Americans are used to paying taxes.
Income tax. Sales tax. Property tax. With those taxes, you generally know what to expect and have a general idea of what those funds support. For example, local property taxes support the infrastructure and services provided to you, the resident.
But sometimes, things aren’t as clear. Let’s say, you book a king suite at the Embassy Suites in downtown Wilmington for one person for one night. Taxes will come to about $45 and change. Let’s book a king studio for the same time at the Hampton Inn on Port Loop Road located between Oak Island and Southport. Though the room is about $150 cheaper, taxes come to more than $70.
What’s the difference? Well, it comes down to occupancy tax. Here’s what you need to know.
What is occupancy tax?
Occupancy tax, also called accommodations tax, was enacted by the North Carolina General Assembly in 1983 to capitalize on the state’s tourist economy. Essentially, guests who stay overnight will pay a percentage of their nightly accommodations rate. The owner of the establishment — hotel, motel, bed and breakfast or cottage — then remits those funds to the local government finance office. In the case of Airbnb and VRBO rentals, funds are paid directly to the North Carolina Department of Revenue and then distributed to the county or municipality.
What’s the occupancy tax rate?
Well, that depends on the town or county. According to the “2024 Profile of North Carolina Occupancy Taxes & Their Investment,” a March 2024 report by the Magellan Strategy Group, 90 of the state’s 100 counties and 110 of the state’s 552 cities and towns have the legislative authority to collect occupancy tax, and those amounts vary by location.
Where does this money go?
While legislation generally stipulates that the funds must be used to promote tourism and cover tourism-related expenses, the exact use depends on the legislation enacted for the locality. For example, some beach communities are permitted to use a portion of the funds for beach renourishment, while others specify the funding may be used for infrastructure and services.
