Communities embrace Minnesota's new lodging tax
ST. PAUL — The state’s lodging tax — a tax on visitors to pay for things to attract more visitors — is spreading in the Twin Cities area.
Woodbury wants to impose the 3% tax, and Cottage Grove expects to start collecting it in December. It has spread to more than 20 other metro-area cities, including Minneapolis and St. Paul.
The tax is usually 3% on hotel stays. By law, 95% of revenue must be used for tourism promotion.
“This is a top legislative priority for us,” said Woodbury administrator Clint Gridley, who plans to ask the Legislature for authorization for his city next session.
The state’s largest cities charge the tax, including Minneapolis, St. Paul and Duluth.
But recently, some suburbs have been signing on, including Apple Valley, Blaine, Burnsville, Hastings, Lakeville, Maple Grove, Shoreview, Stillwater and Oakdale. Inver Grove Heights has a 2% lodging tax.
Several cities charge a higher rate for larger hotels. In addition to the 3% tax, Minneapolis adds another 3% for hotels with more than 50 rooms, while St. Paul adds another 4%.
Bloomington charges a flat rate of 7%.
The lodging tax is in addition to other taxes.
The state sales tax of 6.9% applies to all lodging, and in St. Paul, a 0.5% city sales tax is added.
Visitors in Minneapolis pay the lodging taxes, state sales tax, a half-percent city sales tax, a 0.15% Hennepin County sales tax, and a county tax of 0.5% for transportation. In addition, the city’s 3% “entertainment district” tax is charged on lodging, and tickets, food and drinks involved with live entertainment.
In Cottage Grove, the Chamber of Commerce is helping to establishing a nonprofit visitors bureau to manage the tax revenue. Chamber director Jennifer Wenshau said the tax is expected to raise between $36,000 to $48,000 a year.
But what tourist attractions will it promote?
Economic development specialist Matt Wolf admitted that Cottage Grove isn’t considered a tourist destination. Nevertheless, encouraging visitors to stay longer could benefit local businesses, he said.
For example, last year’s softball tournament of the North American Fastpitch Association brought 50 teams to Cottage Grove. Wolf said the city draws in $7.5 million annually from athletic events, such as softball tournaments.
The city has popular wedding destinations including Hope Glen Farm, the Cedarhurst Mansion and the Historic John P. Furber Farm. Those visitors, too, might be persuaded to help the local economy.
“We want to keep visitors in the community and help businesses,” said Wolf.
The chamber’s Wenshau said revenue will promote tourism in the area around Cottage Grove, including Newport, St. Paul Park and nearby Afton Alps.
The city has a variety of other activities, including golf, disc golf and boating along the Mississippi River.
In some cases, cities may use the revenue for buildings that are related to tourism. Woodbury’s Gridley said the city would use the revenue to help pay for Central Park, the city’s indoor garden and event space.