Hospitality and Accommodations Tax: Who Pays and What They Really Fund

Ever wondered who really pays for Greenville's beautiful downtown, vibrant festivals, and the iconic Swamp Rabbit Trail? This episode of Simple Civics breaks down the world of hospitality and accommodations taxes in Greenville County. We demystify these often-misunderstood 2% taxes that tourists and residents pay on everything from hotel stays to restaurant meals. If you've ever seen an "A-tax" or "H-tax" on your bill and wondered where that money goes, this explanation is for you. We're tackling the core question: how do these small taxes on visitors and locals fund the amenities that define our quality of life?

In this episode, Katy Smith and Nathaniel DeSantis provide a complete guide to South Carolina's tourism-related taxes. You'll learn the difference between the state-mandated accommodations tax (A-tax) for overnight stays - often called the "heads in beds" tax - and the local-option hospitality tax (H-tax) on prepared food and drinks. We explore exactly what is hospitality tax South Carolina style, clarifying what counts as a "prepared meal." (Hint: it includes everything from a restaurant dinner to a grocery store rotisserie chicken and even a Pub Sub!). This A-tax and H-tax explained segment shows how tourists staying in hotels and Airbnbs contribute directly to the local economy alongside residents grabbing a bite to eat.

We then investigate the crucial question of what is funded by hospitality tax, revealing how this revenue has directly paid for major local projects like the Swamp Rabbit Trail, Artisphere, downtown beautification, and park expansions in Greenville, as well as trail extensions and public restrooms in cities like Travelers Rest. You'll also discover a surprising recent change in state law that allows H-tax funds to be used for affordable housing, addressing the needs of the hospitality workforce. The episode also explains the oversight process, detailing the role of the citizen-led accommodations tax committee. Finally, we explore how tourism taxes benefit residents every single day by enhancing public spaces and community events, proving that these funds do more than just attract visitors - they build a better home for all of us. This breakdown of hospitality and accommodations taxes in Greenville County makes it clear how your hot dog purchase helps maintain the parks you love.

Introduction

Katy Smith: This episode of Simple Civics: Greenville County is brought to you by Dolly Parton's Imagination Library, providing free books to children zero to five throughout Greenville County. To sign up, visit greenvillefirststeps.org/freebooks. That's greenvillefirststeps.org/freebooks. It's vacation time, and we are seeing a lot of tourists downtown and on the Swamp Rabbit Trail. We're seeing students who are touring Furman University with their families, and a lot of folks who are visiting Greenville County. How are these tourists and visitors helping pay for amenities in Greenville County? We are going to talk about accommodations and hospitality taxes, what they are, how they work, and what they pay for to help all of us who live and visit Greenville County.

Nathaniel DeSantis: Welcome back to another episode of Simple Civics. I'm Nathaniel DeSantis, the producer of the podcast. You've heard me talk a few times here with Katy. So let's jump right into it, Katy. What exactly are hospitality and accommodation taxes? What are we talking about here?

Defining A-Tax and H-Tax: South Carolina's Tourism Taxes

Katy Smith: They sound dry, as all taxes do, but they really are meaningful in what they accomplish for our community. So in South Carolina, we have two main tourism-related taxes. First is the accommodations tax, and a lot of times people call it the A tax for short. It is a state-mandated 2% tax on overnight stays, and this is in a hotel, a motel, an Airbnb, a campground, and so on.

Local governments can also charge a separate accommodations tax, which is in Greenville County done by some of our cities and the county. So that's the accommodations tax. A lot of times people call it the heads in beds tax. It's someone is coming and sleeping here.

Then we have the hospitality tax or the H tax, and that is a local tax, not a state tax. Cities and counties are able to decide whether they want to adopt it, and it's usually a 2% tax on prepared food and drinks. So restaurant meals, bar tabs, even a hot dog at the gas station. And this is obviously paid for by locals as well as visitors, but visitors pay into it.

Nathaniel DeSantis: So anytime I'm visiting Greenville and I stay in a hotel and eat out downtown, I'm paying both of these.

Katy Smith: Correct. You're paying that 2% accommodations tax on your hotel bill and the 2% hospitality tax on your meal. And you may be paying an additional accommodations tax in the municipality that you're staying in. And it goes to state government and to local government, depending on who's collecting it. But it gets reinvested in that area you're visiting.

Nathaniel DeSantis: Just to clarify, then, I'm pretty sure I know the answer to this, but even if I am not visiting Greenville, but I'm just going downtown and getting food, I pay that hospitality tax?

What Counts as a "Prepared Meal" for the Hospitality Tax?

