Business Insider

Mark Daly: Enjoy your vacation – you’ll be taxed heavily on it

Mark Daly
Mark Daly

Tourism is big business in the United States and a big moneymaker for government. According to the U.S. Travel Association, resident and international tourists spent an average of $2.5 billion per day in 2014. More than 8 million American jobs are tied directly to the tourist and travel industry. The association says 133,000 new tourism jobs were created last year, and 1 of 9 jobs in the U.S. are directly or indirectly related to tourism. USTA figures taxes and fees of $141.5 billion were collected, and it claims these taxes “saved” the average household $1,147.

The so-called three-legged stool of modern taxation are income taxes, property taxes and sales taxes. A less-publicized category is excise and franchise taxes levied by business and collected by government. Excise taxes were designed originally to tax the sale or manufacture of vices and luxury items like tobacco, alcohol, jewelry and yachts. For example, in fiscal 2014, the Idaho State Liquor Dispensary generated $63 million for state coffers, up 3 percent over the previous year.

Municipal governments have found new revenue sources from tourism as well. The Global Business Travel Association lists the Top 10 worst cities for travel taxes. Chicago tops the list, followed by New York City. The survey estimates that travelers on average pay an added $35.16 to $41.04 per day in taxes for hotels, rental cars and restaurants in these cities. Seattle ranks eighth worst in the survey with a 15.6 percent hotel tax, a 17.2 percent car rental tax and 9.5 percent restaurant and sales taxes, or an added $35.11 per day on average. Check your receipts and you will see them listed.

Some municipalities in Florida have a 4 percent tourist development tax that includes 2 percent for marketing and promoting beaches, 1 percent to promote “shoulder” season tourism, and 1 percent for beach “nourishment.” East Coast travelers brutalized by the Atlantic winter are greeted by the transient rental transaction fee, which applies to seasonal rentals lasting six months or less. The professional sports franchise facility tax is used to encourage development of professional sports like baseball.

The Federal Aviation Administration last updated the aviation excise tax in 2014. It begins with a 7.5 percent added-value tax on each airline ticket, followed by segment taxes for each takeoff and landing. Foreign travel is subject to the international facilities tax, plus taxes on aviation fuel, and is conveniently indexed to inflation. Don’t forget the “per capita” tax on each traveler, or the surcharge for travel to Alaska and Hawaii. Some frequent fliers are now rewarded with a 7.5 percent tax on the value of unused miles.

The Idaho Legislature just raised the gasoline tax by 8 cents per gallon, plus a 50 percent increase in car registration fees and a 25 percent increase for trucks. Diesel taxes will increase 12 cents per gallon to help raise millions of dollars for roads and bridges. Hybrids and electric vehicles will pay a surcharge in fairness to those who drive gas guzzlers.

Vacations, business, sports, air travel, driving and tourism are targets for added taxes. But at least you can have some fun while relaxing and enjoying your visit. So pay up — you’re on vacation.