The front desk of a small Inn closes out their December guest folio the same way it has for years, adding sales, state, and local hotel tax to their room rate. But in January, a new tax type appeared on the chart of accounts. It’s important that whoever is running your books is aware of that difference before sending out the next invoice.
2026’s wave of lodging tax increases has important nuances worth paying attention to, including effective dates and where it’s categorized in your books. We’ve figured out the details of these various state changes so you can plan for the year ahead.
The States That Changed Hospitality Taxes
As of this year, several states have made changes to certain tax laws that affect how hospitality business owners will file their taxes, some by property type and others by the booking platform involved.
Before looking at the specific state changes, reviewing some terms that get used frequently in the hospitality industry might help your understanding.
- Lodging tax/transient occupancy tax: These terms are often used interchangeably for a tax charged on short-term stays, typically anything under 30 days. The guest pays, and the property collects it and remits it to a state or local tax authority.
- Marketplace facilitator: This refers to a booking site or app that might handle both the listing and payment for the property owner. The 2026 changes are extending tax collection as a separate obligation with its own filing rules.
- Whole-home rental vs. room rental: Several of the 2026 changes are taxing an entire rental house differently than a single hotel room, which means the same guest stay can trigger different tax codes depending on what was booked.
With those in place, here’s what has changed for various state taxes.
Hawaii
As of January 1, 2026, Hawaii’s Transient Accommodations Tax moved from 10.25% to 11%. This increase aims to fund environmental and climate-resilience projects through the added revenue earned from hotel stays, vacation rentals, and timeshares.
For a condo rental with a rate of $300 a night, the per-night tax difference from $30.75 to $33 looks small. Across a full season of bookings, that’s where the total tax liability a property reports each period might start to change.
Hawaii’s Department of Taxation ties the applicable rate to when the accommodation is furnished, not when it is booked. Revenue recognized in a prior period may still need a rate reconciliation when the guest checks in.
Rhode Island
Rhode Island’s local hotel tax rose from 1% to 2%, effective January 1, 2026, paired with a new 5% tax that applies to whole-home short-term rentals.
A guest booking a single hotel room pays a combined 14% in state sales tax, state hotel tax, and local hotel tax. However, a guest renting an entire house on the same night pays a comparable overall tax rate, but through a different combination since the whole-home tax replaces the room-only hotel tax rather than stacking on top.
Room-only and whole-home bookings now need to be coded separately rather than combined into one general lodging tax category. The two rates are calculated differently, and Rhode Island expects them reported accordingly.
Colorado
Rather than mandating an increase, House Bill 25-1247 raised the ceiling on what counties could ask voters to approve, from 2% up to 6%, with each county holding its own election. Eagle County voters approved doubling the local lodging tax from 2% to 4%, saving the added revenue for childcare and public safety support, and a smaller share for tourism marketing.
The higher 4% rate applies only in unincorporated Eagle County and the town of Gypsum; nearby towns like Vail and Avon already have their own separately set lodging tax rates. A property management company operating across several Colorado mountain towns may now track several local lodging tax rates within the same county.
Illinois and Louisiana
These states expanded who is responsible for collecting an existing rate by broadening the legal definition of “marketplace facilitator” to explicitly include short-term rental platforms and accommodation intermediaries.
Effective July 1, 2025, Louisiana’s Act 82 made accommodations intermediaries responsible for collecting and remitting state and local sales tax on facilitated bookings, shifting the duty off hotels themselves with bookings on those platforms. Starting January 1, 2026, that same responsibility extends to local hotel/motel occupancy tax on those bookings.
In Illinois’s Hotel Operators’ Occupation Tax rules, hotel marketplace facilitators meeting a $100,000 remittance threshold are treated as the hotel operator itself for tax registration purposes. This became effective July 1, 2026, per Illinois DOR’s FY 2026-33 bulletin.
These shifts adjust how property owners complete their routine recordkeeping, particularly if they list their bookings through certain platforms.
What Are This Year’s Common Tax Changes in Hospitality?
As far as state and local tax policy goes, these changes aren’t unusual. For decades, jurisdictions with heavy tourism traffic have leaned on lodging taxes for public revenue because the burden falls largely on visitors rather than residents.
What’s worth your attention about the 2026 cycle is how many different mechanisms are being used at once.
The changes tend to sort into a few recognizable buckets:
- Rate increases on the existing tax (Hawaii, Eagle County). The tax type stays the same; the percentage moves.
- New tax types layered onto existing ones (Rhode Island’s whole-home tax). A new code, not just a new number, needs to be added to the books.
- Definitional expansion of who must collect (Illinois, Louisiana). The obligation shifts toward platforms, but reconciliation work often lands on the property owner or their bookkeeper.
Keeping all of this in sync can be difficult when you have multiple properties, teams, platforms, and other obligations to manage. When taxes start looking complicated, checking with a tax CPA who follows hospitality industry updates can help distinguish how filing might look different for your property this year.
What Are the Reasons for Lodging Tax Increases?
Why are taxes changing? Why are prices climbing?
Many states face funding gaps for various public needs, and in many cases, lodging taxes are the common solution. Business owners in hospitality tend to ask the same questions, but they’re the ones collecting the tax, not only paying it.
There are a few common reasons that explain these changes:
- Budget relief: Local leaders often lean on lodging taxes to fund their restoration and environmental projects that benefit the broader public, funded by tourists rather than the local tax base.
- Short-term rental regulation: Municipalities increasingly target marketplace facilitator platforms to offset the neighborhood and service costs generated by transient tourism. We’re looking at things such as trash collection, parking enforcement, and code compliance where there’s a high concentration of short-term rentals.
- Tourism and capital projects: These collected funds are frequently used for convention centers, civic promotion, and public transit upgrades.
More short-term rentals mean more visitors, which also means your city has more routine upkeep to manage, from repairs to emergency services capacity. Lodging taxes are one of the tools that help cover city upkeep without raising taxes on residents directly.
What does that mean for hotel owners?
Knowing this context helps explain why so many of these increases are showing up in tourism-heavy states at the same time, and why some are focused on the revenue for a specific purpose. With a clearer picture of what’s changed and why, the next question is how a property should plan around it.
Learn more about how lodging property owners can plan for their next tax season.
How Can Hotel Owners Plan for Taxes Now?
Your property bookkeeping doesn’t need a complete overhaul to keep up with these changes, but a few habits can help keep the accounting side steady as they take effect:
- Confirm the operative date rule. Several jurisdictions are tying the applicable tax rate to the occupancy date instead of the booking date. Booking a vacation in 2025 for dates in 2026 may need a rate adjustment at checkout.
- Separate whole-home from room-only bookings. Where jurisdictions like Rhode Island tax these differently, categorizing them together may make month-end reconciliation harder. Setting up the distinct tax codes now can be easier than untangling them after the period closes.
- Track jurisdiction boundaries. Eagle County’s example shows that a lodging tax rate can vary from one town to the next depending on incorporation status. Track incorporation status and applicable local rates by property to help prevent rate mismatches.
- Reconcile platform-remitted taxes against property records. As Illinois and Louisiana shift collection duties toward marketplace facilitators, consider checking periodically what a platform’s statement shows compared to the property’s own booking records.
Lodging tax rules continue to be updated by state departments of revenue and local tax authorities, and you may find that directing specific questions to an accounting professional familiar with your property’s jurisdiction can help when complications begin to reveal themselves. Our hospitality team at MBE CPAs can help you review these changes and determine your next steps based on your specific case.
We understand the rhythm of seasonal hospitality businesses. Revenue and staffing aren’t the only elements that shift throughout the year. Let’s look at the rules together.