Senate advances bill to address tax issues related to online travel companies

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The Senate recently approved legislation that addresses issues related to the collection of the state sales tax from online travel companies.

Traditionally, when a hotel rents a room to a consumer, the hotel collects and remits the state sales tax on the full retail rate charged for the room. However, online travel companies, such as Orbitz, Travelocity, and Expedia, contract with hotels to purchase rooms at a mutually agreed upon wholesale price and then resell these rooms online to the consumer. Online travel companies collect and remit the sales tax on the room rental rate they negotiated with the hotel, rather than the full rate that the consumer pays.

House Bill 1511 would apply the state sales tax to the full price paid by the consumer at the point of sale for booking the hotel room, including any additional fees or markups that an online travel company charges customers for booking the hotel room.

“This is not a new tax, but rather a change in the application of the sales tax to ensure online travel companies are remitting the full amount of tax owed to the state,” Sen. Mario Scavello (R-40), which introduced the legislation, said. “It is estimated that closing this loophole at the state level in the Tax Code will garner approximately $20 million for statewide tourism efforts, which will aid our region and fuel local economies across the Commonwealth.”