Travel industry executives told the National Conference of State Legislators (NCSL) Executive Committee Task Force on State and Local Taxation meeting in Boston today that the overwhelming failure of online travel tax litigation and legislation underscores the flawed logic by proponents who want to raise taxes on efficient ways for hotel operators and guests to book hotel rooms.
Speaking out against the new service taxes included hoteliers, business travelers, and the online travel companies (OTCs). Panelists included Kevin Mitchell of the Business Travel Coalition, John Hrabe of the Independent Lodging Industry Association, Darrel Hieber of Skadden, Arps, Slate Meagher & Flom LLP and Justin Kintz of Orbitz Worldwide.
The majority of the discussion revolved around the dismal failure of proponents of online travel tax litigation and legislation nationwide, the Travel Technology Association said.
On the litigation front, judgment has been ordered in 35 cases nationwide addressing the OTC’s merchant business model—the OTCs have won 26 of those cases outright, with 12 of those rulings being affirmed on appeal. Of the remaining 9 cases, the courts ruled the OTCs are not liable for any back taxes in 4 of them, Travel Tech said.
“Courts nationwide have overwhelmingly rejected efforts by state and local taxing authorities to end run the legislative process and impose occupancy taxes beyond the clear express terms of the taxing statutes enacted,” said Darrel Hieber of Skadden Arps.
On the legislative front, in the last two years, ten different state legislatures have considered these new taxes, and all ten have rejected them, Travel Tech reports.
“Corporate travel managers take into account travel tax rates when comparing convention and meeting destinations for their businesses. States that consider enacting new service taxes on online travel bookings risk putting themselves at a competitive disadvantage,” said Kevin Mitchell, Chairman of the Business Travel Coalition.
“The lodging industry is not united on this issue. Because they lack the marketing budgets of the major chains, independent hotel owners rely on travel agents and OTCs to help move hotel inventory and provide global marketing opportunities. These new taxes would disproportionately harm small business owners who operate independent hotels,” said Tim Rosales, representing the Independent Lodging Industry Association.
“We recognize that local governments want money, but we believe that levying new service taxes on travelers is not a sound path. Those pushing for these new taxes are stepping over dollars to pick up pennies,” said Justin Kintz, Director of Government Affairs for Orbitz Worldwide.
“We are encouraged that NCSL’s Executive Committee Task Force was able participate in a thoughtful discussion of the hotel occupancy tax issue and hear a point-by-point refutation of the many myths surrounding it. Ultimately, some chain hotels don’t like marketing through travel agents. This is really just a business matter that the hotels should never have asked legislators to get in the middle of—especially when it involves raising taxes on their constituents,” said Chris Chiames, Chairman of The Travel Technology Association.
The Travel Technology Association, or Travel Tech, is the association for online travel companies (OTCs) and global distribution systems (GDSs).Travel Tech’s members include: Amadeus, Expedia, Orbitz Worldwide, Priceline, Travelocity, Travelport and Vegas.com.