Buying a small Idaho motel: the room taxes and the appraisal decide it

A twenty-two room motel comes up for sale. Same family since the eighties, roof newer than the carpets, a broker’s package with three years of occupancy and a tidy yield on the back page. The buyer has run hotels for someone else for a decade, the price looks fair, and both sides want to close before the season turns.

What slows that deal is rarely the occupancy. It is that several lines in the revenue column were never the owner’s money, at least one of them changed in January, and the appraisal is about to tell the lender that much of the purchase price has no collateral behind it.

A motel is a special-purpose property with a tax-collection business attached. Both halves of that sentence change the financing, and neither of them appears in a listing.

An Idaho room night is taxed in layers, by different authorities

Most small businesses collect one tax for one agency. Idaho lodging can collect four, for three or four different bodies.

• Idaho sales tax, which applies to sleeping and non-sleeping accommodation alike — so the meeting room and the conference space are in scope as well as the rooms.
• The state travel and convention tax, which applies to sleeping accommodation, vacation-home rentals and overnight stays at private campgrounds. It has its own permit.
• An auditorium district tax, if the property sits inside a district’s boundaries. It reaches non-sleeping rooms too, but not campground charges, and it also has its own permit.
• A city local-option tax, where the city has one. This is the one that is not administered by the Tax Commission at all — the city collects it, and the city audits it.

Idaho now has five auditorium districts, and two of them are new in 2026: one covering Nampa, and a new district across Valley and Adams counties, which is where McCall and Donnelly sit. District boundaries are not city limits, and the Tax Commission publishes an address lookup precisely because a property on the edge of one is a question rather than an assumption. Check the actual address before you model anything.

Resort cities add their own layer. Idaho Code 50-1044 lets a city of ten thousand or fewer that “derives the major portion of its economic well-being from businesses catering to recreational needs” put a local-option non-property tax to its voters. These pass by supermajority — Sandpoint’s lodging increase cleared the sixty per cent threshold in 2022 and runs through the end of 2035 — and they carry expiry dates rather than running forever. McCall’s has two components with separate end dates, one in the late 2020s and one in the mid-2030s, and one of them only took effect at the start of 2026.

Three consequences follow, and they belong in the pro forma rather than a footnote.

1. Where a district or city rate changed, last year’s figures describe a cheaper room night than the one you will be selling — the same daily rate reached the guest at a different all-in price.
2. Collected tax is not revenue. It arrives in your account and leaves again, and a pro forma built off gross deposits overstates the business. Underwriters catch this one regularly.
3. A sunset date is a planning fact: a city tax may lapse, or be renewed at a different rate, inside the term of your loan.

The thirty-day line runs through the middle of your revenue

Those room taxes apply to a rental of thirty days or less. A continuous stay longer than thirty days in the same room or space falls outside them.

That is not a technicality here, because a real share of small-property lodging revenue is exactly that kind of stay: a framing crew on a Kootenai County subdivision through the autumn, travel nurses on thirteen-week contracts, a fire crew in a bad August, a family between houses in a market with nothing to rent. Two motels with identical gross can have very different taxable mixes and very different stability.

It cuts both ways. Long-stay revenue is steadier than leisure nights and a lender will take it seriously, but it is usually booked at a lower rate, often concentrated in one or two customers, and it can leave with the project that created it. Ask for the split before treating an occupancy figure as comparable to the property down the road.

The permits are yours to get, not the seller’s to hand over

Anyone offering short-term lodging in Idaho needs a seller’s permit and a travel and convention tax permit, plus an auditorium district permit if the property is inside a district. Those are registrations in the operator’s name, obtained through Idaho Business Registration. They do not transfer with the keys, and the day after closing is not the day to discover it.

The other direction matters more. Lodging means the seller has been holding other people’s tax money in several accounts rather than one, and the city local-option account is not even at the same agency as the rest. Verifying that each of those accounts is current is diligence a buyer has to ask for by name, because a list of “sales tax” clearances will not cover them.

