State Considers Pressuring Online Travel Websites on Taxes

According to the Baltimore Sun, Maryland is considering whether to go after online travel websites to get them to pay taxes based on the room rate sold to customers instead of the bulk rate that the companies pay the hotel for their rooms.  This issue has been gaining momentum as some local jurisdictions have collected back taxes after filing law suits.

The premise is simple. Maryland now collects sales taxes based on the bulk rates that the websites pay hotels for their rooms. But some officials say the taxes should be based on the higher prices for which the websites sell the rooms to customers.

Or, as Gov. Martin O’Malleyput it recently: The typical booking website “somehow avoids paying the local hotel room tax.”There’s good reason for Maryland officials looking to boost revenue to turn toward the websites. Baltimore City and Worcester County both collected money after suing websites, including Expedia and Orbitz, for back taxes. And in Baltimore at least, some of the companies are paying higher taxes going forward.

Baltimore and Montgomery counties and the District of Columbia have also filed lawsuits seeking more taxes.

However, around the country, lawsuits are being met with mixed results.

A Texas jury found recently that the online booking companies owed the state about $20 million. But in March a Los Angeles Superior Court judge threw out a finding that the companies owed the City of Santa Monica $3 million.

Regardless of the courts findings, counties across the country are concerned with the tax treatment of online travel companies.  At the recent National Association of Counties (NACo) conference in Portland, Oregon, the body approved a resolution opposing preferential tax treatment for online travel companies. Read the NACo fact sheet on the issue here.

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