Innkeepers’ tax raise discussed


Talk of raising the innkeepers’ tax has again come up in Montgomery County.

On Thursday tourism officials were joined by local lodging representatives and others for a public meeting at Fusion 54. Those who spoke shared both the positive and negative consequences of increasing the amount of tourism tax paid at hotels and other lodging venues from 3% to 5%.

Representatives from local hotels, cabin rentals, campgrounds and Airbnb facilities dominated the attendance and discussion.

Hoteliers add the innkeepers’ tax, much like the state sales tax, to a visitor’s bill. The innkeepers are responsible for collecting the tax and forwarding the money to the Montgomery County Convention and Visitors Commission, which is an arm of the Montgomery County Council. The CVC then distributes the funds to organizations that promote events that have the potential to increase out-of-town visitors to the county.

In 2022, the amount of innkeepers’ tax received by the CVC was $324,160. The CVC then used $220,000 of those funds to operate the Montgomery County Visitors Bureau in 2023. The CVC then uses the remaining funds to finance other projects such as a recent $17,000 grant to the Strawberry Festival. Not-for-profit entities also can apply for these funds. As of Thursday, the CVC had a balance of $260,332. The commission has paid $110,000 to the visitor’s bureau. Those payments are disbursed quarterly. Innkeepers pay the collected tax each month to the county treasurer.

Lodging representatives spoke against the potential increase in the tax. They believe a raise in the tourism tax could decrease their corporate business, thereby hurting their financial bottom line. Hotel operators/owners in attendance claim the majority of their business is from corporate bookings and not tourism. They believe since corporations have a maximum per diem they pay for a hotel,
they will start sending their employees to other counties. However, every county near Montgomery County has a higher innkeepers’ tax rate.

“I don’t think you understand that we (hotels) have the majority of our business coming from corporations who have set per diem amounts they can pay for lodging,” said Dunny Gabhawama, Holiday Inn Express Crawfordsville owner. “Raising the tax will come right out of our pocket, not the corporate customers.”

Hoteliers also expressed their belief that better communication is needed between their group and the visitors bureau. Hotel personnel also said the corporations that own their hotels pay a lot of money to promote their hotels nationally.

The proposed tax increase is estimated to raise an additional $180,000, which could be transferred to the visitors bureau through the commission. The visitors bureau board has earmarked any additional funds would go toward the local tourism industry, marketing tools and new tourism products and experiences. One piece of the puzzle would include hiring a marketing director for the visitor’s bureau.

“This is not a new idea,” said Casey Hockersmith, visitors bureau board member and chairman of the innkeepers tax committee. “During our budget process we realized we were doing just the bare minimum on the budget we had. We have created a plan for 2024 and we realize we need more funding.”

It was noted during the meeting that out of the 78 Indiana counties that have innkeepers’ tax revenue, there are only two, Montgomery and Fulton, with a 3% rate. The other 76 counties have higher rates. Nearby counties and their tax rates are: Tippecanoe (5%); Clinton (4%); Boone (5%); Hendricks (8%); Putnam (5%); Parke (5%), however Parke County is in the process of raising its rate to 8%. Fountain County does not have an innkeepers tax.

Indiana statue states the innkeepers’ standard rate can go up to 5%. To go above 5%, counties must seek permission from the state.

The county’s proposed increase must be approved by the Montgomery County Council, and would only affect only those who rent lodging in local hotels.

The visitors bureau board of directors will make their case for increasing the tax rate at 9 a.m. Tuesday before county council members at their regular meeting at the Montgomery County Government Center.


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