What is California Tourism Assessment Tax & How Does it Affect You?

California Tourism Assessment Tax can be confusing. SIXT.VN clarifies this tax for tourists visiting Vietnam, focusing on transparency and ease of travel planning, especially in bustling cities like Hanoi. With SIXT.VN, navigate Vietnam’s tourist landscape smoothly, ensuring your trip is memorable and hassle-free.

This article simplifies the Transient Occupancy Tax (TOT), Tourism Marketing District (TMD) assessment, short-term rental regulations and their implications for travelers.

1. Understanding the California Tourism Assessment Tax: What is it?

The California Tourism Assessment Tax, specifically in cities like San Diego, involves several key components: Transient Occupancy Tax (TOT) and, in some cases, a Tourism Marketing District (TMD) assessment. TOT is a tax on the occupancy of any structure or part of a structure, calculated as a percentage of the rent. Operators are required to collect this tax from transients (individuals renting for less than one month) and remit it to the city. The TMD assessment, aimed at promoting tourism, is levied on lodging businesses and can be passed on to the transient.

• Transient Occupancy Tax (TOT): A tax levied on the rent paid for temporary lodging (less than 30 days).
• Tourism Marketing District (TMD) Assessment: A fee charged to lodging businesses (and potentially passed on to guests) to fund tourism promotion.
• Operator: The entity responsible for collecting and remitting TOT (e.g., hotel, property management company, individual renting out a property).
• Transient: A person who rents a property for less than one month.

2. Who Qualifies as a Transient Under California Law?

A transient, according to California law, specifically in the context of cities like San Diego, is defined as anyone who rents a structure or a portion of a structure for a period of less than one month. This definition is crucial for determining who is subject to the Transient Occupancy Tax (TOT). The key factor is the duration of the rental agreement. If a person rents accommodation for 29 days or less, they are considered a transient and the rental is subject to TOT.

• Less than 30 Days: The definitive criteria for transient status.
• Rental of a Structure or Portion Thereof: Includes hotels, apartments, rooms in a house, or any other form of lodging.
• Impact on TOT: Transient status triggers the obligation to pay TOT on the rental amount.

3. Deciphering the TMD Assessment: How Does it Boost California Tourism?

The TMD assessment is designed to boost tourism in specific areas of California, such as San Diego. This assessment is levied on lodging businesses with 70 or more rooms, though the specific rules can vary over time. The collected funds are dedicated to marketing and promoting the city as a tourist destination, ultimately aiming to attract more visitors and generate revenue for local businesses. Lodging businesses may choose to pass this assessment on to their guests, but it must be listed as a separate line item on the bill.

• Tourism Promotion: The primary goal of the TMD assessment.
• Lodging Businesses: Typically those with a certain number of rooms, are responsible for paying the assessment.
• Separate Line Item: If passed on to guests, the TMD assessment must be clearly identified on the bill.

4. TOT vs. TMD Assessment: Can They Be Combined?

No, the Transient Occupancy Tax (TOT) and the Tourism Marketing District (TMD) assessment cannot be combined on the guest folio or reported as a single total to the city. These are distinct charges with different purposes and requirements. TOT is a tax collected from the transient, while the TMD assessment is levied on the lodging business (although it may be passed on to the transient). Each must be listed separately on the guest’s bill and reported separately to the city.

• Distinct Charges: TOT and TMD serve different purposes.
• Separate Line Items: They must be displayed as separate entries on the guest folio.
• Separate Reporting: They require separate accounting and reporting to the city.

5. How to Obtain a Transient Occupancy Registration Certificate in California

To legally rent out property to transients in California cities like San Diego, obtaining a Transient Occupancy Registration Certificate is essential. You can apply for this certificate online through the city’s website, or by submitting a physical application to the City Treasurer’s office. The certificate number serves as your account number and must be included on all tax remittances and correspondence with the city. This process ensures that the city can properly track and manage TOT collections.

• Online Application: A convenient method for obtaining a certificate.
• Physical Application: An alternative for those who prefer a paper-based process.
• Certificate Number: Essential for all TOT-related transactions and communications.

6. Navigating TOT and TMD for Room Rentals via Online Platforms like Airbnb

Renting out a room through online platforms like Airbnb or Vrbo does not exempt you from TOT and TMD assessment responsibilities in California. If you’re renting for less than one month, the rental is subject to TOT. Depending on the specific period, the TMD assessment may also apply. It’s crucial to obtain a Transient Occupancy Registration Certificate from the city and remit the required taxes. The method of advertising or booking is irrelevant; the key factor is the duration of the rental.

