5 Most Tax-Friendly U.S. Cities for Travelers

IMAGINE WHAT YOU could do with an extra $20 a day in Honolulu. You could buy a few pounds of freshly-ground Kona coffee or take a snorkeling trip out in the crystal-blue waters. The good news: That's roughly the amount travelers will save each day on hotel fees and other taxes when they opt to go to Honolulu over less visitor-friendly cities.

Honolulu is a rare exception, however. A growing number of city governments are sticking visitors with the bill for building and maintaining local attractions. That tab comes in the form of extra fees and taxes on hotel rooms, car rentals and even restaurant tabs. "They can add a huge, huge percentage to your bill," says Jennifer Gaines, a contributing editor for travel booking site Travelocity. Chicago, for example, tacks on $42.44 a day for such expenses. (To see which five cities are the worst offenders, view our slideshow).

While few big cities are cheap to visit, some are less apt to tax tourists than others, says Bill Connors, executive director of the National Business Travel Association. "What that tells us is the strategy in those states is to attract visitors by keeping taxes low," he says.

To help figure out which cities charge visitors the least, the National Business Traveler Association recently crunched the numbers on taxes and fees charged in 50 U.S. cities. They based these figures on average daily charges of $103.70 per night for hotel, $82.03 for meals per day and $76.60 per day for car rental, before taxes and fees.

It's little wonder why Hawaii greets its visitors with a friendly "aloha" and leis made of fresh flowers — tourism contributes $12 billion to the state's economy, according to government estimates. In Honolulu alone, visitors can surf at Waikiki Beach, partake in waterfront luaus or visit Pearl Harbor. They can also get plenty of work done. Honolulu plays home to most Hawaiian businesses, including Fortune 500 firm Hawaiian Electric Industries (HE). It also serves as a major port of call for international shipping companies. All those business and leisure travelers arriving on Honolulu's shores can be thanked for making this city the most tax-friendly spot for visitors who pay an average of $21.45 daily for fees and taxes:

Hotels: 11.42%
Car rentals: 4.17% plus a $3 state surcharge for highway maintenance.
Restaurants: 4.17%

Portland's gorgeous scenery and low cost of living (compared with other big West Coast cities, at least) has made it a popular destination for working professionals and retirees alike. Over the past decade, the city's population growth has outstripped national averages, reports the Metro Council, a Portland-area urban planning group. Big business is also a fan of the city. Now known as the "Silicon Forest," Portland is home to some 1,200 technology companies, most notably chip maker Intel (INTC). Athletic gear makers Nike (NKE) and Columbia Sportswear (COLM) also have base camps here. But perhaps one of the biggest selling points is that travelers pay a mere $22.83 a day for fees and taxes:

Hotels: 12.5%, including 3% for performing arts and cultural activities and 2.5% for the Visitor Facility Trust Fund (convention center debts).
Car rentals: 12.5%, 2.5% of which is slated for tourism. You'll also pay a 29-cent "license recovery fee."
Restaurants: 0%

While it may have made its reputation as a popular Spring Break destination for rowdy college kids, Fort Lauderdale now attracts those with more refined tastes. A major hub for the yachting industry, Fort Lauderdale's proximity to the Caribbean islands makes it a popular port for yachts, as well as cruise ships. Adding to the tourism dollars is the city's convention center, which brings in more than three million visitors each year (many for the annual Fort Lauderdale International Boat Show). While Fort Lauderdale may cater to the wealthy, the daily tax burden is a cheap $23.35:

Hotels: 11%, including a 5% "tourist development tax" to improve beaches and promote tourism.
Car rentals: 6% plus $2 for funds that promote tourism and 43 cents for a "license recoupment fee."
Restaurants: 6%

With so many communications and research companies based in Fort Myers, it's no wonder word about the city's business-friendly reputation got out. (Citing substantial job growth of 32.3% between 2001 and 2006, Inc. magazine named it the best midsize city for doing business a couple of years ago.) Companies based there include directory publisher LocalTel, pay-per-click marketer MIVA (MIVA) and biotech researcher Greystone Pharmaceuticals. Ongoing redevelopment of the historic River District downtown is expected to generate plenty of tourism income, both from leisure travelers and those visiting the nearby convention hall, the Harborside Event Center. Still, the tax burden for visitors remains a low $23.35:

Hotels: 11%, including a 5% "tourist development tax" to improve beaches and promote tourism.
Car rentals: 6% plus $2 for funds that promote tourism, and 43 cents for a "license recoupment fee."
Restaurants: 6%

Extensive downtown development has kept the economy of West Palm Beach booming. The city ranked 36th on economic think tank Milken Institute's 200 Best Performing Cities index. In an effort to compete with nearby Palm Beach's posh Worth Avenue (called the "Rodeo Drive of the East Coast"), West Palm built the $600 million CityPlace shopping and entertainment center in 2000, drawing in major mid- and high-end retailers, restaurants and nightclubs. Up next: the adjacent CityPlace Tower, an 18-story office building slated to open later this year. Despite all this development, the tax burden for travelers is just $24.67:

Hotels: 11.5%, including a 5% "tourist development tax" to improve beaches and promote tourism.
Car rentals: 6.5% plus $2 for funds that promote tourism, and 43 cents for a "license recoupment fee."
Restaurants: 6.5%

Also See:
5 Least Tax-Friendly Cities for Visitors
10 Things Your Airline Won't Tell You
Slideshow: Luxury Trips for Less