SB 438

Under current law, a city, village, or town (municipality) and a local exposition

district may impose a room tax. The room tax is a tax on the privilege of furnishing,

at retail, rooms or lodging to transients by hotelkeepers, motel operators, and other

persons who furnish accommodations that are available to the public, irrespective

of whether membership is required for use of the accommodations.

Generally, the maximum room tax that a municipality may impose is 8 percent.

A single municipality that imposes a room tax may create a commission, which is

defined as an entity to coordinate tourism promotion and development (tourism). If

two or more municipalities in a zone impose a room tax, they must create a

commission. Current law defines a zone as an area made up of two or more

municipalities that, those municipalities agree, is a single destination as perceived

by the traveling public.

Current law requires a commission to contract with an organization to provide

staff, development, or promotional services for the tourism industry in a

municipality if a tourism entity does not exist in that municipality. A tourism entity

is defined under current law as a nonprofit organization that existed before January

1, 1992, and provides staff, development, or promotional services for the tourism

industry in a municipality. The bill changes the definition of tourism entity to be a

nonprofit organization that spends at least 51 percent of its revenue on tourism

promotion and development and provides destination marketing staff and services

for the tourism industry in a municipality without regard to when the entity came

into existence.

Under the bill, the majority of the members of a commission, and the majority

of the members of the governing body of a tourism entity that spends between 51

percent and 70 percent of its revenue on tourism promotion and development, must

be owners or operators of restaurants, tourist attractions, or lodging facilities which

collect the room tax, and which are located in the municipality for which the room

tax is collected. Also under the bill, the governing body of a tourism entity must

include at least one owner or operator of a lodging facility in the municipality for

which the room tax is collected.

Under current law, a municipality that first imposes a room tax after May 13,

1994, must spend at least 70 percent of the amount collected on tourism; the

expenditure may be spent directly by the municipality or forwarded to the

commission for its municipality or zone. The 30 percent or less of the room tax

revenue that is not spent on tourism may be retained by the municipality and used

for any other purpose. If a municipality collected a room tax on May 13, 1994, it may

retain up to the same percentage of the room tax that it retained on that date, even

if that percentage is more than 30 percent.

Under this bill, any revenue that is not retained by the municipality must be

forwarded to a tourism entity or a commission, although the person collecting the