NetChoicePromotingConvenience,Choice,andCommerceonTheNet
CarlSzabo,SeniorPolicyCounsel
1401KStNW,Suite502
Washington,DC20005
202-420-7485
www.netchoice.org
April25,2017
ChairmanRyanSmith
HouseFinanceCommittee
OhioStateLegislature
RE:Oppositionto“Hotelintermediary”languageinHouseBill49–Regardingtravelagents
DearChairmanSmithandmembersofthecommittee,
Weencourageyoutoremovethe“HotelIntermediary”languageinHB49asitimposesanewtaxon
servicesprovidedbytravelagentsandonlinetravelcompanies.Thislanguageimposesanewtaxonthe
feesthesetravelagentschargeforresearching,comparing,andbookingroomsfortravelers.
Citiesandstatesfavorhoteltaxessincetheyfallmostlyonvisitors–notonresidentvoters.Butunder
thisnewlanguage,thisapproachwouldbackfiresincethenewservicetaxwouldbepaidonlybyOhio
citizens–notbytravelersfromout-of-state.
ImposesanewtaxonOhiocitizens
Today,Ohiodoesnotimposesalestaxorlodgingtaxonservicefeeschargedbytravelagents.These
servicefeescompensatetravelagentsforresearchingandcomparingavailablehoteloptions,booking
theroom,andhandlingpaymenttothehotel.Thisnewlanguagewouldimposeanewtaxonthese
servicefeesprovidedbytravelagentsandonlinetravelcompanies,ataxthatispassedontoyour
constituents.
Nearlyalltravelagentsandtravelersrelyupononlineservicestoresearch,compare,and
bookreservations
FromourworkonthisissueinstatesandatNCSL,it’sclearthereissomemisunderstandingabouttravel
reservationservicesandtaxes.Thechartbelowshowstheflowofservices,taxes,andpaymentsina
typicaltransactionwhereatravelerusesatravelagentoronlinetravelcompanytoresearchandbooka
hotelreservation.
Asshowninthechart,travelagentsandonlinetravelcompaniesareprovidingaservicetotravelers.
Theseservicesincludecomparisonsofratesandamenitiesatmultiplehotels,plusfacilitationinmaking
thereservation,processingthepayment,andsendingchargesandapplicabletaxestothehotel
operator.Clearly,thisfacilitationserviceisdistinctfromtheroomprovidedbythehotelwherethe
travelereventuallystays.
Travel Intermediary
PAYMENT
$ Hotel Room Charge
+ Anticipated applicable taxes
+ Compensation for Services
INVOICE
$ Room Charge
+ Applicable Taxes
= Total Payment
= Total Invoice
SERVICE
Facilitating
selection,
booking, and
payment
PAYMENT
$ Room Charge
+ Applicable taxes
= Total Payment
ACCOMMODATION
Hotel provides room to traveler
Services model:
MTC proposal:
CreatesanewtaxontravelservicefeesthatwouldonlyapplywhenOhiocitizensbooktheir
 Tax service and accommodation separately.
 Tax service as part of the accommodation.
travel
 Source to where customer receives the service.
 Source everything to the hotel location.
Thenewtaximposedonbookingservicefeesbythe“HotelIntermediary”languagewouldimpactonly
Ohio’scitizensandbusinesses.That’sbecauseoftherulesfordeterminingthesourcejurisdictionfor
taxableservices–whenatouristusesatravelservice,thereservationservicefeeissourcedtothe
traveler’shomelocation–nottothetraveler’sdestination.
Forexample,saytwotouristsarebookingahotelroominOhio.OnelivesinIllinois,theotherinAkron.
TheIllinoistouristwouldnotpaythetaxcreatedbythisnewlanguagewhentheybookedthrougha
travelagentsincetheyreceivedtheironlinebookingservicesoutsideofOhio.1But,thetouristlivingin
Akronwhobooksthroughatravelagentwouldpaythetaxcreatedbythe“HotelIntermediary”
language.
ThisnewtaxwouldthereforeonlyapplytoservicesprovidedtoOhio-basedtravelers.Thetaxwouldnot
applytoservicefeespaidbyout-of-statetravelersbookingOhiohotels.
