Travel Tech members help promote travel to every corner of the country and the world. Travel Tech member companies work closely with their hotel partners to ensure that they, and the destinations that they represent, are presented to consumers in the most aesthetic light. As partners with independently-owned and local hotels, B&Bs, and Inns, Travel Tech members are often one of the few ways for these small businesses to reach a national, or even international, audience.
Consumers benefit from the ability to search, compare and book their travel itineraries. The online travel agents (OTAs) charge the consumer a service fee for providing that capability. The truth is online travel companies do properly collect and remit applicable taxes.
However, some state and local governments have attempted to apply the hotel occupancy and use tax, a tax that is typically reserved for hotel operators, on these service fees. Travel Tech stands firm in its position that since online travel companies do not operate hotels or buy rooms at wholesale rates and re-sell them at retail rates, these taxes do not and should not apply. Dozens of courts throughout the US have affirmed this and even Marriott itself has confirmed that OTAs do not buy and sell room inventory.
“When we say whole sale, it’s not the most apt analogy. Expedia doesn’t pre-pay Marriott for rooms. What happens is they have access to sell, they’re another conduit for selling. So, first and foremost they’re not allowed to undercut us. We open that inventory, it’s our inventory, and they’re allowed to sell it at that price we’ve indicated.” – Representative from Marriott Corporation.
Some states have considered applying the state sales tax to the services provided by online travel companies and brick and mortar travel agents. While many states have considered sales taxes on services, most have rejected these proposals and have recognized that increasing taxes on service providers is flawed public policy.
These taxing proposals, frequently prompted by plaintiffs’ class action legal firms and state hotel and lodging associations, is damaging to consumers and ultimately to lodging suppliers and the communities in which they operate. Higher taxes on travel makes travel more expensive for consumers. Leisure travelers, especially, are hyper-sensitive to price and will often choose destinations based on cost alone. States with higher travel taxes are at a competitive disadvantage to states with lower travel tax rates.
Whether through litigation or legislation, these new and onerous taxes threaten an industry that has been an important driver of travel and tourism and the economic benefits that brings to localities everywhere.
In courts that have considered the question of whether hotel occupancy taxes apply to travel service providers, nearly 90 percent of the decisions ruled that occupancy and use taxes do not apply to travel service providers.
A list of all court rulings on these issues can be found here.
Courts have also reviewed and considered whether online travel companies are properly collecting and remitting all applicable taxes. In these cases, 100% of the decisions found that online travel companies do properly collect and remit all applicable taxes.