Katy Smith: Correct. So I want to read you the language that is actually used by the county of Greenville, but this is true for any jurisdiction. A hospitality tax is charged on a prepared meal, and that is any food and beverage, inclusive of alcoholic beverages, beer, and wine, prepared or modified, which at time of sale is ready for consumption by members of the public, regardless of the actual quantity, presentation, or packaging, and without regard to the time or day of sale.

So these are the kind of things that would be included in a hospitality tax. It's obviously your bar tab at a bar. If you go to an ice cream store and have a scoop put in a waffle cone for you, that is a prepared food. It might surprise you to know that it's also things that you might buy at a grocery store that is prepared for you. So a rotisserie chicken that you pick up where the work is already done or the pasta salad at the deli that you just have to pop the top off and you didn't have to chop up the peppers and cheese yourself to put in there. It's really anything that is prepared for you that you don't have to do the work.

Nathaniel DeSantis: A pub sub.

Katy Smith: A pub sub.

Nathaniel DeSantis: The best. So, that makes sense. And so if I'm going and buying individual items to then take home and make, that's not really prepared for me. Whereas a rotisserie chicken, it's already been cooked. It's already been made.

Katy Smith: So one other thing that is not included, a canned or bottled drink is not included. A prepackaged food that's made at the factory is not included. So a bag of chips is not included. Or a Otis Spunkmeyer muffin is not included.

And any alcohol that is sold that is not intended for consumption on the premises is not included. So a case of beer that you buy at the grocery store is not included in a hospitality tax. But a beer that you buy at a bar or at a restaurant that is put cold on your table with the lid removed is included. And if you think about it, it's really about the hospitality part. Are you the person who's experiencing the hospitality in some way? That someone else prepared something for you versus you're taking it home to serve yourself or your friends and neighbors.

Nathaniel DeSantis: That's a little bit confusing at first, but I get it. I understand. It's just confusing to differentiate between all the options.

Katy Smith: You're right. Here's the thing about the hospitality tax that I think about, since it's a local option sales tax in a way. It's not necessary, but local governments could add it on to help pay for things. You can, if you're trying to avoid that tax, you can avoid doing all those things. You cannot go out to eat. You cannot stop at the gas station and buy a hot dog. But you do have to eat at your home. You can buy the Otis Spunkmeyer muffin to eat for breakfast at your house. So I think that's where the option of it comes in.

Nathaniel DeSantis: So all this makes sense. It's a little bit convoluted at first if you're not used to it. Something that I would want to know is I'm going out to QT. I got a hot dog. I pay this 2% hospitality tax. Where is that money going? Obviously, it's going to the government. But what are they doing with that? Is it earmarked for something? Is it just part of everything? What happens with the money that we're paying on that?

Where Does the Tax Money Go? Funding for Tourism and Quality of Life

Katy Smith: Let's start with the accommodations tax, the A tax. For the state, the first $25,000 that is collected each year by a city or county, it goes into their general fund with no strings attached. After that, anything over $25,000 has to be spent on tourist-related purposes. So that includes marketing that destination, funding festivals, maintaining parks or convention centers, anything that helps attract or serve visitors. As I said, it's a heads-in-beds tax, so you can use it for things that is going to bring more heads into more beds for the future.

Nathaniel DeSantis: Okay. So that's the accommodation ones. What about hospitality?

Katy Smith: The hospitality tax is a little bit more flexible. Cities and counties can use that money for a wider array of projects, as long as they have some connection to tourism or to quality of life. So that could be sidewalk improvements, new parks, improvements at parks, security at major events and the like.

Nathaniel DeSantis: So the takeaway that I'm getting is that, yes, these things help attract tourists and bring tourists in, but it's also benefiting us residents as well.

Katy Smith: It is. And if you think about it, we also pay the hospitality tax because we're eating out at restaurants and we're taking out pub subs and the like. So we can benefit from it, too. And one great example, I think, of something funded by the hospitality tax is the Swamp Rabbit Trail. And when it was first put in, our county put in a hospitality tax. It helped fund the Swamp Rabbit Trail. It helped fund lots of new soccer fields and park expansions. And it's obviously been an enormous attractor for Greenville County. Enormous as we've been able to have tournaments that people come and stay here, but all of us who enjoy the trail.

Nathaniel DeSantis: So I'm hearing you say all this about H taxes and A taxes. And the first thing that comes to my mind is how do you have oversight and make sure that if a city is saying this money after the 25 grand is going to be used for tourism, that it's actually being used for tourism and not just someone justifying spending money on tourism when it's not really for tourism. Does that make sense?

