As reported by The Capital, Anne Arundel County Executive John Leopold is seeking legislation that would require online travel companies to pay taxes on the room rates they are charging consumers, not the discounted rates at which they purchase the rooms. The Council is scheduled to hold a hearing on this issue at its Monday, October 17 meeting.
Alan Friedman, Leopold’s director of government relations, told the council during a work session this week that the legislation would charge online travel agencies on the retail rate instead of the wholesale rate.
Online travel agencies buy hotel rooms in bulk at a bargain and then sell them to the customer for a profit.
For example, a website such as Orbitz might buy a bunch of rooms at $80 a pop, then charge $100 for each, Friedman said.
The website pays Anne Arundel County’s 7 percent hotel tax on $80, not $100.
This is an issue that many other counties and states are currently grappling with. According to a July Baltimore Sun article:
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.
The National Association of Counties has also passed a resolution during its July 2011 conference opposing preferential tax treatment for online travel companies.
Prior coverage of this issue can be found on the MACo blog.