Georgia Overhauls Hotel-Motel Tax Law, Expanding Tourism Funds and Clarifying Online Travel Rules

ATLANTA — Georgia Governor Brian Kemp signed into law on April 22 a significant overhaul of the state's hotel-motel tax regulations, a move that expands the use of tourism funds to military museums and provides critical clarification on tax collection responsibilities for online travel companies.

The new law, H.B. 1023, amends Title 48 of the Official Code of Georgia Annotated, introducing changes that will directly affect hospitality businesses, online booking platforms, and local governments across the state when it takes effect on July 1, 2024.

This legislation is a prime example of the evolving landscape of state and local taxation. What might seem like a minor tweak to a specific industry tax often has broader implications for compliance and financial reporting that businesses must not overlook. The changes require careful review by affected parties to ensure their operations align with the new mandates.

One of the most notable provisions in the law is the expansion of the definition of "tourism product development" to explicitly include military museums. This change allows counties and municipalities to allocate a portion of the revenue generated from local lodging taxes toward the development, marketing, and operation of these institutions. Proponents argue this will bolster tourism in communities with a strong military presence, such as Columbus, home to the National Infantry Museum, and Warner Robins, home to the Museum of Aviation.

Previously, the use of these funds was generally restricted to convention centers, sports arenas, and marketing campaigns aimed at attracting visitors. By adding military museums to the list of qualified recipients, the state legislature acknowledges their role as significant tourist draws and economic drivers. Local governments seeking to use funds for this purpose will need to follow specific procedures outlined in the bill, ensuring the projects are directly linked to promoting tourism.

The law also addresses a long-standing ambiguity in how lodging taxes are applied to bookings made through online travel companies (OTCs) and other marketplace facilitators like Expedia, Booking.com, and Airbnb. H.B. 1023 clarifies that the excise tax must be calculated based on the full retail price paid by the consumer for the room, not the lower wholesale rate that the OTC pays to the hotel operator.

This distinction is crucial. For years, a "tax gap" existed where localities were potentially losing revenue because taxes were only being collected on the net rate received by the hotel. The new law firmly places the responsibility on the marketplace facilitator to collect and remit the tax on the total amount charged to the customer, closing this loophole and ensuring a more consistent revenue stream for local governments.

In our experience, the distinction between the wholesale and retail price for lodging has been a persistent source of confusion and audit risk for hospitality clients. The clarification in H.B. 1023 provides welcome certainty but also necessitates an immediate review of accounting practices to ensure proper tax collection and remittance. Misinterpreting these rules can lead to significant back taxes and penalties. Navigating these specific state and local tax codes is a core part of our tax preparation and compliance services at C&S Finance Group LLC, and we guide businesses through these exact challenges. For assistance, visit us at csfinancegroup.com.

To enhance transparency and accountability, H.B. 1023 also imposes stricter reporting requirements on local governments. Counties and municipalities that levy a hotel-motel tax must now submit detailed annual reports to the Georgia Department of Community Affairs. These reports must itemize all tax revenues collected and provide a full accounting of how those funds were spent, categorized by specific tourism promotion activities. The law requires these reports to be made publicly available on the department's website, allowing for greater public scrutiny over the use of dedicated tourism dollars.

Failure to comply with these reporting requirements can result in penalties, including the potential for the state to compel the local government to cease collecting the tax until it comes into compliance. This measure aims to ensure that the lodging tax revenue is used for its intended purpose of promoting travel and tourism within the jurisdiction.

Ultimately, laws like this underscore the need for businesses to move beyond a reactive approach to tax compliance. Proactive financial management, which includes understanding how legislative changes directly impact revenue and expenses, is crucial for sustainable growth in any industry.

With the law set to take effect on July 1, 2024, hotel operators, online travel companies, and local government finance departments have a short window to adapt their systems and processes. Businesses in the hospitality sector will need to coordinate with their marketplace partners to ensure tax collection methods are updated, while municipal authorities must prepare for the new, more rigorous expenditure tracking and public reporting mandates.