What is City Tax?

Updated 2026-05-28

A city tax, also known as a tourist tax or transient occupancy tax, is a specific tax charged by a municipal, county, or regional government on the rental of short-term lodging. This tax is typically calculated as a percentage of the rental price or as a flat fee per person per night.

The funds collected are used by local authorities to support tourism infrastructure, marketing campaigns, or general community services.

Join the Lodgify newsletter

How it works

Property owners or managers are responsible for collecting the city tax from their guests at the time of booking or payment. The tax is usually itemized on the guest's invoice.

Hosts must then remit the collected funds to the appropriate local tax authority according to a specified schedule, which could be monthly, quarterly, or annually. Some booking platforms may automatically collect and remit these taxes in certain jurisdictions, but the ultimate responsibility often remains with the host. Vacation rental software like Lodgify can be configured to automatically add the correct tax rate to invoices, simplifying the collection process.

Why it matters

Compliance with city tax regulations is a legal requirement for vacation rental operators. Failing to collect and remit the correct tax amount can lead to significant fines, back-payment demands with interest, and potential legal action.

Properly handling these taxes demonstrates professionalism and contributes to the local economy, funding the services and infrastructure that make a destination attractive to travelers.

Examples

A property manager in a US tourist town adds the required 8% transient occupancy tax as a separate line item to the total cost of a booking made through their direct booking website.
Airbnb automatically calculates, collects, and forwards the appropriate city tax to the municipal government for a booking in Chicago, relieving the host of that specific task for that transaction.
A host in Rome, Italy, collects a government-mandated 'contributo di soggiorno' of €6.00 per guest per night for the first 10 nights of their stay.
In certain German cities, the 'Kulturförderabgabe' (culture tax) is applied to leisure stays, and a host must register with the local finance office to remit the collected amounts.

Frequently asked questions

Is City Tax the same as VAT or Sales Tax?+

Not necessarily. A city tax is a specific lodging levy, and it can be in addition to general sales tax or Value Added Tax (VAT). In some jurisdictions, short-term rentals may be subject to multiple types of taxes, and the rules vary widely by location.

Who is responsible for collecting and remitting city tax?+

The property owner or manager is ultimately responsible for ensuring city taxes are collected and remitted correctly. While some OTAs may handle this in specific cities, the host must verify their local obligations and ensure compliance for all bookings, including direct ones.

How do I find out the city tax rate for my property?+

You should contact your local municipal or county finance or tax department. They are the official source for tax rates, remittance schedules, and registration requirements for short-term rental operators.

Does the city tax apply to fees like cleaning or pet fees?+

It depends on the local ordinance. In many jurisdictions, the tax is calculated on the entire booking value, which includes the nightly rate plus any mandatory fees like cleaning. In others, it may only apply to the base accommodation cost. Always check your local regulations.

Keep reading

Related terms

Policies & Legal

Lodging Tax

A lodging tax is a tax levied by government authorities (such as city, county, or state) on the rental of short-term accommodations, including vacation…

Read

Finance

Occupancy Tax

Occupancy tax is a tax levied on the rental of short-term accommodations, which hosts are legally required to collect from guests and remit to local or state…

Read

Policies & Legal

Transient Occupancy Tax (TOT)

Transient Occupancy Tax (TOT) is a tax levied by local or state governments on the rental of short-term accommodations, such as vacation rentals, hotels, and…

Read

Policies & Legal