• Online Platforms Don’t Exempt: Renting through Airbnb, Vrbo, etc., does not change your tax obligations.
• Duration Matters: Rentals less than one month are subject to TOT.
• Registration is Key: Obtaining a Transient Occupancy Registration Certificate is mandatory.

7. Beyond TOT: Additional Taxes and Fees for Short-Term Rentals in California

In addition to TOT, short-term rental operators in California, particularly in cities like San Diego, may be responsible for remitting Rental Unit Tax to the city if they rent out their property for more than six days in a calendar year. Furthermore, the Short-Term Residential Occupancy (STRO) Ordinance requires a license for all STRO of a dwelling unit for less than one month. Keeping abreast of these additional regulations is critical for compliance.

• Rental Unit Tax: An annual tax on residential rental properties.
• Short-Term Residential Occupancy (STRO) Ordinance: Requires a license for short-term rentals.
• Compliance is Crucial: Failure to comply can result in penalties and legal issues.

8. Reporting Non-Compliance: How to Handle Suspected TOT Evasion

If you suspect a neighbor or another property owner is renting to transients without collecting or remitting TOT, you can report this to the city’s TOT/TMD Administration desk. Providing as much information as possible, such as the rental address, owner’s name, and contact information, will assist the city in investigating the matter. This helps ensure fair compliance with tax laws and regulations.

• Contact the City: Reach out to the TOT/TMD Administration desk.
• Provide Details: Offer as much relevant information as possible.
• Ensure Compliance: Reporting helps maintain fairness and compliance.

9. Are Cleaning Fees Taxable Under California’s TOT Regulations?

The taxability of cleaning fees under California’s TOT regulations depends on the nature of the charge. Non-refundable cleaning fees are considered part of the rent and are subject to TOT and TMD assessment. Conversely, if the cleaning fee is fully refundable (with funds withheld only for specific damages), it is not subject to these taxes.

• Non-Refundable Fees: Considered part of the rent and taxable.
• Refundable Fees: Not subject to TOT and TMD assessment.
• Nature of the Charge: The determining factor in taxability.

10. Understanding TOT and TMD Exemptions: Who Qualifies?

Exemptions from TOT and TMD assessment are available for specific cases. Guests on official government business travel, who provide official government travel orders and a qualifying picture ID, may be exempt. It’s essential to verify the legitimacy of the government agency involved. The guest must complete a TOT Exemption form, which the operator must sign and retain for audit purposes.

• Government Business: A primary basis for exemption.
• Verification Required: Proof of government affiliation is necessary.
• Exemption Form: Must be completed and retained by the operator.

11. What Happens When You Voluntarily Disclose Unpaid TOT?

Even if you voluntarily come forward to catch up on unpaid TOT, penalties are generally not waived. Penalties are governed by specific sections of the San Diego Municipal Code and cannot be waived by the city treasurer’s office. It’s crucial to be aware of this and ensure timely compliance to avoid penalties.

• Voluntary Disclosure: Does not guarantee penalty waivers.
• Municipal Code: Governs penalty regulations.
• Timely Compliance: The best way to avoid penalties.

12. Managing Multiple Properties: TOT Remittance for Property Management Companies

Property management companies do not need to remit a separate TOT return for each property they manage. They can elect to remit their return information on a summary return, which includes monthly totals per property and the corresponding Transient Occupancy Registration Certificate numbers. This simplifies the reporting process for companies managing multiple properties.

• Summary Return: An option for property management companies.
• Monthly Totals: Must be included for each property.
• Streamlined Reporting: Simplifies the TOT remittance process.

13. How to Remit Your TOT and TMD Assessment Return in California

There are several ways to remit your TOT and TMD assessment return: online, by mail, or in person. The online payment portal is a convenient option, but it may involve third-party service fees. Mail and in-person payments do not incur these fees. Choose the method that best suits your needs while keeping in mind any associated costs.

• Online Payment: A convenient but potentially fee-based option.
• Mail Payment: A traditional method without service fees.
• In-Person Payment: Another option without service fees.

14. Rental Duration and TOT: Understanding the 30-Day Rule

If you rent your home to guests for a minimum of 30 days, you may or may not have to collect TOT. The determination depends on how “month” is defined. A month is the period of consecutive days from the first calendar day of occupancy in any month to the same calendar day in the next month following, or the last day of the next month following if no corresponding calendar day exists.

• Definition of “Month”: Crucial in determining TOT obligations.
• Consecutive Days: The key factor in determining exemption.
• Calendar Days: The basis for calculating rental duration.

