Is the VAT refundable for hotels and rental cars?

The VAT refund is only valid for goods that are not consumed in Italy. You will use the hotel and rental car while you are in Italy so the VAT is not refundable. However if you purchase a couple of leather coats and a nice piece of jewelry it would be eligible for the VAT (assuming the items met the price requirement). Goods are to kept in the original packaging and not used before departing the country. You may be asked to present the items - if you're wearing the leather coat you are claiming for VAT you can most likely kiss the refund good-bye.

Thanks SamSn! Death and taxes, as they say, are unavoidable, even in Italy.

Perhaps it depends on the country - but usually Hotel/Food VAT is only rebated for Business-Expenses in those countries for Business travelers. But vacation/holiday stays are not. re: the packaging - some stapled closed a big bag with receits (unwieldy to pack and organize) while others just gave me paper work. Ideally - you need to show the customs folks the un-used new stuff and you should be ok. Id suggest going the day before you leave to the train/airport if its convenient - since it may be easier to repack later. Or just forget it like I do - not worth the hassel for 40-50$ unless you spent 1000s of Euros - in which case (given the exchange rate today) you probably dont NEED the refund! :)