What are Tourism Development Authorities?

What you need to know

What is an occupancy tax? What is a TDA?

When you check out of a hotel, you may see a charge of about 6% labeled “occupancy tax.”

About 200 North Carolina counties and municipalities use tax revenue from room rentals at hotels, Airbnbs, bed and breakfasts and other vacation rentals to help promote tourism in their area. The money is under the control of a Tourism Development Authority, or TDA, an entity state law allows local governments to create.

At least two-thirds of the money must be used to promote travel and tourism, according to state law, and the remainder must be used for tourism-related expenditures.

TDA board members typically spend the money on advertising, marketing, market research and other promotional activities that attract tourists or business travelers to the area.

In McDowell County, for example, the local TDA runs a visitor center in downtown Old Fort, creates and distributes promotional print materials and manages a website and social media accounts.

How much do hotels and vacation rentals charge? How much money is generated?

Occupancy tax is capped at 6% and most places charge 3%. There is an exception for Mecklenburg County where the charge is 8%. The additional 2% in Mecklenburg was charged for the development and operation of the NASCAR Hall of Fame in Charlotte.

In fiscal year 2022, $391 million in occupancy tax revenue was collected at the local level, according to the Department of Revenue.

Where does the money go?

TDA’s spend much of the funds on marketing and promotion for tourism in the area. They may spend money on advertising, marketing and events. Towns or counties may also fund projects that help support tourism such as increased parking or sidewalk improvement.

There is a lot of debate over what constitutes a “tourism-related expenditure.”

In the early 2000s, “tourism-related expenditures” was expanded to include beach nourishment in areas along the coast.

Local governments and courts have grappled with what can be covered as tourism-related expenses. Earlier this year, a Haywood County Republican accused his county’s TDA of misusing funds after it tried to award a grant that would highlight LGBTQ+ friendly businesses in the area. The grant was ultimately canceled.

In 2019, Currituck County residents and businesses filed a lawsuit challenging the county’s use of the tax money. They argued the county violated state law by using the money to fund general county services, such as public safety and equipment, water treatment facility construction, park facilities maintenance and historic building restoration. The case is before the North Carolina Supreme Court.

Who this affects

TDAs are used in about 200 North Carolina counties and municipalities and affect everyone from hotel owners and guests to local businesses and residents. Hotel guests pay taxes on their room rentals. That money then funds tourism efforts in the area, which benefits local businesses and residents.

Once a TDA is created, at least half of the board members must actively promote travel and tourism in the taxing district, such as hotel owners, and one third of the members must be affiliated with the local government, such as commissioners or county finance officers.

How do I get on the board?

If you have tourism or hospitality experience and want to join your local TDA, reach out to the TDA staff or the town or county clerk’s office for information on vacancies and how to apply. The North Carolina General Assembly maintains a list of counties and municipalities with TDAs.

Local TDA meetings are subject to the state’s open meetings law, which means the public can attend and review meeting minutes. Specific dates, times and locations vary by TDA, so you’ll need to contact your local board to learn more.