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Travel

Traveling? Better Budget for Taxes

You’ll pay plenty for hotels, rental cars and restaurant meals.

For summer vacation, you’ve probably included the cost of a room in a hotel or resort, a rental car, some nice dinners, and a few souvenirs in the budget. But if you fail to include taxes, you could end up with a bad case of traveler’s remorse.

This year, taxes on hotels, rental cars and restaurant meals are expected to cost travelers nearly $30 per day, on average, roughly the same as last year. But that’s up from $29.17 in 2012 and about $28 in 2011, according to the Global Business Travel Association’s annual survey of top U.S. destination cities. “For a family of four that might have budgeted $1,000 for their trip, they could end up $100 or $200 over budget,” says Joseph Bates, vice-president of research for the GBTA.

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The city with the highest total tax burden, which includes general sales taxes as well as travel-related taxes, is Chicago, where travelers pay an average of $41.04 in taxes per day. Second on the list is New York City, at $38.65 per day. Fort Lauderdale has the lowest tax burden, at $22.61 per day.

Travel-related tax increases enacted in 2013 include a 2% “transient occupancy tax” tacked on to existing tax rates for hotels in northern Virginia (which are popular with visitors to nearby Washington, D.C.) and an increase in Minnesota’s rental-car tax from 6.2% to 9.2%.

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Taxes on travel-related services have been on the rise since the 1990s, when protests against increases in property taxes led states, counties and other jurisdictions to search for alternative sources of revenue. Taxes on hotels, rental cars and restaurant meals were viewed as a way to raise money without increasing the tax burden on residents. But the GBTA argues that residents feel the pinch, too, because locals also eat in restaurants, stay in hotels for special occasions and rent cars when their own vehicles are in the shop.

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Meeting planners increasingly factor in the cost of taxes when deciding where to hold conferences. “When you’re talking about 1,000 people, those numbers add up,” Bates says.

For leisure travelers, though, figuring out the amount of taxes in a specific destination can be difficult, says Carol Kokinis-Graves, senior state tax analyst for tax publisher CCH. State sales tax rates are readily available (see our State by State Guide to Taxes), and most large cities provide information about taxes and fees on their Web sites. But many smaller cities and jurisdictions that impose their own taxes may not even have a Web presence, says Kokinis-Graves.

Still, you can avoid some sticker shock by planning ahead. Web sites such as Orbitz and Expedia don’t include taxes and fees in their initial quotes for hotel rooms, but once you select a specific rate and provide the dates of your planned visit, you’ll get the total cost. You don’t need to provide your personal information or credit card number to get this figure. Web sites for some rental-car com­panies and travel discounters will give you the total rental cost upfront; with others, you must select the car you want to reserve to get that information.

Renting a car at an off-airport location could also save you the airport concession fee—typically 11% to 13% of your total rate. Just be sure to factor in the cost of cab fare. Some cities tax that, too.

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