Revitalization: To Tax or Not to Tax?

Missouri’s Journey to Tax Recovery from COVID-19

By Kaitlyn Wallace

It is no secret that the past year has been a tumultuous time for the tourism industry. Travel restrictions and COVID-related tourism hesitance famously cost the industry countless jobs, as well as millions of dollars in revenue. Though 2021 has so far seen a massive uptick in tourism and travel-related spending, the industry still faces a long road to full recovery and an adjustment to an ever-changing “new normal.”

But these effects are not limited to the industry. Aside from the thousands of jobs, millions of dollars of revenue, and sales support that tourism brings to cities across the US, tourism also brings valuable infrastructure support in the form of tax dollars. These tax dollars, collected specifically as hotel and tourism taxes, help fund a variety of city projects and travel marketing intended to in turn create a more attractive base for tourists and travelers. These, too, have seen massive shifts; the American Hotel and Lodging Association estimated that the COVID-19 impact on tax revenue generated by the hotel industry in Missouri alone rose to $369.4 million in 2020.

Going forward, it will be essential to balance the tax burden on the hotel and tourism industry with the potential benefits provided by their utilization by government services. So, let’s review the current Hotel and Tourism standards in Missouri:

Missouri

The state of Missouri itself collects a 4.225% state sales tax on any lodging prices in which guests stay for 30 days or less. In addition, cities and counties are able to collect additional hotel, tourism, or special district taxes. These taxes vary widely by region and location.

St. Louis

In St. Louis City, for example, all lodging is subject to a 3.5% Convention and Sports Tax and a 3.75% Convention and Tourism Tax. The Convention and Sports Tax supports Explore St. Louis and helps fund convention facilities and related upkeep activities. The Convention and Tourism Tax, on the other hand, goes to the Convention and Visitors Commission (CVC), which uses its funds to advertise St. Louis’ attractions and promote tourism to the city nationally.

Kansas City, MO

Kansas City, on the other hand, collects a single 7.5% Convention and Tourism tax (with an additional 2% tax on food prepared in temporary lodging facilities). These earnings are used to finance the city’s Convention and Tourism Fund.

Branson, MO

Branson, one of Missouri’s most popular tourism destinations, collects a 4% tax on accommodations and attraction tickets (as well as a 0.5% tax on purchases made at restaurants and concessions). Similar to other tourism tax expenditures, approximately 75% of revenue generated from the Tourism Tax is used to support city infrastructure and development, while the remaining 25% is used for marketing and attracting tourists. This ensures that the additional infrastructure cost burden placed by the high tourism load in Branson is not shouldered by residents, and is instead spread over the visiting population across the year.

This Tourism Tax was up for renewal in the April 6, 2021 municipal election, igniting worry in many officials that should the tax be stricken down, the residents of Branson might face increased financial responsibilities for the infrastructure and development costs that keep the city a popular tourist destination. Luckily, this worry was proven to be unfounded; the Tourism Tax was renewed with over 75% voter approval, ensuring continued provision of funds for marketing and development.

To Tax or Not To Tax

Despite the enormous impact made by COVID-19 on the tourism industry, voters have chosen to retain Hotel and Tourism taxes in various regions across the state. There are, of course, differing schools of thought on the matter. It is always possible that lowering Hotel and Tourism tax will draw visitors in and away from states with increased visitor’s taxes; this would in turn revitalize the industry in the state of Missouri and perhaps begin to make up the revenue deficit caused by decreased travel in 2020. On the other hand, the first months of 2021 have been promising, with many states actually making up for the 2020 tax revenue deficit (though Missouri has not yet joined these states in equivalent gains). If the tourism industry continues in its explosive upward trend in the remaining months of 2021, holding the current tax rates would put Missouri back on par with other states in COVID-related financial recovery.

In truth, only time will tell whether Hotel and Tourism Tax choices will assist or hinder the recovery of tourism in Missouri. But as the industry, and the state at large, begins the long road back to normal, one thing is for sure: St. Louis, Branson, Kansas City, and other tourism hotspots must be prepared for the return of visitors, and the burdens and benefits that will inevitably come with them.

 

MEET

Kaitlyn Wallace is a contributing writer from St. Louis.

 

A 10-Year Comparison of Tourism Tax in Missouri

  2011 2021
  Lodging Tax (%) Total (%) Lodging Tax (%) Total (%)
Branson 4.000 12.475 4.000 12.350
Branson Landing 4.000 13.475 4.000 13.350
Cape Girardeau 4.000 11.975 4.000 12.475
City of O-Fallon 10.000 17.950 5.000 12.950
Columbia 4.000 11.300 5.000 12.975
Hermann 3.000 11.100 5.000 13.975
Independence 6.500 14.100 6.500 14.350
Jefferson City 3.000 10.725 7.000 14.725
Joplin 4.000 11.728 4.000 12.575
Kansas City-Downtown 7.500 15.725 7.500 16.100
Lake Ozarks (Camden & Morgan Counties) 3.000 10.725 3.000 8.775-9.025
Lake Ozarks (Miller County) 5.000 13.290 5.000 10.725
Maryland Heights 7.750 15.175 7.750 15.988
Springfield 5.000 12.725 5.000 13.100
St. Charles 5.000 14.410 5.000 12.950
St. Joseph 3.000 10.700 6.000 14.450
St. Louis City 7.250 14.866 7.250 16.929
St. Louis County 3.000 15.741 3.500 11.238
Ste. Genevieve 2.000 10.225 2.000 11.225
Warrensburg 2.500 10.600 5.000 13.850

 

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