How must Virginia counties spend transient occupancy tax revenue above 2%, and who must they consult?

Plain-English summary

In June 2013, the Wythe County Attorney asked the AG three connected questions about the transient occupancy tax (TOT, the lodging tax counties levy on hotels, motels, B&Bs, and short-term lodging). Virginia generally caps TOT at 2% for counties under § 58.1-3819. The statute then names specific localities, Wythe among them, that may go up to 5%, but any revenue above 2% must be spent on tourism activities, after consulting local tourism industry organizations.

The questions: (1) Is "tourism" defined? (2) What does "local tourism industry organization" mean? (3) How much consultation is required? The AG worked through each.

On the definition of "tourism," the General Assembly did not define it for § 58.1-3819 or anywhere else. The AG looked to the Virginia Tourism Authority (VTA). Its mission statement frames tourism as "the Commonwealth's domestic and international travel market." Its website treats museums, historic sites, theme parks, natural resources, festivals, and similar attractions as tourism. The AG used that as a working understanding of the term: a domestic and international travel market important to the Commonwealth's economy.

On what counts as compliant spending, § 58.1-3819 requires that the above-2% portion be "designated and spent solely for tourism and travel, marketing of tourism or initiatives that, as determined after consultation with the local tourism industry organizations, including representatives of lodging properties located in the county, attract travelers to the locality, increase occupancy at lodging properties, and generate tourism revenues in the locality." A prior opinion of this Office had concluded that whether a particular spending choice (purchasing open space, in that case) promoted tourism was "a factual determination to be made by the local governing body." The AG affirmed that deferential approach: localities have reasonable discretion, but the statute's three-part standard (attract travelers, increase occupancy, generate tourism revenue) controls.

On "local tourism industry organizations," the term is undefined, but § 58.1-3819 is explicit that "representatives of lodging properties located in the county" must be part of the consultation. The AG read the inclusion of lodging-property representatives as mandatory and the broader category of "tourism industry organizations" as discretionary, with localities looking to "established local tourism associations" where they exist.

Currency note

This opinion was issued in 2013. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Background and statutory framework

§ 58.1-3819 authorizes any Virginia county, by ordinance, to levy a transient occupancy tax of up to 2% on lodging providers. The statute then names specific counties, including Wythe, that can go up to 5%, with the above-2% portion earmarked for tourism and subject to the consultation requirement.

The General Assembly's creation of the Virginia Tourism Authority (the "VTA"), and the VTA's own mission framing and website, supplied the working sense of "tourism" the opinion used: the Commonwealth's domestic and international travel market, important to its economy.

Common questions

Q: What can a Virginia county spend above-2% TOT money on?
A: Only on initiatives that, after consulting the local tourism industry, "attract travelers to the locality, increase occupancy at lodging properties, and generate tourism revenues in the locality." § 58.1-3819. The locality has reasonable discretion in deciding what qualifies, but those three goals are the statutory standard.

Q: Who counts as a 'local tourism industry organization' that must be consulted?
A: The statute does not define it, leaving counties reasonable discretion. But "representatives of lodging properties located in the county" must always be included. The opinion pointed localities to "established local tourism associations" where they exist.

Q: Can purchasing open space count as a tourism expenditure?
A: That was the question in a prior opinion of the AG's office. The earlier opinion treated it as a factual determination for the local governing body. The 2013 opinion affirmed that deferential framework.

Source

• Landing page: https://www.oag.state.va.us/annual-reports-opinions/official-opinions
• Original PDF: https://www.oag.state.va.us/files/Opinions/2013/11-139_Farthing.pdf

Original opinion text

COMMONWEALTH of VIRGINIA
Office of the Attorney General
Kenneth T. Cuccinelli, II
Attorney General

June 14, 2013

900 East Main Street
Richmond, Virginia 23219
804-786-2071
FAX 804-786-1991
Virginia Relay Services
800-828-1120
7-1-1

Scot S. Farthing, Esquire
Wythe County Attorney
Post Office Box 1315
Wytheville, Virginia 24382

Dear Mr. Farthing:

I am responding to your request for an official advisory opinion in accordance with § 2.2-505 of the Code of Virginia.