15. Selling Your Hotel or STRO Property: TOT Procedures

If you are selling your hotel or STRO property and will no longer be renting to transients, you need to notify the city treasurer’s office immediately. For hotel properties, a closeout audit will be performed. For STRO properties, you should review your records to ensure you have reported and remitted all tax due. It’s essential to maintain accurate records for the audit.

• Notify the City: Essential when ceasing rental operations.
• Closeout Audit: Required for hotel properties.
• Record Review: Necessary for STRO properties.

16. Handling Over-Remitted TOT: Claiming a Credit

If you over-remitted TOT in a previous month, you may take a credit on future tax returns up to the amount of the over-remittance. Keep records to document the amount and reason for taking the credit. The credit amount taken in any month cannot exceed the tax due for that month, so you may need to spread the credit over multiple months.

• Credit on Future Returns: A way to recoup over-remitted funds.
• Documentation Required: Keep records of the over-remittance.
• Monthly Limit: The credit cannot exceed the tax due for that month.

17. Credit Card Payments for TOT: Understanding the Fees

The City of San Diego accepts credit cards as a payment method for TOT through the online payment portal. However, there is a non-refundable third-party service fee per transaction. This fee is assessed by the third party, not the City of San Diego. Cash and check payments made by mail or in person do not incur a service fee.

• Online Payment Portal: Accepts credit card payments.
• Third-Party Service Fee: Applies to online transactions.
• Cash and Check Payments: Do not incur service fees.

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FAQ: California Tourism Assessment Tax

1. What is the purpose of the California Tourism Assessment Tax?

The California Tourism Assessment Tax, which includes the Transient Occupancy Tax (TOT) and the Tourism Marketing District (TMD) assessment, primarily serves to generate revenue for the city and promote tourism. TOT funds city services, while the TMD assessment is specifically used for marketing and promotional activities to attract more visitors.

2. Who is responsible for paying the Transient Occupancy Tax (TOT)?

The Transient Occupancy Tax (TOT) is paid by the transient, which is any person who rents a structure or a portion of a structure for less than one month. The operator, such as a hotel or property owner, is responsible for collecting the tax from the transient and remitting it to the city.

3. How is the Tourism Marketing District (TMD) assessment used?

The Tourism Marketing District (TMD) assessment is used to fund marketing and promotional activities aimed at attracting more tourists to the city. These activities can include advertising campaigns, event sponsorships, and other initiatives designed to boost tourism.

4. Are there any exemptions from the Transient Occupancy Tax (TOT) in California?

Yes, there are exemptions from the Transient Occupancy Tax (TOT). Guests on official government business travel, who provide official government travel orders and a qualifying picture ID, may be exempt. The guest must complete a TOT Exemption form, which the operator must sign and retain for audit purposes.

5. Can cleaning fees be exempt from the Transient Occupancy Tax (TOT)?

The taxability of cleaning fees depends on the nature of the charge. If the fee is non-refundable, it is considered part of the rent and is subject to TOT and TMD assessment. Conversely, if the cleaning fee is fully refundable (with funds withheld only for specific damages), it is not subject to these taxes.

6. What should I do if I suspect someone is not collecting or remitting TOT?

If you suspect a property owner is renting to transients without collecting or remitting TOT, you can report this to the city’s TOT/TMD Administration desk. Providing as much information as possible, such as the rental address, owner’s name, and contact information, will assist the city in investigating the matter.

7. How do I apply for a Transient Occupancy Registration Certificate?

You can apply for a Transient Occupancy Registration Certificate online through the city’s website, or by submitting a physical application to the City Treasurer’s office. The certificate number serves as your account number and must be included on all tax remittances and correspondence with the city.

8. What is the Short-Term Residential Occupancy (STRO) Ordinance?

The Short-Term Residential Occupancy (STRO) Ordinance requires a license for all STRO of a dwelling unit for less than one month. This is an additional regulation that short-term rental operators need to comply with.

9. How can property management companies remit TOT for multiple properties?

Property management companies can elect to remit their return information on a summary return, which includes monthly totals per property and the corresponding Transient Occupancy Registration Certificate numbers. This simplifies the reporting process for companies managing multiple properties.

10. What happens if I over-remitted TOT in a previous month?

If you over-remitted TOT in a previous month, you may take a credit on future tax returns up to the amount of the over-remittance. Keep records to document the amount and reason for taking the credit. The credit amount taken in any month cannot exceed the tax due for that month.