Taxing online travel sites

The Associated Press has a report headlined “Cities target travel sites for unpaid hotel taxes”.

The article says “Online travel companies are facing a flurry of lawsuits from upset city officials who say they were bilked out of tens of millions of dollars in hotel and occupancy taxes. One of the stiffest challenges was outlined Monday in Georgia Supreme Court. The city of Atlanta claims in a lawsuit that Travelocity, Orbitz, Expedia and 14 other online travel companies owe the city “untold” millions in unpaid taxes”.

Not unexpectedly, the online sites say that “the city isn’t trying to recover any money that’s not theirs” while going on to contend that the “lawsuits are baseless and that the taxes are properly paid”. A lawyer for the online sites notes that “We’re not hotels. We’re not hotel rooms,” and that the sites “provide a service”.

There is no doubt that the sites provide a service but arguably that is no different to the service provided by brick and mortar travel agents for which the latter gets a “commission” with the room rate quoted by them being what is paid to the hotel. And taxes are paid to jurisdictions based on that rate not net of the commission. Online sites have had a free ride for far too long and jurisdictions such as Atlanta have every right to go after them to collect what truly are unpaid taxes. Ultimately, should the cities prevail it may well cause a shake up among the current players but is unlikely to substantively diminish their role in the travel marketplace.

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Vijay Dandapani

Co-founder and president of a New York based hotel company for 24 years. Grew the firm to five hotels in Manhattan and also developed a greenfield project at MacArthur airport, New York. Speaker at numerous prestigious forums including Economy Hotels World Asia, Lodging Conference, NYU, Columbia University Real Estate Roundtable, Baruch College's Zicklin School and ALIS. President and ceo of New York City Hotel Association since January 2017.

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