STALLED: Bill To Boost Tax Haul for Rooms Booked Online
When the PriceLine Negotiator or the Roaming Gnome gets you a good deal on a hotel room, he's paying less in hotel room taxes than you would be if you booked the room yourself.
Counties and some in the Legislature say that should change because of the tax money that's being left on the table.
But a bill to clarify that online rooms should result in the same amount of taxes going to state coffers as rooms booked directly stalled in a House committee Wednesday, while a competing bill that would do just the opposite – clarifying the law to say that the higher tax isn't due, moved forward.
The amount of taxes remitted to the state for an online booked room is lower than the amount sent in for a directly booked room because the online travel booking companies are usually paying taxes on a lower rate. For example, a room that a tourist might pay $99 for may actually be costing something more like $79, with $20 of what the customer is paying going to the online travel booker, for example. Local governments, which say they are missing out on tax collections from tourists, argue that the tax should be due on the total amount that the customer pays, not on the lower amount that the hotel actually charged for the room.
But the online travel industry argues that the portion that goes to Expedia, Orbitz, Travelocity or any other online travel booker is a service fee and therefore not subject to tax. Most services in Florida aren't taxed, including services provided by travel agents – which is what the online booking companies say their work is akin to.
Both sides seem to agree that the law as written is largely unclear on the matter, having been written before online bookings were a common way many people get hotel rooms.
Rep. Janet Long, D-Seminole, is sponsoring legislation that would spell out that the higher amount should be remitted, while Rep. Jimmy Patronis, R-Panama City, has a bill spelling out that the service part of the fee isn't taxable.
Long's bill (HB 335) ran into some stiff opposition on the House Finance and Tax Committee Wednesday – to the point it wasn't clear whether it was going to pass – and she asked to postpone consideration of the measure. Patronis' bill (HB 1241), meanwhile, was approved 8-3 Wednesday by the House Economic Development Committee and next goes to the Finance and Tax Committee – which could at its next meeting vote on both bills.
Long tried to assure the panel that the bill doesn't represent a new tax, but met with skepticism from members whose questions made it clear they believed the bill essentially establishes a tax on a service. Long said the state and local governments are leaving millions uncollected, and that passing her bill could bring more than $30 million into the state general revenue account.
“This is not a new tax,” Long said. “This is a collection and enforcement issue.”
The issue is complicated by the fact that currently 10 Florida counties are suing online travel companies and the attorney general's office is also suing, though an official from the office told the Economic Development Committee Wednesday that the attorney general is suing to have the law clarified, but not taking a position on which tack it should take.
Former Department of Revenue head Jim Zingale, who supports the Long bill, said there are other instances where services that are “married” with goods are taxed. The example he used is car repairs, where the customer pays tax on the entire repair bill, not just the parts, even though some of the bill is clearly for labor, a service.
But Jennifer Green representing Expedia before the House Finance and Tax Committee, said there was a major difference: a hotel room is not a good like a car part, it's a service.
“This is a services tax,” said Wilbur Brewton, representing another online booker, Orbitz. “A service is being performed....Online travel companies do not buy rooms, they don't buy blocks of rooms and re-sell them, they simply negotiate rates.”
House Finance and Tax Chairwoman Ellyn Bogdanoff said the committee will hear the Patronis bill at its next meeting. It's not clear whether the Long bill will come back up.