Taxes could hurt OTAs in US

The principal advocacy organisation for US state legislators is calling on states to consider rules that would require online travel companies to pay hotel occupancy taxes on the full rental price paid by customers and not simply the wholesale rate they have negotiated with the accommodation provider, according to Bloomberg.

State and local governments are increasingly critical of the “merchant model” used by online travel companies, saying it puts local hotels at a disadvantage and hurts revenue collection as municipal budgets shrink. States including New York and North Carolina passed legislation requiring payment on the full room price. In South Carolina and Georgia, state supreme courts ruled taxes were due on the full rate, not the wholesale rate.

Expedia, Orbitz LLC, LP and have argued for years in lawsuits around the US that the difference between what they agree to pay hotels to list rooms for rent on their websites and what they charge customers is a service fee for “facilitating” the transaction, and thus isn’t subject to occupancy taxes.

The National Conference of State Legislatures committee studied the issue and said last week that states should consider legislation that requires the companies to remit taxes based on the full rental price paid by the user.

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