Issues Presented

You ask whether the term tourism has been defined for purposes of § 58.1-3819 and you also seek clarification as to the meaning of a "local tourism industry organization" referenced in the same provision. You further inquire regarding the degree to which the local tourism industry must be consulted in spending transient occupancy taxes in excess of two percent.

Response

It is my opinion that while "tourism" has not been defined for purposes of § 58.1-3819, it is generally considered to be a domestic and international travel market that is important to the economy of the Commonwealth. It is further my opinion that the requirement in § 58.1-3819 for those specified localities is that any transient occupancy tax imposed in excess of two percent must be spent to attract travelers to the locality, increase occupancy at lodging properties, and to generate tourism. Further, a determination on spending requires input from the local tourism industry. Finally, it is my opinion that localities have reasonable discretion in determining what are "local tourism industry organizations," but the inclusion of representatives of lodging properties is required.

Applicable Law and Discussion

Section 58.1-3819 authorizes counties to impose transient occupancy taxes on certain lodging facilities not to exceed two percent. The statute further expressly provides, for Wythe County and other specific localities to

levy a transient occupancy tax not to exceed five percent, and any excess over two percent shall be designated and spent solely for tourism and travel, marketing of tourism or initiatives that, as determined after consultation with the local tourism industry organizations, including representatives of lodging properties located in the county, attract travelers to the locality, increase occupancy at lodging properties, and generate tourism revenues in the locality.

You seek guidance regarding compliance with § 58.1-3819. The General Assembly has not defined tourism for purposes of § 58.1-3819 or elsewhere. The General Assembly has recognized the importance of tourism to the Commonwealth's economy as evidenced by its establishment of the Virginia Tourism Authority (the "VTA"). The VTA mission statement suggests that tourism is "the Commonwealth's domestic and international travel market." A look at the VTA website indicates that museums, historic sites, theme parks, the Commonwealth's natural resources, festivals, and a host of other activities and destinations fall within a category that is considered tourism.

Section 58.1-3819 reflects the General Assembly's intent that the portion of the revenues derived from the transient occupancy tax in excess of two percent be spent to promote and generate tourism in the locality imposing that tax. The statute does not, however, suggest any methods regarding how the locality should do so except to require input from the local tourism industry. A prior opinion of this Office considered whether purchases of open spaces are consistent with the requirement that "such revenues be used to promote tourism in the locality," and that Opinion concluded that such an assessment is "a factual determination to be made by the local governing body."

Although there is some deference to localities in determining what promotes tourism, the statute does require input from "the local tourism industry organizations, including representatives of lodging properties" where the localities have imposed transient occupancy taxes in excess of two percent and those revenues are being spent. Section 58.1-3819 also refers to "local tourism industry organizations" without defining them, but the statute is specific regarding consultation with "representatives of lodging properties located in the county." This would indicate that localities should look to established local tourism associations where possible and must include representatives of lodging properties in spending (beyond the two percent amount) for tourism and travel and marketing of tourism.

Conclusion

Accordingly, it is my opinion that while "tourism" has not been defined for purposes of § 58.1-3819, it is generally considered to be a domestic and international travel market that is important to the economy of the Commonwealth. It is further my opinion that the requirement in § 58.1-3819 for those specified localities is that any transient occupancy tax imposed in excess of two percent must be spent to attract travelers to the locality, increase occupancy at lodging properties, and to generate tourism. Further, the determination on spending requires input from the local tourism industry. Finally, it is my opinion that localities have reasonable discretion in determining what are "local tourism industry organizations," but the inclusion of representatives of lodging properties is required.

With kindest regards, I am

Very truly yours,

Kenneth T. Cuccinelli, II
Attorney General