Allowstaxcollectorstolevytheiroccupancytaxonmorethanjusthotelrooms
Ohiotravelagentsroutinelycreatepackagesthatbundlehotelrooms,food,travel,andeventsintoone
price.Butthis“HotelIntermediary”languageallowsColumbustaxcollectorstoimposetheiroccupancy
taxesonallkindsofgoodsandserviceswhenincludedintravelpackages:
•
taxifromtheairporttothehotel
•
foodservedatahotelrestaurant
•
ticketstotheBuckeyeStadium
•
winetastings
1
Notethattheout-of-statetouriststillpaystheOhiooccupancytaxwhentheybooktheroom.
2
ThisnewtaxonservicefeeswouldonlybecollectedbyOhio-basedtravelwebsites
Therequirementtocollectthisnewtaxonbookingservicescouldonlybeenforcedagainsttravelagents
andwebsitesthathaveaphysicalpresenceinOhio.
Asnotedabove,out-of-statetravelagentsandwebsitesalreadycollectandremitlodgingtaxeswhen
theymakepaymenttotheOhiohoteloperator.Butout-of-statetravelagentswouldnotberequiredto
collectthisnewtaxonservicefeesforprovidingreservationservicesatthetimethattravelersbook
theirhotel.
Toconsideranotherexample,saythataWestVirginiatouristusesaWestVirginiatravelagenttobook
anOhiohotelroom.WestVirginiaalreadytaxestravelagentservicefeesprovidedtostateresidents
receivingtheserviceattheirhomelocation.So,anyWestVirginia-basedtravelagentorwebsiteis
alreadycollectingsalestaxontheservicefeewhenbookingWestVirginiatravelersatOhiohotels.In
fact,thisnewtaxwouldattempttoimposedoubletaxationofthesameservicefeepaidbythisWest
Virginiatourist,whichwasprobablynottheintentionofthebill’sauthors.
Pleaserememberthatthe“HotelIntermediary”languagewouldimposenewtaxesonlyonOhiocitizens,
whileplacingyourin-statetravelservicesatacompetitivedisadvantagetoout-of-staterivals.
Minimalrevenuegenerated
Forreasonsexplainedabove,everystate,city,andcountythathasenactedasimilarnewtaxhasfailed
togaintheanticipatedtaxrevenue.
First,asdiscussedabove,theservicetaxescouldnotbeimposedonanyout-of-statetraveler.Second,
Ohiotaxcollectorsdonothaveauthoritytoforceout-of-statetravelagentstocollectthesenewservice
taxessincestatescanonlyimposecollectionobligationsonbusinesseswithaphysicalpresence.
So,whenyouconsiderthistax,pleaseconsiderwhethertheminimaltaxrevenueisworththeharmto
Ohio’stravelagenciesandtravelwebsites.
Avoidtheconflationoftravelservicesandlodgingproviders
Bymaintainingthetruedistinctionbetweentravelserviceprovidersandhoteloperators,youcanhelp
Ohio’stravelandtourismindustryfocusonservingtravelersandcreatingjobs–notoncollecting
nominalnewtaxesfromthestate’sowncitizens.
Insteadofpassingthislanguagewesuggestamendingittoclarifywhenanoccupancytaxapplies.We
suggestsubstitutingtheexistingbilltextwiththislanguagefromMissourilaw:
“Anytaximposedorcollectedbyanymunicipality,anycounty,oranylocaltaxingentityonor
relatedtoanytransientaccommodations,whetherimposedasahoteltax,occupancytax,or
otherwise,shallapplysolelytoamountsactuallyreceivedbytheoperatorofahotel,motel,
tavern,inn,touristcabin,touristcamp,orotherplaceinwhichroomsarefurnishedtothe
public.
Undernocircumstancesshallatravelagentorintermediarybedeemedanoperatorofahotel,
motel,tavern,inn,touristcabin,touristcamp,orotherplaceinwhichroomsarefurnishedto
thepublicunlesssuchtravelagentorintermediaryactuallyoperatessuchafacility....
3
Thissectionisintendedtoclarifythattaxesimposedasahoteltax,occupancytax,orotherwise,
shallapplysolelytoamountsreceivedbyoperators,asenactedinthestatutesauthorizingsuch
2
taxes.” Weappreciateyourconsiderationofourviews,andpleaseletusknowifwecanprovidefurther
information.
Sincerely,
CarlSzabo
SeniorPolicyCounsel,NetChoice
NetChoiceisatradeassociationofonlinecontentande-Commerce
2
MissouriHB1442(2010),signedintolawJuly2010(emphasisadded).
4