What’s so iAWFUL?

Cities and states are threatening travel agents and online travel sites with the wrong tax rate in the wrong jurisdiction  – and asking consumers to pay for it.

For anyone using a travel agent or online travel site to book a hotel room, local governments want to levy their double-digit hotel occupancy taxes even on the service fees you paid.

Imagine you are booking a hotel room through an online travel website.  The website tells you it is a $100 room, taxed at an 18% occupancy tax.  So, you pay the travel website $130 to rent to room: $100 for the room, $18 for tax on the room, and $12 service fee.  However, these local governments want to tax you 18% on the $12 service fee too.

This means more cost to the traveler and additional tax complexity for travel agents and online travel sites!

Under these laws, local governments mistreat travel agents and online travel sites the same as hotels.  They confuse the role that travel agents play in helping to match travelers with hotels.

Under these laws, local governments confuse the role that the internet websites play as intermediaries to help match travelers with hotels.

D.C. passed such an ordinance  which was upheld in court on September 24.  Last year New York City passed one too.  Similar ordinances have been attempted in Orlando, FL; San Diego, CA.; and San Antonio, TX.

But the great irony in all of this is that these booking services taxes can only be enforced against travel agents and websites that have a physical presence in the jurisdiction passing the ordinance.  So, out-of-state travel agents would not be obliged to collect these new taxes on service fees they earn when providing reservation services at the time travelers book their hotel, only the in-state ones.

This is a tax that is all pain for in-state travel agents.

The American Legislative Exchange Council (ALEC) recognized as much when it recently passed model legislation to prevent the imposition of hotel taxes on travel intermediaries. The model legislation is based on a Missouri bill that became law in 2010.

This year, nine states considered and decided against imposing these taxes.

NetChoice is also working with the Streamlined Sales Tax Governing Board and with NCSL to evaluate an alternative proposal that taxes agent services as a service rendered to the traveler booking the room.

NetChoice Statements:

Resources:

NetChoice Testimony on Tennessee SB 2663 – Taxation of Travel Services

NetChoice Testimony on Connecticut HB 5420 – Taxation of Travel Services

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