New Transient Room Tax Legislation: Action Needed

House Bill 8 was a KLC legislative initiative passed during the 2022 legislative session. The bill remedies a long-standing transient room tax collection gap that omitted online travel companies.

The Kentucky Court of Appeals held in 2011 that Kentucky’s transient room tax was not assessable on rentals facilitated by online travel companies. Bowling Green v. Hotels.com, L.P., 357 S.W.3d 531 (Ky. App. 2011). Specifically, the Court of Appeals determined that KRS 91A.390 applies to charges for rental accommodations and not to services that merely facilitate rental accommodations like online travel companies.

Effective Jan. 1, 2023, cities that impose a transient room tax to fund a tourist and convention commission can now assess their transient room tax on rental accommodations facilitated by online travel companies pursuant to KRS 91A.345 and KRS 91A.390(1)(b). All short-term rentals, brokers, and companies that arrange rental accommodations within city boundaries are now responsible for collecting the tax.

It is important to amend your city ordinance to ensure that the city can take advantage of the statutory changes effective Jan. 1, 2023. City ordinances imposing the transient room tax generally mirror the old language in KRS 91A.390, prior to the House Bill 8 amendment. Any amendment should clarify that the tax applies to rentals through online travel companies, as well as the companies subject to the transient room tax under the old KRS 91A.390 language. Cities should draft the amendment to include all types of accommodations as articulated in the newly amended KRS 91A.390.

House Bill 8 amends KRS 91A.390(1)(b) to clarify that the transient room tax applies to rent for a “suite, room, rooms, cabins, lodgings, campsites, or other accommodations charged by any hotel, motel, inn, tourist camp, tourist cabin, campgrounds, recreational vehicle parks, or any other place in which accommodations are regularly furnished to transients….” This expanded definition of rental accommodations that qualify for transient room tax assessment must be included in the amended ordinance to ensure that your city can maximize collection.

For questions about this or any other legal matters, please contact the KLC Municipal Law Department.