Exempting from the state sales and use tax the sales price of lodging supplies sold to a lodging provider

Description

Senate File 394 exempts lodging supplies sold to a lodging provider from sales and use tax if the lodging supplies are consumed or used by customers.

The definition of “lodging supplies” includes toilet tissue, facial tissue, shampoo, conditioner, complimentary toiletries, running water, electrical service provided to a guest room, bottled water, towels, sheets, blankets, pillows, wrapped glasses, coffee cups, Internet service, television service, pens, paper, phone service, and cleaning supplies.

Background

According to the Iowa Hotel and Lodging Association website, there are 714 hotel properties in the State with more than 51,000 guest rooms.

According to the Energy Star Hotels: An Overview of Energy Use and Energy Efficiency Opportunities report, hotels spend approximately $2,000 per available room each year on energy costs.

Assumptions

• The Bill is effective July 1, 2023 (FY 2024).
• Based on Department of Revenue research, lodging supplies as defined in the Bill comprise approximately 10.0% of sales reported on tax returns by hotels and motels.
• Growth trends in future fiscal years are based on the Consumer Price Index (CPI-U) less food and energy average estimated increases of 2.0% from FY 2024 to FY 2028.

Fiscal Impact

Senate File 394 would reduce revenues to the General Fund, Secure an Advanced Vision for Education (SAVE) Fund, and local option sales tax (LOST) by the estimated amounts listed below.

Table 1 — Fiscal Impact of SF 394 (in millions)General Fund SAVE LOST 2024 -6.0$ -1.2$ -1.2$ 2025 -6.1 -1.2 -1.2 2026 -6.2 -1.2 -1.2 2027 -6.4 -1.3 -1.2 2028 -6.5 -1.3 -1.3

Source

• Department of Revenue