Oneida implements 4% hotel-motel tax
The tax revenue will be used for tourism development purposes
ONEIDA | The Town of Oneida has adopted a hotel-motel tax that will generate revenue for its efforts to grow tourism.
According to Virginia Bruce, the town’s Community Development Coordinator, the funds will be used “exclusively” for tourism development, and the tax could generate several thousand dollars each year.
“According to the TN Dept. of Tourism Development, the town is leaving about $6,000 on the table annually by not having a hotel tax,” Bruce said.
Hotel-motel taxes are known by different names, including a lodging tax. Effectively, such taxes are occupancy taxes on short-term rentals — and not just hotel and motel rooms, but also AirBNB and VRBO rentals, as well as any other type of overnight rental.
According to an ordinance that was passed by the town on second reading in April, short-term rentals are defined as residential dwelling units that are rented for less than 30 continuous days.
The town’s occupancy tax will be 4%, which will be assessed in addition to Scott County’s 5% occupancy tax, as well as state and local sales taxes.
Bruce reiterated that the tax will not be paid by local residents or business owners.
“This is a tax paid by visitors who spend the night in our hotels or short-term rentals,” she said.
It is not uncommon for counties and municipalities to levy a hotel-motel tax for tourism-related purposes. Under state law, hotel-motel tax revenues can only be used for the promotion of tourism and tourism development. The assumption is that the funds should go to tourism development because they’re being paid by tourists. The Tennessee General Assembly passed a law in 2021 authorizing all municipalities in the state to levy a lodging tax, at a maximum rate of 4%.
Scott County’s hotel-motel tax, which was actually grandfathered in from the time before the state specified where the funds must be spent, is technically earmarked for tourism purposes, although it actually funds the county’s entire industrial development efforts.
With Oneida’s occupancy tax in place, lodgers will be taxed at a total rate of 18.75% inside Oneida — including the 7% state sales tax, the 2.5% local option sales tax, the 5% county lodging tax and the 4% Oneida lodging tax — and 14.75% in areas of Scott County outside Oneida.
The only Tennessee counties without an occupancy tax are Bedford, Bledsoe, Carroll, Dyer, Grainger, Grundy, Hancock, Hawkins, Jackson, McNairy, Pickett, Smith, and Washington counties. However, in most of those counties without a lodging tax, one or more municipalities have a lodging tax.
The state’s highest effective tax rate on occupancy, which combines the state and local sales tax rates and the local occupancy tax rates, is found in Kingsport and Johnson City, at 21.75%. That includes 9.25% in sales taxes, a 5% county lodging tax, and a 7% municipal lodging tax in each city.