Legislation Would “Level the Playing Field” On Hotel Taxes

SB 190, sponsored by Senator Richard Madaleno, heard before the Senate Budget and Taxation Committee on February 11 would “level the field” when its comes to sales taxes remitted on hotel rooms booked through online travel companies (OTCs). As reported by Marylandreporter.com,

Under current Maryland Law, the actual room rate charged by the hotel is taxed at 6%. Senate Bill 190 would clarify the definition of “taxable price” and apply it to online travel companies.

According to the legislation’s fiscal note, in many instances online travel companies can purchase bulk hotel room rentals for a reduced rate from a hotel, which they in turn rent to customers. The purchaser of the room rental is usually charged the same rate as the person would be if the hotel room rental was purchased directly from the hotel.

The issue that has arisen in recent years is the definition of taxable price that is the basis of state and local sales and use taxes and hotel taxes. Online travel services have typically been remitting these taxes based on the reduced rate that they pay for the hotel rooms — not the full price they charge to hotel guests.

MACo testified at the hearing stating it would support amendments to extend this same principle to any local hotel tax.  Doing so, would establish fair and equitable tax treatment of hotel rooms for both state and local taxation purposes.

According to the article,

The Maryland comptroller’s office has been arguing in court that these taxes should be collected on the total room rate paid by the end user. That is the basis on which the taxes would have been been imposed if a customer rented the hotel room directly from the hotel.

In Maryland, Baltimore City and Baltimore, Montgomery, and Worcester counties have sued the online bookers over the definition of taxable price as it applies to their local hotel taxes. These jurisdictions have reached settlement agreements with the various OTCs regarding unpaid taxes.

Steve Shur, president of the Travel Technology Association, disagreed.

 …this bill would create a new sales tax on service fees,  With the new sales tax, Shur said, the added cost would encourage travel sites to steer consumers to other destinations that do not charge the sites, which in turn would hurt Maryland’s tourism economy.