At the start of this year a number of changes took effect regarding California’s Seller of Travel (SOT) regulations, a program which requires all sellers of travel doing business in California to register with the state’s Attorney General’s Office and to display that registration number on all advertising. Acting on a tip from one of our readers, Travel Agent investigated the changes and is back with a full breakdown of what travel agents need to know.
Under the new rules, the actual definition of who counts as a seller of travel – and therefore must register – has not changed, according to several experts Travel Agent interviewed.
“The changes that went into effect January 1 do not alter the definition of seller of travel,” says Peter N. Lobasso, general counsel for the American Society of Travel Agents (ASTA). “Nothing has happened on that front.”
“The requirements for doing business in California have not changed in the slightest,” agrees Mike Estill, chief operating officer of the Western Association of Travel Agencies (WESTA). “The only change is that a company’s California state business ID, a number issued by the Secretary of State that everyone needs to legally do business in California, has to be entered on the Seller of Travel application/renewal form. It just makes sense. Why would the Attorney General’s office issue a company an SoT number, if that company is not registered to legally transact business in the state.”
According to a letter from the California Coalition of Travel Organizations (CCTO) to California Governor Jerry Brown in support of the changes provided to Travel Agent, the new rules ensure that sellers of travel file with the Consumer Law Section of the Attorney General’s Office with the file number assigned to the seller of travel by the Secretary of State or Franchise Tax Board.
“The current SOT law does not require that sellers of travel comply with the requirements of current law that they obtain a file number assigned by the state,” the CCTO wrote. “Sellers of travel who are in compliance with this requirement have identified businesses that are not in compliance.”
The other major change to the SOT regulations involves the exemption for independent travel agents.
“Formerly [the exemption] was natural persons, only individuals could claim it,” says Lobasso. “But that’s been expanded to include single member LLCs and corporations.”
Under the new rules, the independent agent provision now applies to “a person who is an individual, a single-member limited liability company whose sole member is an individual, or a single-shareholder ‘S’ corporation whose sole shareholder is an individual,” according to the CCTO letter.
“This part is a very positive change,” says Eben Peck, senior vice president of government and public affairs at ASTA.
“Independent agents are one of the fastest growing segments of the industry,” adds Lobasso. “To be a single member ‘S’ corporation and still have that exemption available to you would largely be welcomed by contractors and host agencies.”
“The only issue I see is that independent agents should use their host agency’s CST#,” says Anastasia Mann, chairman and CEO at Corniche Travel in West Hollywood, CA. “Otherwise they are not protected by the fund. If they go rogue, and don't register on their own, (perhaps trying to get more commissions undisclosed to their host) then they can be personally liable as opposed to being protected by the fund under the host agency registration.”
Travel Agent reached out to the California Attorney General's office for comment on the new rules but did not hear back by press time.
For more information on the Seller of Travel rules, visit https://oag.ca.gov/travel. For the full text of the legislation that took effect at the start of this year, visit https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201520160AB2106.