Changing the Way Online Travel Companies Remit Taxes in Ohio
About the Issue:
The world is only now learning how to deal with the impact (positive and negative) of technology. The legislation will help the industry and the state "catch-up" with the technology - meaning online travel companies pay what is owed in bed taxes.
Online travel companies (OTCs) such as Expedia and Travelocity advertise hotel rooms at the same price or higher as hotels located in Ohio. They also charge taxes and fees in their final prices which are within pennies of the taxes required to be collected and remitted by Ohio hotels. But a current loophole in Ohio law allows the OTCs to calculate the tax they remit on their wholesale costs rather than the retail price paid by their customer and the OTCs keep the balance as profit. This tax loophole amounts to $7 to 10 million in Ohio annually.
To collect hotel taxes that they believe are charged, collected, and owed, local governments throughout the U.S., including the Ohio local governments of Hamilton County, the City of Columbus, and the City of Findlay, have filed lawsuits against OTCs. However, the courts have found that Ohio’s antiquated tax laws do not apply to these online transactions. Ohio’s state law must be updated to require the online travel companies to pay their fair share of taxes.
Hotel taxes are important funding sources for many local governments and a portion of the collected hotel taxes goes to promote tourism which brings more visitors and dollars to local communities. We support this amendment, and thank our industry partners at the Ohio Hotel and Lodging Association for pursuing this important change in Ohio's tax law.
Efforts are being made to include tax parity in the travel economy in the HB 49 operating budget. Talking points include the following:
- State budget constraints create more pressure to raise taxes and/or cut vital services
- Out-of-state entities that sell hotel rooms in Ohio (such as Expedia) don't remit taxes on the full amount they charge customers
- Hotels, which are often locally owned, are taxed at a higher rate than online travel companies for the same type of room, sold for the same amount, on the same day
- Ohio and its communities lose out on revenue needed for infrastructure, law enforcement, destination marketing and other priorities, and the burden to pay for them falls on Ohioans
- Ohio should join with the growing number of states in eliminating the online travel companies' tax loophole
This legislation is proposed once again as SB 160. It is sponsored by J. Hugues (R-Columbus) and T. Patton (R-Strongsville). The bill requires online travel companies to collect and remit sales and use tax on the full amount paid for hotel lodging. It mandates that these intermediaries supply customers with itemized invoices and does not hold Ohio hotel liable for the failure of a hotel intermediary to properly collect or remit applicable taxes.
Aug. 13, 2013
(Reprinted from AHLA Statement)
The American Hotel & Lodging Association (AH&LA) issues the following statement on today’s unanimous approval by the Executive Committee Task Force on State and Local Taxation of the National Conference of State Legislatures of a resolution noting that states should pass legislation clarifying their tax laws and requiring online travel companies (OTCs) to remit taxes paid on their retail prices:
“The lodging industry greatly appreciates state legislators’ recognition that the out-of-state OTCs’ controversial practice of choosing to remit taxes only on their wholesale costs imposes a higher effective tax rate on in-state hotels,” said Katherine Lugar, AH&LA president and CEO. “Hotels simply want a level playing field and to not be subjected to unequal taxation. The passage of today’s resolution by NCSL delegates sends a signal to elected officials in all 50 states that laws need to be clarified to ensure that hotels are not placed at a competitive disadvantage because identical transactions by OTCs receive a different tax treatment. We urge them to ensure that tax policies for both OTCs and hotels are consistent.”
Today’s resolution was drafted with three goals in mind: promotion of transparency for consumers; ensuring full collection of revenues and the promotion of equity and fairness in state tax codes; and ensuring efficiency in taxation through statutory impositions and providing clarity for hotel room buyers and sellers.
July 1, 2013
Despite a strong and cohesive effort, led by the Ohio Hotel and Lodging Association, we were unsuccessful in making this policy year in the latest budget. Communications about this issue, however, has raised awareness of the disparity that exists between taxes paid by lodging properties and online travel intermediaries.
May 23, 2013
Testimony was heard yesterday during the Senate Ways and Means Committee. Providing testimony in support of the amendment was Matt MacLaren (Ohio Hotel and Lodging Association), Jacob Evans (Ohio Association of Convention and Visitors Bureaus), and Dirk Bengel, the GM of the Crowne Plaza Columbus Downtown and Lofts Hotel. The Ohio Travel Association attended the hearing and continues to personally reach out to lawmakers in support of the amendment, including followup responses to committee members.
MacLaren, requested that online travel companies "to play by the same rules as Ohio hotels." The service fee charged by online travel companies represent a "loop hole" in the state's current tax policy that allows online travel companies to calculate the tax they remit on their wholesale costs, not the retail price, allowing them to make a profit on the undisclosed amount.
"Ohio hotels are required to remit tax on the retail rate paid by the customer and out-of-state online travel companies should be required to do the same," MacLaren said. "Closing this tax loophole and requiring the online travel companies to remit tax on the retail rate would keep an estimated $7 to 10 million more annually in Ohio as taxes."
The Senate is expected to release a new budget next Tuesday.
May 21, 2013
After surveying its member businesses in Ohio, the Ohio Travel Association is taking a stand supporting the changes to the way online travel companies (OTCs) remit taxes. By updating this law, between $7 and $10 million will be produced in revenue for Ohio, including more funding for convention and visitors bureaus to promote tourism. We have contacted Senate leadership and committee members expressing our support of this issue.
Thank you to our members who have reached out to their elected officials in support of this amendment as well.