearly. Nothing damages client trust faster than being told “everything is included” when the front desk adds another $300 for a week’s stay.

3. Why it matters for Travel Advisors

• Client trust: Surprises at check-in erode credibility. The advisor's value proposition is built on expertise and removing friction; failing to disclose an easily quantifiable cost negates this value.

• Comparisons with international markets: In Europe or Asia, taxes are generally included in advertised prices. U.S. practices feel misleading to foreign clients.

• Package pricing: If you’re bundling hotel + flights, you need to decide whether to build taxes and fees into your package or show them separately.

📌 Example: A luxury advisor sells a $10,000 New York package including hotels, meals, and transfers. If they forget to mention $1,000 of additional hotel taxes and resort fees, the client feels overcharged, even if the rest of the trip runs perfectly.

4. State-by-State Variation

Each state sets its own tax rules:

• Hawaii: Hotel tax is 10.25% + 3% county tax. Resort fees often exceed $40/night.

• Nevada (Las Vegas): 13.38% room tax + resort fees averaging $35–$45.

• Florida (Miami/Orlando): State sales tax 6% + county tourist development tax up to 6%. Disney area hotels are a prime example.

• New York City: 8.875% sales tax + 5.875% hotel occupancy + $2–$3.50 flat fee.

• California (Los Angeles/San Francisco): 14–16% transient occupancy tax + tourism improvement assessments.

Agents selling U.S. hotels to international clients must know these hotspots, as they can add hundreds to the bill.

5. Practical Guidance for Travel Agents

• Always quote “room + tax” when providing estimates.

• Check resort fees directly with the hotel — OTAs sometimes bury them in fine print.

• For group bookings, confirm whether taxes/fees are included in contracted rates.

• Flag in writing: “Local taxes and resort fees are payable directly at the hotel and are not included in this package price.”

• When invoicing international clients, clarify that local hotel taxes in the U.S. are not pre-paid unless specifically stated.

6. The Future of Hotel Fees

There is growing pressure in the U.S. to ban or regulate resort fees:

• The Federal Trade Commission (FTC) has investigated “drip pricing” practices.

• Several states (e.g. California, New York) are considering legislation to force hotels to include all mandatory fees in upfront pricing.

• Until rules change, agents must assume resort fees will remain and communicate these accordingly.

7. Deeper Dive on VAT/GST Reclaim

For international business travelers, the U.S. tax structure creates an additional hidden cost compared to many other countries:

• No VAT/GST Refund Mechanism: Unlike the Value-Added Tax (VAT) systems in Europe, Canada (GST/HST), and Australia, the U.S. system of state and local sales tax and occupancy tax generally does not offer a recovery or refund mechanism for non-resident businesses or tourists.

• The Impact: In VAT jurisdictions, a business traveler can often reclaim the VAT paid on hotel stays and other business expenses, effectively reducing the net cost of the trip. In the U.S., these taxes are non-recoverable, meaning the final, post-tax price is the true expense.

• Advisor Clarity: When invoicing or quoting for a foreign corporate client, advisors must clarify that the U.S. hotel taxes (sometimes as high as 15-20% combined) are a non-refundable business cost, which can surprise clients used to reclaiming foreign taxes.

Conclusion

Hotel taxes and fees in the U.S. are complex, inconsistent, and often frustrating for travelers. For advisors, they represent both a challenge and an opportunity: a chance to demonstrate professionalism by preparing clients for the real cost of their stay. Clear communication avoids surprise charges, builds trust, and reinforces your role as a financial steward of your clients’ travel.

High-Tax U.S. Destinations

While tax rates fluctuate and resort fees vary wildly, comparing major hotspots by the known combined statutory tax rate (excluding the variable resort fee) helps advisors set expectations.

Handling Loyalty/Redemption Bookings

This is a frequent point of contention and confusion for even the most seasoned travelers.

• The "Free" Misconception: While using hotel loyalty points or a free night certificate covers the room rate and often the statutory taxes on that rate, the mandatory Resort Fees/Destination Fees are frequently still required and payable in cash at check-in.

• Key Program Policies:

  • Waived on Points Stays: Hilton Honors and World of Hyatt generally waive resort fees when booking with points or free night certificates.

  • NOT Waived on Points Stays: Marriott Bonvoy and IHG One Rewards generally do not waive resort fees on point redemption bookings (though some elite tiers may offer exceptions at select brands).

• Advisor Action: Always check the final booking summary on the loyalty program's site or contact the hotel directly to confirm the amount of any mandatory cash fees, even if the client believes their stay is "free." This prevents the surprise cash charge that can sour an otherwise perfectly executed trip.

References

• Federal Trade Commission (FTC). (2023). FTC Takes Action Against Hidden Hotel Resort Fees. Federal Trade Commission, U.S. Government. Available at: https://www.ftc.gov/news-events/news/press-releases/2023/10/ftc-takes-action-against-hidden-hotel-resort-fees

• American Hotel & Lodging Association (AHLA). (2024). Resort Fees Fact Sheet. AHLA Policy & Advocacy. Available at: https://www.ahla.com/resortfees

• New York City Department of Finance. (2024). Hotel Room Occupancy Tax Rates. City of New York. Available at: https://www.nyc.gov/assets/finance/downloads/pdf/23pdf/hotel_room_occupancy_tax_rates.pdf

• Hawaii Department of Taxation. (2024). Transient Accommodations Tax (TAT). State of Hawaii. Available at: https://tax.hawaii.gov/geninfo/transient-accommodations-tax/

• Nevada Taxation Department. (2024). Lodging and Room Tax in Clark County (Las Vegas). State of Nevada. Available at: https://tax.nv.gov/FAQs/RoomTax/

• Visit California. (2024). Tourism Improvement Districts in California. Visit California. Available at: https://industry.visitcalifornia.com/research/tourism-improvement-districts

• Orlando/Orange County Convention and Visitors Bureau. (2024). Tourist Development Tax (TDT). Visit Orlando. Available at: https://www.visitorlando.com/en/travel-trade/tourist-development-tax

Disclaimer:
Content published by Antravia is provided for informational purposes only and reflects research, industry analysis, and our professional perspective. It does not constitute legal, tax, or accounting advice. Regulations vary by jurisdiction, and individual circumstances differ. Readers should seek advice from a qualified professional before making decisions that could affect their business.