The American Hotel & Lodging Association (AH&LA) notes that two of the basic principles governing Internet sales tax released by House Judiciary Committee Chairman Bob Goodlatte (R-VA) are consistent with the positions of the lodging industry as they relate to the treatment of hotel room reservations through online travel companies (OTCs) such as Orbtiz, Expedia, and Travelocity.
The first, related to tech neutrality, states that the sales tax burden on both on- and offline businesses should be consistent. A second relating to states’ rights advocates that the federal government should not mandate particular sales tax compliance burdens on individual states.
“Chairman Goodlatte’s principles are consistent with the long-held position of the lodging industry that the tax treatment of online room reservations should be equal, regardless of whether they are made through an online travel company or directly with a hotel,” said Katherine Lugar, AH&LA president/CEO. “Through a highly controversial practice, online travel companies have chosen to remit tax only on their wholesale costs, rather than the prices they charge their customers. Many states and localities have taken steps, including the filing of successful lawsuits, to ensure online travel companies remit taxes on retail prices, as hotels have always done. The principles outlined by the Chairman reinforce the lodging industry’s position that the taxation of rooms booked online should be applied equally regardless of the channel used for the booking.”
In recent months, several states and cities, including New York City, North Carolina, Oregon, Washington, D.C., and New York State, have clarified their laws and ordinances to ensure that those written prior to the creation of the Internet cannot be used to cloud the issue of whether taxes should be paid equally by those engaging in identical transactions.
In response, legislation has been circulated in Congress that would provide OTCs with a tax preference by exempting them from remitting taxes on the retail rates they charge. It also nullifies state laws and local ordinances, and shields OTCs from further lawsuits over their tax remittance practices.
If enacted, hotels would be discriminated against because OTCs would enjoy a tax preference over them, as hotels would continue to remit taxes on their retail prices, as has always been done. This would result in an uneven playing field through the creation of two different types of tax treatment for identical transactions, involving the same hotel room and the same retail rate paid by the guest.
