The La Paz City Council is preparing to implement an Environmental Sanitation Tax (ISN) in 2026 as part of statewide tax reforms approved in late 2025. Although the city has not confirmed an official target, the Baja California Sur government expects to collect more than $11.2 million US through this tax increase, with Mayor Milena Quiroga supporting its broader application. The measure is expected to generate significant revenue for La Paz, likely tied to tourism-related activity.
The new fee will apply to tourists staying in hotels and other accommodations, with the funds managed through municipal trusts to support sustainability and infrastructure projects. Mayor Quiroga has advocated for extending this environmental fee across all municipalities in Baja California Sur, aligning with state efforts to fund water security and infrastructure projects such as new dams.
The Environmental Sanitation Fee targets tourism-related activities to finance environmental and infrastructure initiatives, including waste management and water projects. While the $11.2 million estimate is not confirmed specifically for La Paz, it aligns with the state’s broader revenue expectations and the mayor’s push for expanding these fees statewide in 2026.
Local business leaders, however, warn that the new taxes could increase operating costs and final prices for both residents and tourists. Representatives from the hotel and restaurant industries say the package of tax hikes will make services more expensive and potentially affect the region’s competitiveness as a tourist destination.
Under the reforms approved by the 17th State Legislature, the Payroll Tax will rise from 2.5% to 3% across Baja California Sur. In addition, La Paz, Comondú, Loreto, and Mulegé will now implement an Environmental Sanitation Fee already in place in Los Cabos since 2022.
Agustín Olachea, president of the Association of Hotel and Tourism Companies of La Paz (Emprhotur), explained that the environmental sanitation charge, set at 70% of the Unit of Measurement and Update (UMA) per night will be added to the existing Lodging Tax. “This ends up being paid by the guest and reported by hotel owners,” Olachea said. “We’ll become a bit more expensive, and if that makes us a high-cost destination, tourists may start looking elsewhere.”
The fee will take effect in January. However, uncertainty remains over whether the 20% increase in the ISN will be properly allocated to the designated municipal trust. Olachea noted that, combined with the minimum wage increase, the tax measures could raise operating costs for local businesses by as much as 33%.
David Gracia, president of the National Chamber of the Restaurant and Seasoned Food Industry (Canirac), also expressed concern. “It’s understandable that some taxes need updating, but lawmakers failed to consider the full scenario,” he said. “This is not an isolated increase. It’s a cumulative burden that businesses will face in 2026.”
Gracia warned that the combined increases, including those related to IMSS and Infonavitcontributions, could result in inflation of 4% to 5% next year. “We’re talking about restaurant operating costs rising by 20% to 30% in some cases,” he said. “More than 90% of restaurants in our state are micro-enterprises with fewer than 10 employees, so this could have serious consequences.”
He added that the increases could discourage formal employment and even lead to restaurant closures. In Los Cabos, the environmental sanitation fee is already applied at 10% of the UMA for restaurant bills exceeding $24 USD, a cost directly passed on to customers.
“The business sector in Baja California Sur is resilient,” Gracia said. “But we hope there are no further tax changes in 2026, or we could face a catastrophic scenario.”
Governor Víctor Castro defended the reforms, saying they are necessary to modernize the state’s tax structure. “We must update the tax system. It’s not about creating new taxes,” he said. The Environmental Sanitation Tax was first implemented in Baja California Sur on February 1, 2023.