Your competition cannot be zoned away

In most tourist markets, part of the case for buying a lodging property is that supply is constrained — permits are capped, and the municipality can be relied on to keep it that way. Idaho took the opposite path, and a buyer who does not know that will underwrite the wrong market.

Idaho Code 67-6539 bars a county or city from adopting or enforcing anything that has “the express or practical effect of prohibiting any type of short-term rentals,” and goes further: no county or city may require a licence, fee, permit, certification or registration to operate one. Short-term rentals are classed as non-transient residential use for zoning and building purposes. What a city may still do is regulate for health and safety — smoke alarms in sleeping areas, an extinguisher and carbon monoxide detector on each floor, escape ladders for upper-floor sleeping windows, occupancy limits no higher than those for comparable homes, and a posted handout with exits and an emergency contact — and apply the same noise, parking and nuisance rules it applies to any other house.

So in McCall, Sandpoint, Ketchum or Coeur d’Alene, the house two streets away can become your competitor without asking anyone’s permission, and the city cannot stop it on your behalf. That is not an argument against buying lodging here. It is an argument against paying for a scarcity that does not exist, and a reason to be specific about what your property offers that a rented house does not — a front desk, housekeeping, a lot a trailer fits in, a booking a guest can make at nine at night. Short-term rentals do pay the same room taxes you do, so the tax layers are not a disadvantage against them.

The appraisal splits the price three ways, and only part of it is collateral

SBA treats hotels, motels and lodging as special-purpose property — a facility with a limited-market use, in the same category as fuel sites. That classification drives the valuation work, and the valuation work drives the structure.

The appraisal cannot come back as one number. It has to allocate separate values to the land, the building, the furniture, fixtures and equipment, and the intangible assets. If the report does not break those out, it goes back to the appraiser to be revised.

Two further rules shape the timetable. The appraiser must be state-certified general, independent of the lender’s loan production, and must have completed several going-concern appraisals of equivalent special-purpose property in the last three years — a bench that is not deep for lodging in Idaho, so a broker’s two-week appraisal assumption is worth challenging early. And if the business changed hands within the last three years, the lender must obtain a new appraisal plus either a second appraiser’s review or a site visit by senior staff. A property already flipped once is a slower file.

An appraisal or valuation the seller or the broker commissioned cannot be used, and where the intangible portion is large enough an independent going-concern appraisal is required rather than the lender’s internal view. Budget for that report as a real, non-refundable cost of finding out whether you own a business.

How to sequence it

1. Put the exact street address into the Tax Commission’s auditorium district lookup, and call the city about its local-option tax and its term. Build the tax stack from the address, not from the county.
2. Ask the seller to split trailing revenue into stays of thirty days or less and continuous stays over thirty days, and to name the long-stay customers.
3. Rebuild the revenue line net of collected tax, then compare it with the package. The difference is the first thing you have learned.
4. Ask your lender early how it expects the appraisal to allocate between real property, equipment and goodwill, and what equity that implies. This is the conversation that sets the price you can actually pay.
5. Confirm each tax account is current — sales, travel and convention, auditorium district and city — and put the remedy in the purchase agreement while you have leverage.

When not to buy it

Plenty of small Idaho lodging properties are good businesses, and some sit on the best real estate in a town that is not making any more of it. The bad ones share tells.

• The pro forma uses gross deposits as revenue, and nobody has netted out the room taxes. Everything downstream of that is wrong, including the price.
• The price only works if goodwill is treated as collateral, which no appraisal is going to do.
• The market case assumes short-term rental supply is constrained. In Idaho it is not, and the statute says so plainly.
• Deferred maintenance is described as cosmetic while the figures show no capital spend for years. On lodging, deferred maintenance is deferred revenue.

A motel purchase that clears a lender’s desk cleanly looks the same every time: revenue stated net of tax, the thirty-day split visible, every tax account current, and a price the appraiser’s allocation can support. Work it in that order and the loan is an ordinary acquisition with an unusual tax appendix. Work it the other way round and you will spend the spring paying for an appraisal that tells you the price was wrong.