I’ve been asked a number of times to explain how bed tax, or Tourist Development Tax, is used. There also have been some letters suggesting that it be used for items or services that aren’t currently covered, so I thought a brief explanation might be useful. Please bear in mind that I’m not a lawyer, but it would appear that even some lawyers can’t agree on the interpretation of some bed tax clauses, so I’ve gone with what the TDCs, tax collectors and others usually use.
You may remember that bed tax was set up to be charged on short-term rentals in designated tax areas. Some counties implement across the whole county (Escambia for example) while others have specified tax areas (e.g. Okaloosa and Walton). The tax is collected by the rental companies and hotels, and paid to the tax-collecting body of the county. Owners can pay direct to the county, too.
The complete Florida Statute is 125.0104. If you’re having trouble sleeping, you can find it at http://ow.ly/I1Bu30a3k3D.
Just to be clear, this is a Tourist Development Tax and is quite separate from sales tax. The former is only charged on short-term rentals and the latter is charged to everyone on qualifying purchases. In Florida, tourists pay 24 percent of all sales tax.
Counties charge differing amounts of bed tax. Four counties don’t levy the tax at all. Others charge between 2 and 6 percent. Okaloosa, Santa Rosa and Bay charge 5 percent while Walton and Escambia charge 4 percent. You can find the complete list at http://ow.ly/zlOO30a3kTl.
What can the tax be used for? Well, there is some variation between what the individual county ordinances interpret the state statute to mean, but the actual uses are pretty clearly defined (see the details of the statute above). Let’s look at Okaloosa’s (as the county sits in the middle of the local area) 5 percent, or five pennies as the collection is known. I’ve got this simplified description from the Okaloosa Tax Collector, although actual collection is now passing to the Florida Department of Revenue.
1st penny: Beach, park improvements and maintenance, shoreline protection, restoration improvements.
2nd penny: Beach, waterway and tourist destination facilities improvements, lifeguard services, administration.
3rd penny: Convention Center and other facility operations.
4th penny: Debt service for construction, reconstruction or renovation of convention center and future improvements.
5th penny: Tourism promotion.
For Okaloosa, the county helpfully describes Tourist Development Department activities and how they allocate the tax on their website at http://ow.ly/r58530a3lqX. I’m sure all the other counties do the same, but I don’t have room to list them all here. For Okaloosa TDD (again some counties differ), their only funding comes from the bed tax imposed on tourists. No local sales or property taxes are used.
As you’ll see, only one-fifth goes into actual tourism promotion. Some also goes into reserve funds to recover the area’s tourism should we have a natural disaster — for hurricanes, that’s “when” not “if”!
Martin Owen is an independent consultant to the tourism industry and owner of Owen Organization in Shalimar. Readers can email questions to email@example.com.