LA Transient Occupancy Tax: Clean Audits For Hotels

If you operate a hotel in Los Angeles, a Transient Occupancy Tax audit can feel like a distraction you do not have time for. You focus on guests and revenue, not paperwork and reconciliations. The good news is that clean audits are achievable with the right records, simple routines, and a clear plan. This guide shows you what LA requires, what auditors look for, and how to prepare so you move through an audit quickly and confidently. Let’s dive in.

LA TOT basics you must know

Los Angeles imposes a Transient Occupancy Tax on the privilege of occupying a room or similar lodging. The current rate is 14 percent of the rent charged, as set in the Los Angeles Municipal Code. You are generally taxing stays of 30 consecutive days or less, while longer stays can be exempt if you have a written agreement in place.

• Review the City’s code and definitions in Article 1.7 of the Los Angeles Municipal Code. See the LAMC Article 1.7 overview.
• LA’s Office of Finance explains registration, exemptions, and platform collection on its Transient Occupancy Tax page. Read the City’s TOT requirements.

Filing and deadlines in Los Angeles

You must register for a Transient Occupancy Tax Registration Certificate within 30 days of starting business. Returns are filed monthly, and for most operators they are due on or before the 25th day after the end of each month. Keep proof of filing and payment in your records.

• Check monthly due dates and reminders on the Office of Finance site. View monthly filing guidance.

Recordkeeping rules and what to keep

LA requires you to preserve records necessary to determine the tax for three years. The Office of Finance has the right to inspect those records at reasonable times. Organize files so you can hand an auditor exactly what the notice requests.

• See the City’s record retention and audit authority. Review LAMC Section 21.7.11.

Key documents to maintain and reconcile:

• Registration and filings
  • Current TOT registration certificate and Business Tax Registration Certificate
  • Filed monthly TOT returns with payment proofs
• Revenue and reservations
  • PMS reports: daily revenue, night-audit, occupancy, month-to-date and year-to-date
  • Guest folios and registration cards, especially for any claimed exemptions
  • Group and corporate master bills
• Third-party and platforms
  • OTA invoices and remittance reports; copies of platform agreements showing who collects and remits the tax
• Financial reconciliation
  • Bank statements, merchant processor statements, and cash logs
  • General ledger and trial balance tied to room revenue
• Adjustments and exceptions
  • Documentation for voids, comps, discounts, refunds, and cancellations
• Contracts and controls
  • Management or secondary operator agreements
  • Written agreements for stays longer than 30 days
  • Internal SOPs for nightly audit, reconciliations, and record retention

How LA audits usually proceed

Audits follow a predictable path. You will receive a notice and an initial request for records that defines the period and scope. The auditor will schedule an opening discussion, review your documents on site or by desk audit, and then present proposed adjustments. If you disagree, you have appeal rights through the City’s processes.

• Learn how the Office of Finance’s Audit Division operates and what to expect. Visit the Audit Division page.

Common audit triggers in Los Angeles

• Failure to register or a gap in registration status
• High or unusual exemption claims without strong documentation
• Mismatches between PMS reports and bank or merchant statements
• Change of ownership, including buyer requests for tax clearance
• Data matches from platforms and third parties

Clean-audit checklist for LA hotels

Use this shortlist to prevent most findings and speed resolution:

• Compliance basics
  • Register for LA TOT and keep your certificates current
  • File and pay monthly by the 25th, and save confirmations
  • Show TOT as a separate line on guest folios
• Reconciliation discipline
  • Reconcile PMS and night-audit room revenue to bank and merchant statements each month
  • Keep a simple variance log that shows issues found and cleared
• OTA and platform control
  • Save OTA transaction and remittance reports, and the platform agreements
  • Map platform flows to your PMS and returns so totals agree with the City’s expectations
• Exemptions and long stays
  • Keep signed written agreements for any stay over 30 days
  • Maintain a basic exemption register with guest name, room, dates, and contract reference
• Internal oversight
  • Run periodic spot checks of folios, OTA postings, and exempt or house-use rooms
  • Document your SOPs so auditors see consistent controls

What to do when an audit notice arrives

• Respond on time and confirm the period and scope

• Organize documents in the order requested and label files clearly

• Join the opening call prepared with your reconciliation summaries and index of records

• If issues are complex, consider engaging a CPA or tax counsel familiar with municipal TOT

• If you receive a proposed assessment, use the City’s appeal and review channels

• For appeals, assessment review, and taxpayer rights, start here. See Audits and Assessments.

• For penalty relief in qualifying cases, the Office of Finance accepts written requests. Review penalty waiver guidance.

Buying or selling a hotel in LA

If you are acquiring a hotel, protect yourself from prior TOT liabilities. California law gives purchasers the right to request a transient tax clearance certificate. That request often prompts a focused audit, and it helps you confirm or resolve any legacy exposure before closing.

• Understand the buyer’s tax clearance process under state law. Read California RTC Section 7283.5.

Local updates to watch

LA has reviewed how platforms are taxed and has considered code updates. City leaders also adjust enforcement and relief in specific situations, such as emergency-related tax relief. Short-term rental enforcement has tightened, which can increase discovery of unregistered activity and related audits. Before filing or responding to an audit, check current City pages for any changes.

• See recent Council interest in updating the TOT code. Read the Council update.
• Review strengthened homesharing enforcement steps. See the homesharing ordinance update.

Final thoughts

A clean LA TOT audit comes down to timely filings, tight reconciliations, and clear support for any exemptions. Build these habits into your monthly close so you are always audit ready. If you are planning a sale, acquisition, or asset plan that involves hotel operations, thoughtful diligence around TOT is part of protecting value.

If you want strategic guidance on how tax, operations, and real estate intersect in a hotel transaction, connect with Robert Rauchhaus.

FAQs

What is LA’s Transient Occupancy Tax rate and what is taxed?

• The City taxes the privilege of occupancy in hotels and similar lodging at 14 percent of the rent charged, as set in the Los Angeles Municipal Code’s Transient Occupancy Tax provisions.

Who counts as a transient and when is a stay exempt in Los Angeles?

• A transient is a guest who occupies for 30 days or less; stays over 30 consecutive days can be exempt if supported by a written agreement that documents the length and dates.

When are LA TOT returns due and how long must records be kept?

• Returns are generally due monthly by the 25th day after the end of each month, and you must keep records necessary to determine the tax for three years, subject to City inspection at reasonable times.

Do platforms like Airbnb handle my LA TOT obligations for me?

• Some platforms collect and remit TOT for bookings they process, but you still need to register, file as required, and maintain records unless the City’s platform rules and agreements fully cover your situation.

What documents should I prepare first when I receive an LA audit notice?

• Gather your TOT certificates, filed returns with payment proofs, PMS and night-audit reports, guest folios for exemptions, OTA remittance reports, bank and merchant statements, general ledger ties, and any management or long-stay agreements.

How can a hotel buyer avoid inheriting prior LA TOT liabilities?

• Request a transient tax clearance certificate under California RTC Section 7283.5 during due diligence, which can prompt a focused review and helps confirm liabilities before closing.