Legislative Priority Deep Dive: Occupancy Tax Flexibility

By Denise Canada
NCACC Fiscal Policy and Research Director

Before each legislative long session begins, NCACC and all 100 counties engage in a months-long process to determine the legislative goals that the Association should pursue in the best interest of counties. With participation from so many of the organization’s member counties, it’s possible to reach agreement on goals that are important to all members of this diverse organization. 

During the goal-setting process, counties agreed on a goal to “Seek legislation to give counties flexibility with use of occupancy taxes.” This article summarizes the landscape of county occupancy taxes across the state and what flexibility in the uses of tax revenue could look like. 


Across North Carolina, most counties and many towns capitalize on the tourism industry by levying an occupancy tax, sometimes also called a “room tax.” These occupancy taxes are charged on rental accommodations, such as hotel rooms and vacation rentals, in addition to sales and use taxes. The Department of Revenue’s most recent data shows that county occupancy taxes raised just over $234 million in fiscal year 2020-21, down from a pre-pandemic high of $262 million two years prior. 

Although the General Statutes – essentially North Carolina’s laws – broadly outline occupancy tax guidelines (G.S. 153A-155), they do not authorize the tax. Instead, each county must first receive explicit taxing authority from the General Assembly –  typically in the form of a local act, which is a piece of state legislation that applies to a limited number of local governments. The legislature authorized the state’s first local occupancy taxes in 1983, starting with Buncombe, Forsyth, Haywood, Mecklenburg, and New Hanover counties, plus a handful of municipalities. Since then, it has authorized occupancy taxes for an additional 80 counties and over 100 towns. 

Of the 85 counties that have been granted legislative authority, 82 currently levy the tax; Avery County’s tax authority has since been repealed; Iredell County’s Board of Commissioners has not yet chosen to levy the tax; and as of February, the Wilkes County Board of Commissioners voted to begin levying a 6% occupancy tax as of April 1st of this year. 


The occupancy tax rates authorized for counties range from 1% to 6%, although Mecklenburg County is permitted to levy a combined rate of 8% from two separate taxes. Some local acts specify a tax rate (for example, 3%); others create a tax rate cap (for example, up to 3%). Statewide, most counties have an occupancy tax rate of either 3% (28 counties) or 6% (38 counties). The state’s lowest county occupancy tax is 1%, in both Wayne and Brunswick counties. Mecklenburg’s combined 8% rate is the state’s highest; it’s a combination of a base 6% tax and a supplemental 2% tax fully dedicated for costs related to the NASCAR Hall of Fame Museum and related properties.


Occupancy tax collections are remitted to the local government; usually, the authorizing legislation requires the county to establish a Tourism Development Authority (TDA) to manage and allocate most or all of the tax proceeds. Across the 82 counties currently collecting occupancy taxes, a full 60 have a Tourism Development Authority. In the remaining 22 counties, proceeds are managed by either the county, a different tourism authority such as a Tourism Board or Convention and Visitor’s Bureau, the Chamber of Commerce, or the local Economic Development Corporation. Wilkes County will create a TDA for its new tax as well. 

With rare exception, the tax proceeds must be used for specific tourism-related purposes as prescribed in the local act authorizing the tax. Since the late 1990s, language in the local acts has become more uniform, and most authorizing legislation requires the TDA to use at least two-thirds of the funds to promote travel and tourism and the remainder for “tourism-related expenditures.” Some acts are more prescriptive, such as Session Law 1983-980, which has been amended multiple times and which requires Craven County to allocate 35% of net proceeds over $100,000 of the first 3% of tax, and all of the next 3% of tax, to a separate Room Tax Trust Fund, required by the bill, for construction of a convention facility in New Bern and a tourist center in Havelock.


The state’s Local Government Budget and Fiscal Control Act recognizes TDAs as a form of local government – specifically, TDAs are “public authorities.” A “public authority” is defined in statute as either a municipal corporation not subject to the State Budget Act, or “a local governmental authority, board, commission, council, or agency that (i) is not a municipal corporation, (ii) is not subject to the State Budget Act, and (iii) operates on an area, regional, or multi-unit basis, and the budgeting and accounting systems of which are not fully a part of the budgeting and accounting systems of a unit of local government.



The tax’s net proceeds must be given to the Brunswick Tourism Development Authority to be used to promote travel and tourism in the county.


Five sixths of the gross revenue from accommodations in the City of Albemarle must be remitted to that City; in turn, the City of Albemarle must give 40% of what it receives from Stanly County to the Stanly County Tourism Development Authority (TDA). The City of Albemarle must use its remaining 60% for tourism-related expenditures.

For rentals in towns other than the City of Albemarle, Stanly County must remit the tax proceeds to the town where the tax was generated; in turn, each town must give the TDA the greater of $1 for each resident of the town, or 50% of the tax proceeds that the town receives from the County. The municipalities must use their remaining funds only for tourism-related expenditures in the county.

Finally, after doing all of the above, Stanly County must annually give the TDA the greater of $25,000 or 50% of its remaining net proceeds.


At least two-thirds of the funds remitted to the Wilson County Tourism Development Authority must be used to promote travel and tourism in Wilson County; remaining funds must be used for tourism-related expenditures that are mutually agreed upon by the Wilson County Tourism Development Authority and the Wilson City Council.


All of this brings us back to the legislative goal mentioned at the beginning of this article, endorsed at the Legislative Goals Conference last November by a majority of voting counties: to seek legislation to give counties flexibility with use of occupancy taxes. In recent years, some counties have expressed frustration with the limitations of their authorizing legislation; they’ve noted that tourism and development would benefit from other uses of the funds, such as general infrastructure investments. Together with counties and the General Assembly, NCACC’s advocacy team will work to find ways to help counties realize the change they need on this important revenue source.

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