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The new vacation budget-buster: taxes

Image: Statue of Liberty
Leticia Baes, of the Phillipines, poses for a photo at the bases of the Statue of Liberty on July 4. Tourists spent $56.9 billion in New York, generating $10.9 billion in tax revenue for the state. That's $300 million more than Florida collected for its $71.5 billion in tourist spending.Mary Altaffer / AP

Consumers may find it's getting tougher to stick to their travel budget.

It's not just pricey airfare, hotel rooms or car rentals, although those rates have been rising. The less-noticed budget buster: more taxes and fees levied on such purchases.

States, counties and cities continue to weigh taxes and surcharges aimed specifically at travelers:

  • Effective July 1, Northern Virginia's "transient occupancy tax" on hotels rose 3 percent, to 8 percent total.
  • Voters in Selma,Calif., will vote in November on whether to double the lodging tax there to 12 percent.
  • In Orange County, Fla., lawmakers have proposed adding a $2-per-day car-rental surcharge.

"The trend is for more and more local jurisdictions to impose these," said Carol Kokinis-Graves, a senior writer analyst with tax advisory firm CCH.

State budget woes often trickle down to the local level in the form of cuts to local government. Extra charges on hotel rooms and car rentals are one way to make up for lost revenue or fund planned projects, she said.

They can make a big difference. According to the U.S. Travel Association, in 2011 both North Dakota and South Dakota tallied $2.6 billion in tourist spending. But North Dakota generated $415 million in tax receipts from those transactions—$133 million more than South Dakota.

Big windfall for the Big Apple
Tourists spent $56.9 billion in New York, generating $10.9 billion in tax revenue for the state. That's $300 million more than Florida collected for its $71.5 billion in tourist spending.

It doesn't hurt that locals are unlikely to pay the extra taxes in question. "This is certainly an area [of legislation] generally accepted by voters and policymakers as easy to pass," said Joe Bates, vice president of research for the Global Business Travel Association.

The result can be a lengthy list of state, county and local taxes and fees that pop up on the final travel bill. According to a 2012 GBTA study, the cost to rent a car in Denver, for example, includes the state sales tax (2.9 percent), a regional transportation district tax (1 percent), a scientific and cultural facilities district tax (0.1 percent) and a special tax to finance construction of the Colorado Convention Center (7.25 percent), as well as a flat $2 daily fee to fund transportation projects. Collectively, they add $8.31 to the typical daily cost to rent a car.

'It leaves travelers with a bit of a bad taste in their mouth'
Fees tend to surprise travelers. "Most people don't even think about it until they leave," said Jason Clampet, co-founder of travel advice site "You check out of the hotel or you return your car, and then you look at the line item. It leaves travelers with a bit of a bad taste in their mouth."

Businesses tend to be more aware than consumers of the impact of taxes on their budget, said Bates. They usually consider such charges when deciding where to hold a large staff meeting or conference. Taxes on travelers to Chicago are 81 percent higher than those in Fort Lauderdale, he said.

That's less useful for consumers set on a particular destination, although it's still possible to book to limit some taxes and fees.

The easiest switch is comparing costs across car rental locations, said Clampet. Airport pickup often entails more fees, something easily assessed at booking. (But some cities tack on fees regardless. Boston levies a $10 surcharge on all car rentals.)

Lodging is tougher. Some states, like Connecticut, assess lodging taxes at the state level, and prohibit additional local taxes. Most,however, give counties and cities leeway to add their own charges—which can be tough to track.

"Local tax information is notoriously difficult to find and maintain," said Kokinis-Graves. "There are still some local jurisdictions that do not have an online presence." Even online travel booking sites often hedge their bets, providing estimates of tax owed, with the caveat that local taxes and fees may be added at the time of travel. Travelers' best bet may be to leave extra room in their budget for the unexpected.

By's Kelli B. Grant. Follow her on Twitter @KelliGrant.