Oversight and Community Involvement: The Accommodations Tax Committee

Katy Smith: It makes sense. And this is what I think is really neat because we've had previous episodes where we've talked about boards and commissions. There are important committees that are involved in looking at where accommodations taxes and hospitality taxes go. So if a city or county collects more than $50,000 in accommodations tax revenue, they are required by law to have an accommodations tax committee.

This group reviews those actual funding requests for the park or for the festival or whatever it may be. And they recommend how to spend that money. It has to have at least one person from the hospitality industry, like a restaurateur, and it has to have someone from the lodging industry. So someone who runs a hotel and they make sure that the decisions reflect the kind of needs and realities of that local tourism economy. Their recommendations are not binding. They're an advisory committee, but local councils take these recommendations seriously, almost for the most part, all the time. So if you are a resident or part of a nonprofit, this is a great way to get involved and apply to serve on that board and help make those decisions.

Nathaniel DeSantis: Then let's talk about some of those decisions, at a street level, what's actually been funded. We talked about the Swamp Rabbit Trail. What definitively have we funded through the H taxes and the A taxes?

From the Swamp Rabbit Trail to Affordable Housing: What These Taxes Fund

Katy Smith: So many great things that all of you know and love and enjoy. In Greenville, the H tax dollars have supported things like Artisphere, Downtown Beautification, Park Expansion, and other cities like Travelers Rest have put their age tax dollars into trail extensions, public restrooms, and event signage. You'll see lots of festivals supported.

Interestingly, a couple years ago, our state changed the law so that we can use hospitality tax dollars to help support affordable housing. The reason is that so many hospitality workers who might work downtown at a restaurant or work at the ballpark, have trouble finding housing that's affordable to them anywhere nearby. So tourism is wonderful, but it can make housing more complicated and having an available workforce a challenge. So some of that funding can go to build more tourism-related, hospitality-supported housing.

Nathaniel DeSantis: So what about common criticisms and concerns about these taxes? What are people bringing up as reasons they don't like it?

Common Criticisms and Concerns About Tourism Taxes

Katy Smith: They're not super surprising. They're the kind of concerns that come up with taxes, and that could be from restaurant owners or lodging providers, a concern that it drives up prices or hurts competitiveness, especially if there are places that are already expensive for visitors. But I will say that I think the draw that our community has shown it is because of some of these beautification improvements and the number of visitors we have, that has not been a huge concern for folks.

Another issue that people can raise is transparency. Not every local government is great about showing where the money goes or how decisions are made. And I'm not speaking of anyone in particular at all in Greenville County within our community. But generally, that's a concern people raise. And that's why those advisory committees are so great and public participation. You can go to a county council meeting or a city council meeting and see here's the recommendations for A-tax and H-tax spending.

And lastly, that short-term rental compliance can be tricky. Platforms like Airbnb now do collect state-level accommodations tax on behalf of hosts, but it might not always be collected if a local government doesn't have a specific agreement in place.

Nathaniel DeSantis: So then the big takeaway question that everyone's wondering, if you are listening and live in South Carolina, why should you care about this?

The Big Picture: How Tourism Taxes Benefit Greenville County Residents

Katy Smith: Taxes touch everything about the city and the county from the look and the feel, whether or not there's funding for your favorite local events, the beautification of the places that you go, festivals you enjoy, venues that you enjoy. A lot of that is funded through hospitality or accommodations taxes. Plus, if you're part of a nonprofit or community group that serves tourists in some way or hosts public events, you might qualify for funding.

Nathaniel DeSantis: So the big picture is that even if I don't run a hotel or eat out every day and get a pub sub, this still affects my quality of life.

Katy Smith: It does. Whether you live here year round or you just visit, this really shapes these beautiful places that we live in and the vibrant community that we have. We will put in the show notes for you links so that you can check out some of the things that accommodations and hospitality taxes have gone to in Greenville County and our cities in recent times. So you can see some of the ways your funds and those of your visitors have helped support.

Nathaniel DeSantis: Perfect. Well, thank you for explaining a concept that a lot of people probably haven't thought about much, but I'm sure we've all seen that 2% tax on our bill before. So I'm sure we're all aware of it and have never really known. So thanks for clarifying that. And to those of you listening, enjoy your day and have fun eating that hot dog.

Katy Smith: I was about to say, I think you're about to head out to Publix for a sub.

Nathaniel DeSantis: I might. We'll see.

Catherine Puckett: Simple Civics: Greenville County is a project of Greater Good Greenville. Greater Good Greenville was catalyzed by the merger of the Nonprofit Alliance and the Greenville Partnership for Philanthropy. You can learn more on our website at greatergoodgreenville.org.