State-Shared Lodging Tax. A city or county legislative authority may impose a 0.2 percent special excise tax on the sale or charge made for furnishing lodging. The tax is credited against the state sales tax rate. The state-shared lodging tax is also referred to as the hotel/motel tax or the transient rental tax.

Certain requirements of the tax may prevent some cities from imposing the tax. Proceeds from the tax must be used for tourism promotion, acquisition of tourism-related facilities, or operation of tourism-related facilities.

Beginning January 1, 2021, for counties with a population of at least 1.5 million, proceeds from the tax must be used as follows:

• at least 37.5 percent for art museums, cultural museums, heritage museums, the arts, and the performing arts;
• at least 37.5 percent for contracts, loans, or grants to nonprofit organizations or public housing authorities for affordable workforce housing within 0.5 miles of a transit station or for housing, facilities, or services for homeless youth, or to repay general obligation or revenue bonds used to finance contracts, loans, or grants for affordable workforce housing within one-half mile of a transit station, or revenue bonds authorized by a community preservation and development authority that promote sustainable workplace opportunities near a community impacted by the construction or operation of tourism-related facilities; and
• the remainder for capital or operating programs that promote tourism and attract tourists to the county.

Affordable workforce housing includes housing for a single person, family, or unrelated persons living together whose income is at or below 80 percent of the median income, adjusted for household size, for the county where the housing is located. 

A county, city, or town is authorized to impose a special excise tax on furnishing of lodging of short-term rentals. The legislative body of the local government must adopt a resolution of intent prior to imposing the tax. Adoption of the tax requires a simple majority approval of the enacting legislative authority.

The tax may be imposed in unincorporated areas of the county for the county tax and in the corporate limits of the city for the city tax. A county ordinance or resolution must contain a provision allowing a credit against the county tax for the full amount of any city or town special excise tax on furnishing short-term rentals. Local governments may develop criteria to exempt up to one short-term rental per operator based on the operator's age, or income, or both. The tax on short-term rentals is not subject to the statutory cap on all other taxes imposed on lodging. A county, city, or town must specify exemption criteria and outline a certification process for the exemptions in the resolution when it adopts legislation imposing the tax.

Revenues from the special excise tax must be used for operating and capital costs of affordable housing programs including homeless housing assistance, temporary shelters, and other related services. A county, city, or town may use revenues from the special excise tax for contracts, loans, or grants to nonprofit organizations or public housing authorities for services related to affordable housing programs.  A local government may retain up to 5 percent of the moneys collected for the direct and indirect costs to administer services and programs.

• Changes the provision allowing a county, city, or town to develop criteria to exempt no more than on short-term rental property based on a person’s age or income to be based on an operator’s age or income.
• Requires a county, city, or town to specify exemption criteria and outline a certification process for the exemptions in the resolution when it adopts legislation imposing the tax.
• Defines operator to mean any person who receives payment for owning or operating a dwelling unit, or portion thereof, as a short-term rental unit.

The committee recommended a different version of the bill than what was heard. PRO:  Homes that have been traditionally used as long-term rentals are now being used for short-term rentals, which displaces workforce housing in the area.  This bill is councilmanic and if jurisdictions choose to do so, they can use this to bring in local dollars to pay for housing.  There are a number of communities that are vacation centers and destination locations that have a proliferation of short-term rentals that has an impact on the existing housing market and takes units that would otherwise be available for long-term rentals for business opportunities.  It is challenging to find housing in those communities that is available for the workforce.  This bill is a smart and targeted approach for local jurisdictions.