The Bed Tax: Who Pays?

What's a hotel?

Seems like a simple question, doesn't it?

It's not though, particularly when you're talking about the bed tax and who's actually responsible for paying it.

Properly known as the Hotel Occupation Retailer's Tax at the state level, the bed tax is charged against lodging operators as a percentage of the lodging bill. The state levies a 6 percent rate. Counties and municipalities can levy a rate up to 5 percent. Most, if not all, lodging operators tack this tax onto the lodging bill rather than pay it out of pocket.

In Williamson County there's a two percent bed tax that funds the Williamson County Tourism Bureau and a three percent bed tax that pays off the financing of the Williamson County Pavilion.

For motels and hotels there's no question that they are covered and are supposed to pay. The only exception is for guest stays over 30 days.

For bed and breakfast inns it's more tricky. Generally they do pay the tax on the total amount, though if the breakfast is billed separately, they don't have to pay the bed tax on that. However, then they would have to collect the sales tax on the food.

Campgrounds and cabins are the next tricky stage. Campgrounds are exempt, but cabins on a campground are not.

According to the Illinois Department of Revenue, if it's a permanent structure rented as lodging, it's covered. If it's not permanent, such as a camper hauled to a campground and rented to various people over the summer, it's exempt. Likewise, RVs rented out for vacations are not covered.

The last two categories of lodging are usually the most surprising for the operators who long thought they were exempt. Hunt clubs that offer overnight accommodations are covered, even if it's just a bunkhouse and not a private room.

Tax-exempt organizations are also covered even though they are normally exempt from paying or collecting taxes in other situations. That's one of the reasons why SIU's Touch of Nature pays the bed tax on its cabin rental when they do corporate retreats. Even though they are a public university, they are still covered.

Even churches that run campgrounds and retreats are covered under Illinois law. I'm not certain if the three-sided cabins at Camp Ondessonk would be covered, but the motel-like rooms of the St. Noel Conference Center there would be. Likewise the cabins at San Damiano Shrine in Pope County should be paying bed tax.

There are times when the operators of smaller sites or otherwise tax-exempt sites argue that they shouldn't be covered, and that's their right. However the law is the law, and until it's changed they are obligated to pay.

It's also in their best interest to pay. Most of the problems occur in the smaller counties that struggle for every dollar they can get to promote tourism and create jobs. That's in everybody's best interest.

For more on the state bed tax check the Illinois Department of Revenue's website.