Local Governments Taxing Online Travel Services?

A new study from the Tax Foundation looks at how local governments are attempting to change the way they calculate hotel occupancy taxes, from the amount paid to the hotel to the amount paid by the consumer to online travel services like Expedia and Priceline:

Local governments’ efforts to collect discriminatory taxes from online travel services amount to a revenue grab from out-of-staters and ultimately harm interstate commerce, according to a new Tax Foundation report.

City officials in 22 states have, with limited success, sought to reinterpret hotel occupancy taxes to apply to amounts paid by consumers for online travel booking services (such as Expedia, Orbitz and Priceline).

“Hotel taxes are attractive to local politicians because they are a way to shift the tax burden to ‘outsiders,'” said Joseph Henchman, the Tax Foundation’s Tax Counsel and Director of State Projects, who authored the report. “But because every U.S. city has a hotel tax, we’re all somebody else’s ‘outsider.’ And that means everyone is paying high hotel taxes everywhere.”

This study compares combined lodging tax rates across different cities. Las Vegas has the lowest rate and San Francisco the highest; four of the five highest-tax cities are in California. When rental car and meal taxes are factored in, Chicago, Nashville, Charlotte, Seattle, and Houston are the most taxed cities for visitors. (It’s not unusual in my experience when renting cars in Houston to pay more in taxes, fees, and assessments than the base rental price of the vehicle.)

This book chapter looks at the efficiency and incidence of tourist taxes. An article from USA Today shows how fiffering practices between web sites have made comparison shopping tricky.