Talking Tourism: Leveraging Lodging Tax Dollars for Success | By Molly O’Neill

Talking Tourism Monthly Column in the Cook County News Herald.

Originally published: January 2018

Talking Tourism: Leveraging Lodging Tax Dollars for Success | By Molly O’Neill

What is Lodging Tax? Who pays it? What is it used for? Who authorized it? Do I need to register my lodging property? There are a number of misconceptions and questions surrounding the collection of lodging tax. So in 1,000 words I will try to explain this complex subject that is vital to the success of tourism in our community. It’s not only visitor bureaus and chambers of commerce who rely on lodging tax for funding. Target Center, Mall of America, The DECC, and even Superior National Golf Course owe their existence in part to lodging tax funding. So how does it all fit together? 

A brief History of Minnesota State Statute 469.190:

While the art of hospitality has long been a part of our heritage, the official collection of lodging tax has a brief history. Prior to 1972, cities and towns were allowed to impose local tax on sales of admissions, lodging, or live entertainment to fund entertainment or tourism projects as approved by individual city ordinances but it was up to the local governments to decide to participate. In 1983 the first law of what is now known as MN State Statute 469.190 was passed authorizing MN cities to collect a 3% tax on lodging room sales. In 1985 that tax as extended to include towns and counties.  In 1987, the townships of Tofte, Lutsen and Schroeder voted to approve lodging tax. The City of Grand Marais followed in 1988, and the county approved the unorganized territory of the Gunflint Trail in 1992. Additions of unorganized territory areas that fall outside township boundaries and increases to the approved percentages followed until 2000, when all areas had adopted the 3% maximum allowed.

Revenues collected through lodging tax must be used only for promoting the city or town as a tourist area. The collection of all lodging tax is monitored and penalties imposed for non-compliance by the authority stated in each entity’s ordinance. In Cook County, this is done by the Auditors office while compliance with other laws such as state health laws is monitored and regulated by the state.

In 2008, to address the need for supporting the production of events that draw visitors and fall outside the scope of marketing, the state of MN wrote an allowance into session law (366.007 Section 17) specifically for Cook County to apply an additional 1% lodging tax, and also allows up to 3% tax to be collected on sales related to recreation. The 1% Event Tax, what we call it for clarity, is used to support and promote local events selected by the tourism associations that make up Visit Cook County as we are now known. This law is up for renewal after 15 years, unlike the permanent 3% lodging tax.

Marketing and Events– How we use tax revenues to bring visitors here and enhance their stay:

Now that you know the history, let’s talk about how Visit Cook County leverages those tax dollars. The 3% lodging tax is used primarily for marketing the entire Cook County area, whereas the 1% event tax is used to produce and market events that may attract visitors or augment their itinerary. Marketing initiatives can be anything from a print ad in a magazine to hosting a booth at a tradeshow to a digital billboard in the Twin Cities. In addition to traditional marketing efforts, Visit Cook County also manages social media accounts and works with a public relations firm in Minneapolis to spread awareness of the area’s communities. The 1% event tax is unique to Cook County and ensures that events are well marketed and supported. Thanks to the 1%, event planners specifically choose to host events in, or even move existing events to Cook County for the support that Visit Cook County provides for event marketing and funding, bringing their attendees and their tourism dollars with them.

Lodging tax dollars are also invested in bolstering the visitor experience. It’s imperative that tourists have a positive and memorable time in Cook County which they then share with friends, family and others through word of mouth and social media. To accomplish this Visit Cook County prioritizes the website, funds and staffs information centers in Grand Marais and Tofte, and creates printed publications including an annual visitor guide, recreational trail and attraction maps and a monthly event newsletter. These tools help visitors plan their trips, find interesting things to do while they’re here and share their memories when they return home.

How is lodging and event tax collected and paid?

Cabins, hotels, resorts, vacation rentals and private campgrounds are all required to collect lodging tax from their overnight guests. Once collected, it must be paid to the Cook County Auditor’s Office monthly, quarterly or annually.  Additionally, some non-lodging recreation businesses voluntarily collect a fee in lieu of tax to provide financial partnership with the lodging tax funds.

More and more there is heightened awareness about vacation rental by owner properties collecting lodging taxes from guests and paying it in to the county. Along with state and local requirements about zoning compliance and health regulations, all rental property owners except those leasing for more than 30 days, are required by law to participate in lodging tax collection. The benefits that vacation rentals by owner, or VRBO’s, bring as additions to our area’s lodging offerings are clear and undeniable. VRBO’s can fill a visitor’s vision of a dream escape. VRBO’s also provide employment opportunities for local cleaners, contractors, and administrative professionals. Homes and cabins that might otherwise be part-time second homes become occupied with more frequency by visitors who then imbibe in our local retail, dining and activity offerings. But this only works if the rental property is compliant with regulations regarding zoning, health and lodging tax.

So what does it mean?

The proof is in the pudding folks. Since the inception of the current structure of Visit Cook County in 2010 lodging tax revenues are up over 40% in every geographical area of the county. In 2016 that sum was over $1.16 million, which represents just a fraction of the total dollars brought into our local tourism economy by visitors. Visit Cook County Executive Director Linda Jurek has put together and reworked the organizational structure of her team to provide uniquely outstanding performance results in leveraging these lodging tax dollars for our area’s success. Check out for links to the resources and to see a little more of what we do and how we do it.

Cook County News Herald by Molly O'Neill, administrative manager at Visit Cook County MN Molly O'Neill