Who Will Win the Merchant Hotel Room Occupancy Tax Battle?

The American Hotel & Lodging Association (AH&LA) held its annual Legislative Action Summit following receipt of an open letter drafted by five major travel associations requesting support of proposed legislation that would eliminate room occupancy tax assessments on merchant model hotel room transactions processed by online travel companies. With millions of dollars at stake, the question for this week’s RockCheetah Weekend Poll is “Who Will Win the Merchant Hotel Room Occupancy Tax Battle?”

Bathing in the Hotel Merchant Tax Quagmire

The hotel merchant tax issue is creating havoc for online travel agencies. At the present time, more than 200 municipalities, counties and states have lawsuits pending in an attempt to claim additional tax revenues based on the markups applied by Online Travel Agencies (OTAs.) In some cases, the suits are groundless as the current hotel occupancy tax laws are based on the revenue received by the hotel. However, some cities are changing their tax laws to base the taxes on the retail price paid by traveler. Unfortunately, there is widespread confusion – this article attempts to provide clarity on the key issues and a recommendation for resolving the hotel merchant tax problem.

Online Travel Companies in Hotel Tax Squeeze Play

Online travel agencies such as Expedia, Travelocity, Orbitz and Priceline are being subjected to lawsuits from a large number of cities claiming that they are underpaying the hotel room tax on stand-alone hotel bookings. A $184 million consumer class action lawsuit was recently filed in Washington State against Expedia that now opens a new front for these online travel agents to defend.