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Travel Taxes Can Take a Bite Out of Your Budget

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Cash in HandWhen most people travel, they budget for airfare, gas, lodging, food, and miscellaneous items such as baggage fees and taxi fares.

Few of us think about taxes, however. But according to a recent study, maybe we should pay more attention –  because taxes can add up to a hefty portion of the total daily cost of traveling.

So what should travelers do in response?

In the annual report issued by the National Business Travel Association (NBTA) Foundation, researchers found that travelers can pay up to $41 per day in taxes on hotels, rental cars meals, and general merchandise in the most expensive cities in the U.S., and up to $22 per day in the least expensive ones.

Of the 50 cities studied, Chicago topped the list, with taxes averaging $40.99 per day. Rounding out the top five were Seattle at $37.95 per day, Dallas at $37.26, San Antonio at $37.20, and Houston at $36.83.

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Interestingly, the overall amount of taxes paid by travelers has declined this year compared to 2009, but that is attributed to the fact that base prices for hotels and food have gone down. Since taxes are a percentage of the total, they go down along with the base price.

Tax signHowever, according to the report, many cities have been attempting to combat the recession-driven drops in their local tax base by boosting taxes that affect visitors.

For example, visitors renting cars in Boston are likely to find additions such as a state parking surcharge, a convention center surcharge, a vehicle license cost recovery fee, a concession recovery fee, plus the regular state sales tax crowding their bill.

In Green Bay, Wisconsin, Kansas City, Missouri, and Phoenix, Arizona, car rental bills reflect surcharges and taxes aimed at helping raise money to build massive new sports stadiums.

And many cities are also levying taxes on hotel stays, such as the four percent occupancy taxes found in a suburb of Nashville, which, added to the 18.75 percent state hotel tax, can add a huge chunk to your final bill.

The study’s authors caution that these kinds of surcharges could backfire, because business travelers – and meeting planners in particular – are beginning to carefully scrutinize travel expenses, and may begin to avoid places where the tax burden is deemed too high.

Accounting taxesFurthermore, the trend does not sit well with some average citizens who have concerns about its legality. Since those who are most affected by the taxes tend to be out-of-town visitors who are not able to vote in the particular municipality, some claim that it amounts to taxation without representation.

By the way, in case you’re wondering, you’ll pay the least taxes in Portland, Oregon ($21.49 per day), Detroit ($22.37), Honolulu ($22.55), Fort Myers, Florida ($22.91), and Fort Lauderdale ($23.69).

So aside from avoiding Chicago, taking the bus instead of renting a car, and scheduling your next 10 vacations in Ft. Lauderdale, what can the average traveler do to avoid big tax bills?

If you’re headed to a city that socks you with big rental car taxes, try renting from a location outside the affected city (and especially outside a major airport, where fees are even higher). But this can result in higher taxi expenses to get to the car rental location, so it’s usually only financially sensible for pricier, longer-term car rentals.

Other than that, taxes are a fact of life, and there seems to be little chance that any of these surcharges will be removed, even after the recession is over. So your best strategy is to be prepared.

Call the hotel or rental car office directly to find out how many additional surcharges are likely to appear on your bill, so you don’t have any nasty surprises when you check out.

The bottom line: when you’re planning a trip, make sure that you add at least 20 percent on top of your base budget to account for taxes, no matter where you’re headed.

By Karen Elowitt for PeterGreenberg.com.

Related links: HotelExecutive.com, USA Today

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