The American Hotel & Lodging Association (AH&LA), the sole national association representing all segments of the 1.8 million-employee lodging industry, applauded the Washington, D.C. Court of Appeals decision requiring online travel companies to pay more than $60 million in unpaid sales taxes and interest to the District of Columbia.
D.C. Court of Appeals decision asserts that these companies are liable to pay a sales tax on the amount charged to consumers rather than the amount paid to hotels for rooms.
Online travel companies sell hotel rooms to customers and pay a certain portion of the sales price back to hotels. However, online travel companies typically fail to remit state and local taxes on the amount paid by consumers; rather, they pay taxes only on the portion of the sales price that they pay back to hotels and retain the difference, depriving cities and states of much needed tax revenue. On the other hand, when hotels sell a room directly to the consumer, via their website or through other means, they remit state and local taxes on the rate charged to consumers.
“The ruling by the Washington, D.C. Court of Appeals is great news for taxpayers and the citizens of the District of Columbia,” said Vanessa Sinders, AH&LA Senior Vice President and Head of Government Affairs. “For several years, hoteliers have been working to close tax loopholes so that online transactions, whether they occur through a hotel company’s website or through an online travel company site, are taxed equally. Online travel agencies have been getting a free pass when it comes to paying their fair share of taxes for online transactions. Attorney General Karl Racine and (President of the Hotel Association of Washington, D.C.) Solomon Keene have been leading the charge to close the loophole. This ruling demonstrates a growing commitment to providing marketplace tax equality, as well as ensuring that the taxpayers are not shorted much-needed revenue. AH&LA looks forward to continuing to reinforce this position in local municipalities and states across the country.”
“We are thrilled that online travel companies will be required to pay their fair share of taxes in the District of Columbia,” said Solomon Keene, Hotel Association of Washington, D.C. “This decision not only reinforces our position that these taxes are owed to District taxpayers but hopefully also sends a message to OTCs that the days of misleading consumers are over.”