Travel in Maryland could undergo significant changes pending proposed legislation that would require travel agents to pay sales taxes based on how much the services cost the customer as opposed to the discounted rate they currently receive.
According to WBALTV.com's David Collins, Sen. Richard Madaleno, a Democrat representing Maryland's Montgomery County, has proposed a bill designed to "ensure that hotels and online travel companies are collecting and remitting sales taxes at the same rate as the consumer paid."
As it stands now, online travel agents pay sales taxes based on the cost they receive from hotels and not on the amount they charge the consumer.
However, the travel and tourism industries call the legislation dangerous and say that it will do nothing more than create a tax that will ultimately be passed on to the agents' customers.
The bill currently has the support of the Maryland Hotel and Lodging Association as well as the Maryland Chamber of Commerce.
The former group's president, David Reel, says the proposal "levels the playing field."
"They pocket the difference. When you go to buy a shirt, you wind up paying the sales tax on the full price of the shirt, not the price the retailer bought the shirt from the manufacturer," said Madaleno. "When you go to an online booking site, you pay for the hotel room, but the hotel company charges the full sales tax but only remits the sales tax to the state based on what they paid for the room."
Travel Technology Association president Steve Shur points out that "online travel companies, brick-and-mortar travel agents do not buy hotel rooms in bulk and resell them at retail rates." And as a resut, "that amount will be passed onto consumers in the form of higher rates."
Safe Harbors Travel Group president and CEO Jay Ellenby also warned of more expensive business accommodations: "If we were to put a meeting together and charge a service fee for that, we would be charged for that and it would be turned back to our clients."
It's estimated that the state of Maryland could collect anywhere from $3 million to $5 million each year if the legislation is enacted.
It remains to be seen whether the bill will be approved and ultimately take effect. Regardless, it's possible that the proposed changes could be implemented in other states down the road.
For the latest travel news, updates and deals, subscribe to the daily TravelPulse newsletter.
Topics From This Article to Explore
