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Bill to tax online travel firms gets thumbs-up from Havasu hospitality

March 7, 2019 GMT

An Arizona house bill dealing with taxes related to online hotel bookings has the backing of some in the Lake Havasu City region.

House Bill 2027 was introduced by Arizona Senator John Kavanugh at the beginning of the 54th session earlier this year.

In the case of an online lodging, a city, town or other taxing jurisdiction may levy a transaction privilege, sales, use, franchise or other similar tax or fee on the gross receipts of an online lodging marketplace.

For Matt Brewster, president of the Lake Havasu Hospitality Association, he said the bill could close a loophole that is preventing the city from seeing more revenue from the fees that are currently generated.

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“Online travel agents sell rooms at retail rates, rent them at wholesale rates and they include bundled taxes and fees,” Brewster said. “But they are only remitting the occupancy tax on the wholesale and keeping the difference. They should be remitting the tax on the retail rate.”

Brewster wasn’t sure how much money the city could receive, but he cited national figures that indicate online travel agents are keeping anywhere from $275 to $400 million annually.

“We’d be on the lower end of what we get because our tax rate is so competitive,” Brewster said. “California is two and a half to three times higher than we are, for instance. But the money we would receive is not insignificant.”

Brewster said the Hospitality Association hasn’t made an official statement on the bill yet, but he said on a personal level, he supports it and he believes the association should support the measure.

“There does need to be a fix that works for everybody,” Brewster added.

The issue isn’t a new one, either. According to information from taxfoundation.org, more than 30 states have filed dozens of lawsuits against online travel agents over the last several years in the hopes of having hotel tax applied to online travel agents.

Many state courts have ruled that online travel agents aren’t subject to hotel occupancy rates, but some have ruled the other way.

Another provision is that a city, town or other taxing jurisdiction couldn’t levy a transaction privilege, sales, use, franchise or other similar tax or fee on the business of operating an online lodging marketplace.

Terence Concannon, the President and CEO of the Lake Havasu City Convention and Visitors Bureau, is against any new taxes related to a new delivery system for bookings.

“We would be against any tax that doesn’t directly impact the health and welfare of the hospitality industry in this town,” Concannon said. “We’re doing very well here and I don’t see Lake Havasu enacting anything like that.”

The bill made it through the House of Representatives Rules Committee by a 7-0 vote Monday and it was recommended by the committee for passage Tuesday.

A House panel was scheduled to discuss the bill Wednesday but postponed it.

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