Hotel/Motel Tax

As permitted in Code of Iowa Chapter 423A, a city may impose a hotel/motel tax at a rate not to exceed 7 percent after a successful election of a simple majority vote within the city. To begin the process or to change the amount of a previously approved hotel/motel tax, the city council must pass a resolution to hold an election which is filed with the county commissioner of elections (usually the county auditor).

The state code only allows two dates for the tax to begin: January 1 or July 1 and there must be sufficient time for the Iowa Department of Revenue to be notified by the city at least 45 days before imposition. For a change or repeal of the tax, the state code only allows two dates: December 31 or June 30. Therefore, an election must be held on or before November 14 or May 14 to impose, or November 13 or May 13 to change or repeal the existing tax. Regardless of the election date, the county auditor must notify the Director of the Iowa Department of Revenue within 10 days after the successful election if the tax is approved in a new jurisdiction or of any change or repeal in an existing jurisdiction.

The hotel/motel tax is then imposed on the gross receipts from rented sleeping rooms, apartments or sleeping quarters in any hotel, motel, inn, public lodging house, rooming house, tourist court, bed-and-breakfast or in any place where sleeping accommodations are furnished to transient guests. The taxes are remitted to the Iowa Department or Revenue on a quarterly basis. The actual amount collected is distributed to the city quarterly through an automatic deposit to the city’s account.

Under Section 423A.7, a city that has lawfully established a hotel/motel tax must spend at least 50 percent of related revenues for “the acquisition of sites for, or constructing, improving, enlarging, equipping, repairing, operating, or maintaining of recreation, convention, cultural, or entertainment facilities including but not limited to memorial buildings, halls and monuments, civic center convention buildings, auditoriums, coliseums, and parking areas or facilities…or for the promotion and encouragement of tourist and convention business in the city or county and surrounding areas.” Any remaining revenues may be spent by the city for any other lawful city purpose.

Note: local option sales tax is not collected on room rentals.

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