A hotel/motel tax is a tax on the privilege of occupancy of hotel rooms. Under T.C.A. § 67-4-1401(2), the term hotel includes private, public, and government owned hotels, inns, tourist camps, tourist courts, tourist cabins, motels, short-term rental units, primitive and recreational vehicle campsites and campgrounds, or any place in which rooms, lodgings, or accommodations are furnished to transients for consideration.  Prior to July 1, 2021, counties levied the hotel/motel tax by private act (with the exception of counties with a metropolitan form of government, which use a general law, T.C.A. § 7-4-101 et seq.)

When a person has stayed in a hotel for 30 continuous days, the operator is required to remit the tax to the county and stop collecting the tax from the person for the remainder of their stay. T.C.A. § 67-4-1404. 

Modifying, Levying, and Repealing Hotel/Motel Tax —T.C.A. § 67-4-1404 allows counties (except for those with a metropolitan form of government) to levy, modify, or repeal a privilege tax by resolution (rather than by private act) subject to the following restrictions:

1. Except as provided in (3) below, the tax must not exceed 4% of consideration charged to the occupant of the hotel; provided that, on or after May 5, 2025, a county shall not increase the tax in an amount such that the cumulative amount in a city exceeds 8%;
2. Subject to T.C.A. § 67-4-1414,  a hotel/motel tax authorized before May 1, 2025 that exceeds the limit remains in full force and effect; and
3. This does not void or modify a private act, ordinance, or resolution authorizing a hotel/motel tax that existed on or before July 1, 2021, except as provided in  T.C.A. § 67-4-1414.

Under T.C.A. § 67-4-1403(a), revenue received by the county from the tax must be used for tourism promotion and tourism development. Tourism development investments must not be used for general government expenditures unless approved through a memorandum of understanding between the county legislative body and the designated destination marketing entity. However, subject to T.C.A. § 67-4-1414,  a county levying a hotel/motel tax before May 1, 2025 may continue to use revenue from the tax in the same manner described in the private act or resolution. T.C.A. § 67-4-1403(b). Further, hotel/motel taxes levied before July 1, 2025 remain in full force and effect, but counties are not authorized to change the use of revenue of a preexisting tax except for tourism promotion and tourism development and must repeal a preexisting tax before adopting a new tax. T.C.A. § 67-4-1414. 

A county levying a hotel/tax is required to provide a written report to the commissioner of the Department of Tourist Development within 90 days after the end of the county’s fiscal year. The annual report must detail the amount of revenue spent by the county and how the expenditures have been used for tourism and tourism development. If an audit finds that the county used hotel/motel tax revenue for purposes not related to tourism promotion or tourism development, the county is required to use general funds equal to amount spent improperly to be used for tourism promotion and tourism development. T.C.A. § 67-4-1403(c). The Tennessee Department of Tourist Development has created a form for FY 2025 reporting which can be found here.

Short-Term Rental Marketplaces

T.C.A. § 67-4-1501 defines a short-term rental marketplace as a person or entity, excluding a vacation lodging service, that provides a platform for compensation, through which a third party offers to rent a short-term rental unit to an occupant. Examples of short-term rental marketplaces are Airbnb and VRBO. Hotel/motel taxes on short-term rental units secured through a short-term rental marketplace must be collected and remitted by the short-term rental marketplace to the department of revenue for distribution to the county. T.C.A. § 67-4-1502. The department is required to remit the taxes collected to the county on a monthly basis. The department may deduct an administrative fee of 0.75% for the collection and distribution of the tax. T.C.A. § 67-4-1506. 

Hotel/Motel Tax in Metropolitan Counties 

Metropolitan Counties follow the general law found at T.C.A. § 7-4-101 et seq. These counties are authorized to impose a hotel/motel tax in an amount not to exceed 3% of the consideration charged by the operator. The privilege tax shall be approved by ordinance of the metropolitan council. T. C. A. § 7-4-102.

In addition to tax described above, metropolitan counties having population of less than 25,000 according to the 2020 federal census or subsequent federal census are authorized to impose an additional hotel/motel tax not to exceed 3% of the consideration charged by the operator. The additional tax shall be approved by ordinance of the metropolitan council. T. C. A. § 7-4-102.