Hamburger and Hotel Taxes Now Require Voter Approval

by Kristin Higgins - March 8, 2023

Extra sales taxes on hot food purchases and hotel stays will now require voter approval in Arkansas after the passage of Act 190 in the General Assembly.

Since the 1970s, city councils and quorum courts have had the ability to levy the hospitality tax without voter approval. Seen as a way to promote tourism, the "hamburger tax" is often used to support local parks or promote tourist attractions and events across the state. 

In most cities with this tax, an Advertising and Promotion Commission made up of local restaurant and hotel owners oversee how the revenues are spent. Some cities require spending to be approved by the city council.

State law specifically prohibits using Advertising and Promotion tax revenue for:

(1) general capital improvements within the city;
(2) for costs associated with the general operation of
the city; and
(3) for general subsidy of any civic group or the chamber of commerce. 

At least 44 communities across Arkansas charge an Advertising and Promotion tax, though no state agency formally tracks who has the tax as cities collect the revenue themselves from restaurants, grocery stores, food trucks, hotels and motels.

Communities vary on their tax rates, who pays them, and how the revenue is spent. In 2022, the state's three top cities for collection reported a combined $38 million in hospitality taxes.

Last month, Bryant City Council members considered implementing a 3% tax on lodging and 1% tax on hot foods but postponed the decision until they could have a a workshop on city taxes. The city's finance director told council members the tax revenue was needed for parks and would play a role in balancing the city's 2024 budget to pay higher salaries for police and firefighters.

With the passage of Act 190, the city will now have to pursue a special election to levy the tax.

Nothing in state law prevented a city or county from putting the Advertising and Promotion Commission on the ballot for voters to decide. In 2021, voters in Johnson approved a 1% tax on hot foods and lodging. The revenue was earmarked for parks and trail development.

What Does The Hospitality Tax Apply To?

Communities across Arkansas vary on whether they apply the tax to both food and hotels, or to just one of those categories.

State law defines lodging gross receipts as revenues from renting, leasing, or otherwise furnishing hotel,
motel, house, cabin, bed and breakfast, campground, condominium, or other similar rental accommodations
for sleeping, meeting, or party room facilities, excluding for rental or lease of accommodations for 30 or more days.

Prepared food gross receipts include sales from restaurants, cafes, cafeterias, delicatessens, drive-in
restaurants, carry-out restaurants, concession stands, convenience stores, grocery store-restaurants, or similar businesses for prepared food and beverages for on premises or off-premises consumption. It does not
include packaged or grocery items.

Advertising and promotion taxes are not collected on sales from nonproft organizations.