Tinkering with the hotel tax

On November 2, San Franciscans will again be asked to choose between two dueling ballot measures. This time the measures deal with the city’s hotel tax. The Ballot Simplification Committee struggled today to draft ballot language that would make clear the differences between the two propositions.

Currently the city has a 14 % hotel tax applied to the cost of cost of renting a hotel room in the city. There is also a fee of 1% to 1.5% added on to this tax to pay for upgrading the Moscone Convention Center and promote San Francisco. Long term residents, those who rent for more than 30 days, are exempt from these charges.

One measure on the ballot this year would raise the hotel tax from 14% to 16% for the period January 1, 2011 until January 1, 2014. This ballot measure would also specify that the person who collects the rent must collect this tax and turn it over to the government. The measure also changes the definition of “long term residents” so that it applies only to individuals. (Ballot measures do not yet have final titles or letter designations, so I will refer to this measure as Hotel Proposition One.)

The second ballot measure (Hotel Proposition Two) being placed on the ballot comes from the mayor’s office. It would keep the hotel tax at 14%, but would make the other changes suggested in Hotel Proposition Two.  In other words, the tax would have to be collected by anyone who rents a hotel room, and also, the definition of “long term residents” would apply only to individuals.

If both Hotel Proposition One and Hotel Proposition Two are passed by the voters, the decision about raising the tax will depend on how many people vote for each. If Hotel Prop. One has more votes, then the tax goes up to 16%; if Hotel Prop. Two has more votes, the tax stays the same. The other provisions are the same in both bills, so they will go into effect if either or both measures are passed.

Voters may wonder what all the fuss is about and why the definitions are being changed. They are designed to close loopholes in the present tax code. As the law is written, travel agents (primarily online travel companies) claim they are not actually renting the hotel rooms even though they collect the room rent, so they do not have to collect the taxes. Both propositions would require them to collect the taxes and turn them over to the City government.

The current definition of “long term residents” includes many businesses that rent blocks of rooms for the use of their employees or others. It also includes nonprofit organizations that rent blocks of rooms to provide housing for homeless people or others. Both propositions would put an end to their exemption from the hotel tax.

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