Legal advice obtained by the tourism industry says passing a bed tax onto customers would be illegal.
Auckland Council's original proposal of a $28 million bill for hotels, motels and backpackers has been met with sharp criticism from the industry.
Earlier this month, Auckland's Mayor, Phil Goff, responded with a modified proposal excluding accommodation further from the city centre, and bringing in a sliding scale of contribution - ranging from a doubling for central city hotels, to nothing for campgrounds and backpackers.
The money is to be used to replace ratepayer funding spent on attracting visitors and supporting major events.
The move has been strongly opposed by the hospitality sector, which said it got only 10 percent of the total spend from tourists, and that it should not bear the full burden of the costs.
Tourism Industry Aotearoa chief executive Chris Roberts said legal opinion from Lane Neave Lawyers showed that the rate could not be passed onto customers as a surcharge.
Under the Fair Trading Act, hotels and motels could not separate out the surcharge as an extra cost and would have to include it in their headline room rate, he said.
"You also can't have any of the hotels and motels agreeing to what a surcharge should be because that would be in breach of the Commerce Act.
"So, this cost has to be absorbed by the businesses running commercial accommodation in Auckland," he said.
Mr Roberts called for the council to vote against the proposed rate when it discussed its budget on Thursday.
Phil Goff has previously told RNZ that he first sought legal advice on the proposal, and that he had been advised the rate was legitimate.