Small lodging providers, including bed-and-breakfast houses, like the Hillcrest B&B in Uptown (above), will no longer have to pay a surcharge for tourism marketing starting Sept. 1.

Small San Diego hotels with fewer than 70 rooms will continue to pay the city's 10.5% transient occupancy tax, but no longer pay an additional marketing surcharge. Under the current system, hotels with fewer than 30 rooms, B&Bs and home-sharing services like Airbnb, HomeAway and VRBO pay 0.55% per room for marketing, while those with 30 rooms or more pay a 2% surcharge.

The decision will cost the city’s tourism marketing pool an estimated $2.4M of the $34M raised annually, reports the San Diego Union-Tribune. The SD City Council has agreed to eliminate the tourism surcharge for small lodging providers, because they have no say in how the funds are spent. Large hoteliers control the fund.

The legality of the 2% room levy is being challenged by attorney Cory Briggs and his client, San Diegans for Open Government. Briggs argues it is a tax and should have been voted on by the electorate. The case is scheduled for trial later this month. [SDUT]