It's expelled with the warm air. There's some tube on the back to drain liquid, but definitely no tank. And we had no need to use the hose all of last summer.

Please be warned that this unit (just like all the other single hose systems) suffers from the drawback that it needs to suck the air from somewhere, and that somewhere will end up being outside. So the efficiency in the end is quite a bit diminished.

You can convert it to dual hose system (gangsta style), but yeah, it ain't pretty.