Once upon a time, if you bought something online it was pretty much tax free. Then there were taxes on goods bought from companies or stores in your same state. Then they began to discuss an Internet tax. Etc., etc., etc.
Now cities are suing online travel agencies like Expedia and Travelocity for hotel occupancy taxes owed and not paid. Houston is one of the cities entering into these lawsuits.
City looks to collect hotel tax from online firms
Travel officials say it’s a service fee not covered under tax laws
— reported by the Houston Chronicle
But while booking over the Internet has made it quicker and easier for customers to compare prices, states and municipalities now face the complicated question of how to collect tax on rooms rented through online travel companies.
The city of Houston may soon join a host of other cities in the state and across the country that have sued travel Web sites over taxes they say are owed but have not been remitted — as much as $2 million annually in Houston.
Hotels in Houston remit 17 percent in hotel-occupancy taxes (often called HOT), based on the price at which they sell rooms. Those funds help the city promote tourism and are a key source of money to pay off debt on Reliant Stadium, Toyota Center, Minute Maid Park and the Hilton Americas convention hotel.
But some lawyers say the tax should be paid on the price at which the customer buys the room from the third-party Web site, not the wholesale rate paid by those companies.
The quandary is just one example of how the Internet has complicated business.
Art Sackler, director of the Interactive Travel Services Association, which represents travel Web sites, argues they do not have to pay the tax because the price markup represents a service fee. Companies charge customers for the convenience of finding them an affordable, available hotel room, he said.
Soon, when we buy something online and offline, it will be the same price. At least that’s what I think.