If you’re a frequent traveler, then you have to know the different forms of travel tax. You pay taxes with almost all your travel expenses — from purchasing a ticket to booking your hotel or rental car. You may not notice it, but these taxes actually make your travelling costs even higher than you probably expected. Familiarize yourself with the travel taxes you may encounter to make sure you are aware of every cent of your travel expenses and where they are going.
In this guide:
- Who Collects Travel Tax?
- How Does The Government Collect Travel Tax?
- What Are (And How Much Are) The Travel Taxes That The Federal Government Collects?
- How Much Travel Tax Do States and Cities Collect?
- Why Does The Government Collect Travel Tax?
- Who Is Exempt From Paying Travel Tax?
Things You Need To Know About Travel Tax
1. Who Collects Travel Tax?
The federal government collects travel taxes through the Internal Revenue Service. Apart from the IRS, some US states and cities also impose their own travel taxes.
2. How Does The Government Collect Travel Tax?
Travel taxes collected by the IRS are either included in the airfare ticket fee or directly paid at the airport through the Transportation Security Administration.
Some states and cities impose taxes on different types of travel expense — particularly lodging tax and rental car tax.
3. What Are (And How Much Are) The Travel Taxes That The Federal Government Collects?
Based on Revenue Ruling 72-10, the IRS collects the following travel taxes:
- US Domestic Transportation Tax – 7.5% of the airfare
- Federal Flight Segment Tax – $3.00
- Alaska/Hawaii Domestic Transportation Tax – based on the assessed miles flown between the continental US and anywhere in Alaska or Hawaii
- US International Arrival/Departure Tax – $13.40
- Alaska/Hawaii International Departure Tax – $6.70
- Passenger Facilities Charges – up to $4.50
- Federal Security Segment Tax – up to $5.00
- US Customs Fee – $5.00
- Immigration Fee – $7.00
- Animal and Plant Health Inspection Service Fee – $3.10
4. How Much Travel Tax Do States and Cities Collect?
At least 22 states collect lodging tax for accommodations in hotels and motels, and 38 states impose rental car tax. Lodging tax ranges from 1% (in Kentucky and Nebraska) to 15% (in Connecticut). Meanwhile, rental car tax range from 1.5% (in Alabama) to 11.5% (in Maryland).
Also, some states allow their cities to impose additional travel tax. In the last assessment by the Global Business Travel Association, a traveler can accumulate a combined travel tax of anywhere between $22.61 (in Fort Lauderdale, Fort Myers, and West Palm Beach — all in Florida) and $41.04 (in Chicago, Illinois) in a single day.
5. Why Does The Government Collect Travel Tax?
The IRS use collected travel taxes to fund the operations of the Federal Aviation Administration (FAA). The taxes are used to improve airports by enhancing security and safety, strengthening their capacity and infrastructure, and financing airport-related rehabilitation projects.
Meanwhile, the collection of travel taxes in states and cities serve as a revenue-generating mechanism for local governments. Instead of burdening their own residents with taxes, some states and cities would rather pass the obligation to their visitors by imposing additional taxes on them.
6. Who Is Exempt From Paying Travel Tax?
As per the IRS, diplomats are exempted from paying the following travel taxes:
- US Customs Fee
- Immigration Fee
- Animal and Plant Health Inspection Service Fee
To take advantage of the exemption, a diplomat must be able to present any of the following visas when purchasing airline tickets:
- A-1 or A-2
- G-1 through 4 series
The federal and local governments collect different forms of travel tax for various reasons. It is important to understand what these taxes are, what they are for, and how much are each tax form to help travelers budget their travel expense properly.
Is there other information about travel tax you want to know? Post your questions in the comments section below.