What is the City's transient occupancy tax rate? What is the rate in Arlington and Fairfax Counties? Does the City have the authority to increase the rate and if so, what is the cap? How much revenue would a 1.0% increase produce?
The City’s transient occupancy tax rate is 6.5% of the room charge plus $1 per room per night. The regional transient occupancy tax for the Northern Virginia Transportation Authority (NVTA) is 2.0% of the room charge. The combined transient occupancy tax is 8.5% of the room change plus $1 per room per night in addition to sales tax. The total sales tax (which applies to hotel room sales) in the City is 6.0% which includes State sales tax of 4.3%, the City sales tax of 1.0% and the regional sales tax for NVTA of 0.7%. In total the cumulative tax rates equal 14.5% plus $1 per night. This is an increase of 4.0% since FY 2009.
The table below illustrates the total taxes assessed on the average daily room rate of $132.00
|Tax Rate Category (Rate)||Tax|
|City Transient Occupancy Tax (6.5%)||$8.58|
|City Room Tax ($1/night)||$1.00|
|Regional Transient Occupancy Tax-NVTA (2%)||$2.64|
|Total City Transient Tax (8.5% plus $1 per night)||$12.22|
|State Sales Tax (4.3%)||$5.68|
|City Sales Tax (1%)||$1.32|
|Regional Sales Tax (0.7%)||$0.92|
|Total Sales Taxes (6.0%)||$7.92|
|Total Taxes (14.5% plus $1 per night)||$20.14|
The table below provides a breakdown of the combines transient occupancy and sales tax in Arlington and Fairfax County.
|Tax Rate Category||Arlington County||Fairfax County|
|County Transient Occupancy Tax||5.0%||2.0%|
|Regional Transient Occupancy Tax-NVTA||2.0%||2.0%|
|State Sales Tax||4.3%||4.3%|
|County Sales Tax||1.0%||1.0%|
|Regional Sales Tax-NVTA||0.7%||0.7%|
|Total Tax Rate||13.25%||12.00%|
*Used exclusively for travel and/or tourism
The City does have the authority under Virginia code sections 58.1-3840 and 15.2-1104 to increase the tax rate to any rate, unless specifically prohibited by law, therefore there is no tax rate cap on transient occupancy tax. In FY 2016, the City generated $11.8 million in transient occupancy taxes. Of this amount, $10.7 million was derived from the base tax rate on room charge and $1.1 million was derived from the room tax. Based on the FY 2018 projected revenue of $11.3 million from the base tax rate, the City would generate $1.7 million in additional transient occupancy tax if the rate increased by 1.0%. With the City combined transient and sales tax rate of 14.5% plus $1 per night already being the highest rate in Northern Virginia, caution should be exercised and further research on hotel rate competition be undertaken before the City considers raising this tax rate again. It should be noted that the 1% sales tax add-on for Metro’s dedicated source of funding would add to this total.