Lodging Resort Management
December 6, 2011
Online Hotel Booking Taxes
The hospitality industry is in a struggle right now to keep revenues maximized with less leisure travel from consumers as well as a soon to be major issue faced with the internet. Currently, a Federal legislation act is looking to be imposed on hotels nationally prohibiting state and local governments from collecting room taxes from online third party intermediaries. This would put hotels in harms way by placing them at an extreme disadvantage when marketing their own rooms as well as the government looking to get the taxes somewhere else which will most likely be an increase in taxes for hotels. The reason I selected this topic is to cover the possible problems this can put on hotels to stay profitable and to cover the issue which seems to be putting lots of people out of work; the internet. I purchase almost everything online, as I am sure a lot of people do, so this issue seems very current and could possibly do some major harm within the next five to ten years.
When Internet booking sites are purchasing from hotels, they pay wholesale for the rooms, which in turn leads to lower taxes because of the lower price. State jurisdictions have caught on to this strategy and have begun filing lawsuits on what they claim are unpaid tax revenues according to McBurney. Their main argument is that when the TPI charges for a room, they essentially receive the taxes that the local government would have because they are included in the rate the site is showing. These actions have caused the online booking companies such as Expedia, Travelocity, Kayak, Hotwire, are pushing to file federal legislation that would essentially pre-exempt them from paying taxes on a state level. It some cases where companies like Expedia have lost legal battles, they have delisted the hotels in that jurisdiction in response and will provide listings for surrounding areas.
Under current laws, this...