Hotels Want to Tax Expedia for Competition’s Sake

Marriott, Hilton, InterContinental, Starwood, and the rest of the hotel industry are pressing the State of Maryland to make online travel agencies such as Expedia pay sales tax on the room rate consumers pay when they book a room so that the hotels can compete more effectively against these rivals.

Thomas Maloney, Marriott International’s director of government affairs, recently testified in the chain’s home state before the Maryland Assembly’s Ways and Means Committee in support of a bill (HB 1065) that would require online travel agencies to pay sales tax on the full retail rate, and not just the net rate they get from hotels, as the online travel agencies are doing now.

When hoteliers sell a room for $100 through their own websites or call centers, they would pay the state $6 in sales tax while online travel agencies, which might have obtained the room from a hotel for an $80 net rate, would only pay the state $4.80 in sales tax, Maloney said.

That seemingly miniscule disparity amounts to $3 million to $4 million annually in lost sales tax to the State of Maryland, Maloney said, although a committee analysis stated that the economic impact would be difficult to predict.

Maloney mused whether that “windfall” should go to Expedia or Orbitz or to the State of Maryland to promote travel and pay for police officers?

The online travel companies, Maloney said, should not keep the windfall “so they can out-compete us in the booking space.”

“The entire hotel and lodging industry is aligned behind HB 1065,” Maloney said. “This includes competitor brands like Hilton, InterContinental, Starwood, and also ownership entities in the hotel business like the Asian American Hotel Association.”

The hotel industry isn’t monolithic, though. The 5,000-member Independent Lodging Industry Association, which includes the OTA-oriented Travel Technology Association among its sponsors, opposes the bill, stating that the additional sales tax would be passed along to consumers and make a stay in Maryland less attractive than in other states without such a sales tax.

The bill would also require the online travel agencies to detail their service fees to consumers instead of just lumping them into “taxes and fees,” as they currently do.

The Maryland State Senate passed a similar bill (SB 190) on March 24.

The Travel Technology Association, a trade group representing the online travel agencies and global distribution systems, which service traditional travel agencies, opposes the Maryland legislation, arguing that it represents a “double tax” because travel agencies already pay corporate income tax.

“This new tax on travel services would mean hotels, B&Bs, and inns would be more expensive for travelers visiting Maryland destinations,” says Travel Technology Association spokesperson Philip Minardi. “The bill (HB1065), would also have a devastating impact on brick-and-mortar agents. Maryland is home to over 1,100 travel agents — over 80 percent of which are small-business employees.”