Municipal Accommodation Tax

The regulations do not provide a definition for a “Destination Marketing Organization (DMO).”

The transient accommodation tax regulation under the City of Toronto Act, 2006 requires the City of Toronto to share a portion of their revenues from the tax, if they choose to implement a transient accommodation tax, with Tourism Toronto.

The transient accommodation tax under the Municipal Act, 2001 requires municipalities that choose to implement a transient accommodation tax to share a portion of their revenues from the tax with an “eligible tourism entity.” Depending on the circumstances, this may be a Destination Marketing Organization, Regional Tourism Organization, or other not-for-profit tourism organization. The amount to be shared, and with whom, would depend on whether or not there is an existing destination marketing program in the community.

All single-tier and lower-tier municipalities have the authority to put a municipal accommodation tax in place. A transient accommodation tax is not a requirement for local municipalities—rather, they have the flexibility to decide if they want to put the tax in place. Upper-tier municipalities (regional or county governments) do not have the authority to implement a tax.

Please refer to the Municipal Act, 2001, s. 1(1) for definitions relating to various types of municipalities.

Yes. Local municipalities that choose to impose a transient accommodation tax could reach an agreement with a person or entity to collect the tax on a municipality’s behalf and this could include a regional municipality. It is up to the discretion of the local municipality’s council to design the transient accommodation tax.

No. Should a municipality choose to implement a transient accommodation tax, it has the flexibility to determine the design of the tax, including the tax rate.

The answer depends on decisions about the design of the tax made by the municipality’s council.

The transient accommodation tax authority allows each municipality that chooses to implement a transient accommodation tax to determine the types of short-term accommodation the tax would apply to. The tax can only apply to accommodation that is short-term in nature. That means a local municipality could apply the tax to hotel accommodation only, or it could choose to apply the tax to other types of short-term accommodation, including transient accommodation offered through services such as Airbnb, or other accommodation that is short-term in nature. Please note that short-term accommodations at universities and colleges cannot be taxed under a municipal accommodation tax.

The answer depends on the nature of the fees or charges and decisions about the design of the tax made by the municipality’s council.

The transient accommodation tax authority allows each municipality that chooses to implement a transient accommodation tax to determine the types of short-term accommodation the tax would apply to. The transient accommodation tax authority does not extend to incidental fees and charges unrelated to the purchase of accommodation. For example, the purchase of a meal in a hotel restaurant could not be considered transient accommodation and therefore could not be made subject to a municipal accommodation tax.

Yes.

Decisions about whether to implement destination marketing programs continue to be industry-led. There is no provincial involvement. These fees are entirely a private-sector initiative. However, some tourism leaders have indicated that if a transient accommodation tax is in place, they will terminate their destination marketing programs due to competitiveness reasons.

When exploring either option, municipal and tourism partners may wish to consider all factors that will ensure their regions remain competitive tourism destinations. We encourage municipalities to work together with their tourism partners and to consider potential impacts on the tourism industry and consumers when making decisions about whether or how, to implement a tax on transient accommodation.

Yes.

Decisions about whether to implement destination marketing programs continue to be industry-led. There is no provincial involvement. These fees are entirely a private-sector initiative. However, some tourism leaders have indicated that if a transient accommodation tax is in place, they will terminate their destination marketing programs due to competitiveness reasons.

When exploring either option, municipal and tourism partners may wish to consider all factors that will ensure their regions remain competitive tourism destinations. We encourage municipalities to work together with their tourism partners and to consider potential impacts on the tourism industry and consumers when making decisions about whether or how, to implement a tax on transient accommodation.

Yes. The 13% Harmonized Sales Tax (HST) applies to the all-in price of transient accommodation, including any municipal accommodation tax.

We encourage municipalities that have questions about the requirements of the legislation or regulations to discuss them with their legal counsel.

The answer depends on the activities of the economic development corporation. To be eligible to receive municipal accommodation tax revenue, a tourism entity must be a not-for-profit organization, whose mandate includes tourism promotion in Ontario or in a municipality.

Revenue shared with an eligible tourism entity must be used for the exclusive purpose of promoting tourism. Tourism promotion includes the development of tourism products. The regulations also require a municipality and tourism entity to enter into an agreement that deals with reasonable financial accountability matters to ensure that amounts paid to the entity are used for the exclusive purpose of promoting tourism.

Yes.

Revenues from the transient accommodation tax that exceed the amount that municipalities are required to share with a not-for-profit tourism organization may be retained by municipalities for their own purposes. The sharing formula does not prevent municipalities from dedicating more than the required amount to tourism activities.

This should be part of the negotiation between the tourism entity and the municipality, and then clearly defined in the agreement between the two bodies.

The transient accommodation tax regulations do not govern municipal decisions to fund the local tourism sector above and beyond the sharing requirements set out under the transient accommodation tax regulations.

If a hotel association (or other collecting tourism organization) has a reserve fund consisting of DMF funds collected in years prior to a tax being introduced, and the association decides to provide all or part of those reserves to a tourism organization during the reference fiscal year, only the portion of the reserve fund that was collected in the reference fiscal year would count toward the municipality’s minimum sharing requirement.

As well, any DMF amounts collected on transient accommodation provided in a municipality before a tax is in place, and put into a reserve by the hotel association and are paid to a tourism organization after a tax is in place, would not decrease the municipality’s minimum sharing requirement in the year the amounts are received by the tourism organization.

Regarding a potential reserve fund of tax revenues, please note that tax revenues shared with an eligible tourism entity must ultimately be used by the entity for the exclusive purpose of promoting tourism (which includes the development of tourism products).

The regulation allows for the decision around who collects the funds raised by a Municipal Accommodation Tax to be made at the local level.

Under the Municipal Act, 2001, s. 400.5 and the City of Toronto Act, 2006, s. 271, municipalities that choose to impose a transient accommodation tax could reach an agreement with a person or entity to collect the tax on a municipality’s behalf. It would be up to the discretion of the local municipality’s council to design the transient accommodation tax.

The legislation stipulates that municipal bylaws implementing a transient accommodation tax must meet certain requirements, including setting out the manner in which it would be collected.

If a municipality decides to implement a municipal accommodation tax, it would need to enact the appropriate bylaws in order to implement the tax. Should a municipality choose to implement a transient accommodation tax, it has the flexibility to determine the design of the tax, including the appropriate enforcement mechanism.

RTOs were established to improve coordination, investment and planning within the sector across Ontario. The RTOs’ mandate is to provide leadership in four areas: marketing; product development; workforce development; investment attraction.

Additional activities of RTOs are subject to provincial approval as part of the business planning and Transfer Payment Agreement process.