What Is Occupancy Tax (Hotel Tax)?

Occupancy tax, also called hotel tax, lodging tax or transient occupancy tax (TOT), is a tax on short stays at hotels, motels and other lodging, set by states, counties or cities and usually charged as a percentage of the room rate. The operator, or a booking platform, collects it from the guest and passes it to the tax authority (AHLA: State & Local Tax Issues) (HVS: 2023 HVS Lodging Tax Report - USA) (Wikipedia: Hotel tax in the United States) (Texas Comptroller: Hotel Occupancy Tax).

Last updated: October 2026

How transient occupancy tax works

In the US, hotel taxes are usually levied at the state level, and in some places cities and counties add their own charges on top (Wikipedia: Hotel tax in the United States). It is charged on top of any sales tax, when the stay is paid for (Wikipedia: Hotel tax in the United States).

"Transient" is the working word: the tax targets short stays. In the City of San Diego, for example, a transient is anyone who rents for less than one month, and since 1 May 2025 the rate is 11.75%, 12.75% or 13.75% depending on the zone (City of San Diego: Transient Occupancy Tax (TOT)/Tourism Marketing District (TMD)).

Texas, for example, charges a state hotel occupancy tax of 6% of the room cost, and cities, some counties and special purpose districts can add a local tax on top (Texas Comptroller: Hotel Occupancy Tax).

In Texas, hotel owners, operators and managers must collect the state tax from their guests, and so must people renting out their own houses; the tax reaches beyond hotels and motels to bed-and-breakfasts, condominiums, apartments and houses (Texas Comptroller: Hotel Occupancy Tax).

Why occupancy tax matters for hotel distribution

Once a room sells on more than one channel, the open question is who collects the tax on each booking. In Texas, property management companies, online travel companies and other third-party rental companies may also be responsible for collecting it (Texas Comptroller: Hotel Occupancy Tax). A short-term rental platform that has agreed with an owner to collect and remit the state tax must do so; without that agreement, the owner collects and remits (Texas Comptroller: Hotel Occupancy Tax FAQ).

Platform collection has limits. Where Airbnb collects, hosts remain responsible for assessing all their other tax obligations, and a host who accepts a reservation waives any exemption they believe applies (Airbnb Help Center: Areas where tax collection and remittance by Airbnb is available).

For a property selling through several channels, the practical work is knowing, channel by channel, who collects which tax and on what price, and keeping rates and tax settings consistent across all of them.

Occupancy tax compared with other charges

ChargeWho sets itHow it works
Occupancy tax (TOT)States, counties and citiesA share of the room price on short stays, as described above
Sales tax on lodgingThe state, plus local add-onsIn Florida, the 6% state sales tax plus any local surtax applies to rentals of six months or less, and counties can add a tourist development tax on top Florida Dept. of Revenue: Sales and Use Tax on Rental of Living or Sleeping Accommodations (Jan 2025)
Tourism marketing district assessmentA city districtIn the City of San Diego, a separate 2% assessment on lodging businesses with 70 or more rooms, used to promote tourism City of San Diego: Transient Occupancy Tax (TOT)/Tourism Marketing District (TMD)

Frequently asked questions

Is occupancy tax the same as sales tax?
Some states tax rooms through their sales tax, while others add a separate occupancy tax. New York City does both: a stay carries sales taxes plus a city hotel room occupancy tax of 5.875% plus $2 per room, and a $1.50 state unit fee. The total comes to a little under 15% plus $3.50 per day, by the Hotel Association of New York City's estimate.
What is transient occupancy tax used for?
Lodging tax revenue pays for tourism marketing, debt on tourism-related projects, or the general fund, according to HVS's 2023 lodging tax report. San Diego's 2025 increase sends 59% of the added revenue to convention center improvements and operations, and the rest to homelessness programs, with street repairs joining that share in the second five years.
Who is exempt from hotel occupancy tax?
In Texas, permanent residents who occupy a room for at least 30 consecutive days are exempt, and any interruption in the stay voids the exemption. The US government and its employees traveling on official business are exempt too. Religious, charitable and educational organizations are exempt from the Texas state tax only, so local taxes still apply to them.
What is the occupancy tax on Airbnb?
Where Airbnb has agreements with governments or is required by law, it calculates occupancy taxes, collects them from guests at booking and pays them to the tax authority on the host's behalf. In Pennsylvania, for example, Airbnb charges a 6% state hotel occupancy tax on the listing price, including cleaning and guest fees, for stays of 29 nights or fewer, plus local occupancy taxes.
Does a vacation rental platform collect occupancy tax for the owner?
On Vrbo, in some places. Vrbo collects and remits lodging tax in jurisdictions that require it, for bookings and payments made on its platform. Owners and managers stay responsible for tax compliance otherwise, including bookings made outside Vrbo's online system and bookings made through external software integrated with Vrbo.

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Where Jetstream fits

Occupancy tax rules change by city, by length of stay and by channel, so a property's rates and tax settings need to stay consistent everywhere it sells. Jetstream builds an AI channel manager that connects a property's systems to the channels where guests book, and keeps rooms, rates and availability accurate on each one, managed from one place.

See Jetstream's AI channel manager Book a demo