While Wisconsin's Room Tax statute 66.0615 was revised almost 2 years ago, there are some changes that are just now finally coming into fruition, and we wanted to provide a brief refresher on some key points, plus add at the end some simple tips on determining if expenditures are considered "tourism promotion and tourism development".
New Annual Reports to DOR on Room Tax Expenditures for Tourism
As of May 1st of this year, each municipality with a Room Tax must submit a report electronically on the 2016 fiscal year to the state Department of Revenue (DOR) on the following:
- The total amount of room tax collected (aggregate - not broken down by property)
- The room tax rate imposed (what percentage)
- What dollar amount was designated for "tourism promotion and tourism development" (TP&TD) (to ensure compliance with the statutes)
- Did the municipality hand over oversight of the TP&TD funds to a local tourism commission OR to a local tourism entity (the only two options they have)
- What are the names and the name of the business they own or are employed by, of each member of the tourism commission or tourism entity governing body (to ensure compliance with statutory requirements)
- A detailed break down of all expenditures of $1,000 or more made by the commission or the entity from the TP&TD funds. Note: payroll may be reported in aggregate, not by individual. (also to ensure the funds are spent in compliance)
PLUS,
if a municipality was "grandfathered" back in 1994 to retain more than 30% for their own purposes, they need to submit the following proof to retain their right to continue keeping more than the 30%:
- A copy of the room tax ordinance in effect on May 13, 1994 that notes the percentage imposed
- They must provide a copy of the municipality's financial statement completed closest to May 13, 1994 that demonstrates the percentage they retained for other than tourism promotion and development use
While the DOR will not judge submissions, this will be publicly available information, so residents or any interested party (including the media) can see the information. Should a municipality choose to not remit the report as required, the DOR may impose a $3,000 fee, which could offset some of their expenses in collecting the information.
Once the DOR submissions from municipalities become live on their website, we will provide you a link, and strongly encourage you to view what your municipality has posted, to help to monitor compliance with the Wisconsin Room Tax Statute.
New Scale-Backs in Grandfathered Revenue Kept by Municipalities
Starting on January 1 of 2017, for municipalities that were grandfathered since 1994 to retain more than 30% of total room tax collections for their own purposes, a new dollar cap limit has been imposed that should begin to provide modest annual increases in revenues available for tourism promotion and tourism development(TP&TD).
How does this work?
- In 2017 a municipality may not retain more in the 2017 year than the total room tax dollar amount they retained in 2014. Any revenues beyond that figure must go to TP&TD.
- In 2018, they may not retain more dollars in 2018 than they did in 2013, with the remainder to TP&TD.
- In 2019, they may not retain more dollars in 2019 than they did in 2012, with the remainder to TP&TD.
- In 2020, they may not retain more dollars in 2020 than they did in 2011, with the remainder to TP&TD.
- Finally, beginning in 2021 and from there on, they may not retain more dollars than they did in 2010, with the remainder each year to TP&TD. Should at some point the municipality finds they would retain more by keeping the standard 30%, they can switch to that formula.
To provide checks and balances in your community, one can request from the municipality the financials for each of the years of 2010, 2011, 2012, 2013, and 2014, which should outline somewhere within just how much room tax was spent on TP&TD (with the remainder going elsewhere in their funds) OR it should note the amount of room tax revenue retained for the municipality.
Determining Eligible TP&TD Expenditures from Room Tax
While the "tourism promotion and tourism development" revised designation has now been in place for well over 18 months already, we frequently receive questions about whether a certain expenditure really is considered tourism promotion and tourism development (TP&TD).
A simplified way to judge this is whether you are able to answer each of the following questions with a "yes":
- Is this expenditure reasonably likely to generate paid overnight stays in multiple lodging properties with different owners collecting & remitting room tax in this municipality? If there is only one lodging property in the municipality, then it can generate paid overnights in the one lodging property.
- Is the expenditure on something that is significantly used by transient tourists? As a basic premise, transient tourists would not include residents in this and nearby communities.
- Is the expenditure on a: marketing project, transient tourist informational service, or tangible municipal development? The statute specifies "Marketing projects" include advertising media buys, creation and distribution of printed or electronic promotional tourist materials, or efforts to recruit conventions, sporting events, or motor coach groups. Again, the first two questions must be answered with a "yes" first, which would remove eligibility for a number of non-tourism focused marketing projects, services, or development.
While the WH&LA voluntarily fields questions on room tax from around the state from a wide variety of tourism industry and non-tourism sources on a daily basis, much of the information is covered in different resources online at our website: www.wisconsinlodging.org/roomtax. You may find it helpful to download the resources of interest or to bookmark the link so that you can access the information 24/7. We plan to add further resources in the future, and will continue to do our best to respond to all room tax questions to help encourage that room tax will be addressed and applied according to Wisconsin's laws.
Thank you for your continued support.
