ASTA Urges Maryland House to Oppose OTA Sales Tax Bill
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A Maryland bill that would require third-party travel websites to pay all of the state’s sales tax passed the Senate by way of a 31-16 vote this week, prompting a response from the American Society of Travel Agents.
On Wednesday, ASTA president and CEO Zane Kerby issued a statement, expressing the organization's disappointment in the Maryland Senate's passage of the bill, which supporters say closes a loophole for online travel companies.
"We strongly urge the House of Delegates to oppose SB 190 and its House counterpart, which would impose new taxes and red tape on the independent travel distribution channel upon which so many Marylanders rely," said Kerby.
Kerby and the ASTA point to the bill's lack of specificity as one of the major concerns.
"As with similar bills across the country, this is being described in Annapolis as something that is all about the big online travel agencies (OTAs)," said Kerby. "However, the word ‘online’ is nowhere to be found in the legislation. Instead, it clearly gives taxing authorities the ability to go after travel agents of all shapes and sizes, online or offline – including the 226 Maryland agencies that employ more than 1,100 people, according to the U.S. Census."
Sen. Richard Madaleno, a Democrat representing Maryland's Montgomery County, first proposed the bill last month, with the intent being to "ensure that hotels and online travel companies are collecting and remitting sales taxes at the same rate as the consumer paid," according to WBALTV.com.
But in Wednesday's statement, Kerby argued that service fees should be treated differently than hotel bookings.
"The fees these agents charge their clients are for a service – saving consumers time and money by helping them navigate a travel marketplace that offers an overwhelming number of options and choices. Our long-held position is that this service fee revenue should not be subject to taxes traditionally applied on hotel room stays."
Kerby added that "imposing sales tax on this revenue would amount to 'triple taxation,'" thus creating a "disincentive for agents."
"Contrary to the misplaced notion that travel agents are a dying breed, travel agencies that have adapted to the Internet era have not only survived but have thrived. Part and parcel of that evolution has been a shift in business model, from one based on commissions to one based on fees. Simply put, traditional travel agents do the things the OTAs do and thus will be impacted by bills such as SB 190," said Kerby.
According to the Associated Press, Travel Technology Association spokesman Philip Minardi said that courts in other U.S. states have determined that websites are paying the correct amount and that the bill is destined to hurt travel agents if passed into law.
The bill will now go to the Maryland House of Delegates.
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