Hotel Occupancy Tax Cap & Definition of Tourism
Organization Overview
Tennessee has enacted a strict 8% cumulative cap on hotel occupancy taxes in incorporated areas, preventing municipalities from levying new tax rates that exceed this threshold. However, any rates authorized before May 1, 2025, that surpass the cap are grandfathered in and remain valid. The law further mandates that all revenue from hotel and short-term rental occupancy taxes be used exclusively for tourism promotion and tourism development, with general government expenditures prohibited unless formally approved. It introduces clear definitions for “tourist," “tourism development," and “tourism promotion.". Municipalities must submit annual reports detailing fund usage, and audits will trigger reimbursement if funds are misused.