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California Lodging
Industry Association

1017 L Street #527
Sacramento, CA 95814-3805

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Press Room 

CLIA Fights to Protect Hotel Owners
Facts About the Internet Travel Tax Fairness Act
Published on 4/28/10


Some associations have  made a number of assertions about the Internet Travel Tax Fairness Act (ITTFA), as you may have heard.   The following is intended to dispel these inaccurate claims through factual recitation that can be independently verified by review of ITTFA, decisions and other outcomes of litigation to date, and the application of hotel taxes by states and localities.

1) Lodging companies face no increase in taxation under ITTFA

  • States and localities have never applied hotel taxes to travel intermediary service fees. Therefore, they face no loss of tax revenue under ITTFA.
  • Because ITTFA merely validates current tax practice, there will be no shortfall for cities to make up.  
  • Travel intermediaries oppose increases in all tourism taxation and stand shoulder to shoulder with their hotel partners in opposing tax increases.

2) ITTFA does not create special tax treatment of intermediary hotel bookings.

  • ITTFA preserves the status quo. Hotel taxes do not apply to travel intermediary service fees charged by travel agents, tour operators and others.
  • Some associations falsely claim ITTFA would exempt all intermediary bookings from any hotel tax. The claim is without merit.
  • ITTFA contains specific language making it clear that all hotel bookings  regardless of channel  remain subject to all applicable hotel taxes.

 3) ITTFA protects lodging companies from adverse hotel tax laws.

  • If localities are permitted to tax travel intermediary service fees, they may look to hotels to recover such taxes.
  • The city of South San Francisco recently changed its hotel tax laws to force hotels to collect and remit taxes on service fees charged by travel intermediaries.
  • Such laws impose a huge burden on hotels, as they would be required to collect tax on amounts they do not receive.
  • ITTFA will prevent enactment of such laws.  
  • ITTFA has protection for hotels: On protection for hotels, here's the action paragraph from ITTFA: 


 (a) In General.-A State or a political subdivision of a State shall not levy or collect any occupancy tax or lodging fee, directly or indirectly, on any facilitation fee paid to a travel agent or intermediary, regardless of the terminology used to describe the occupancy tax or lodging fee or whether such tax or fee is imposed on a transaction or on a consumer, a travel agent or intermediary, or a provider of sleeping accommodations.

By the terms of this paragraph, states and subdivisions are barred from imposing a tax for our facilitation fees upon hotels.  And following is the definition of "provider of sleeping accommodations:"

(6) Provider of sleeping accommodations.-The term "provider of sleeping accommodations" means any entity which holds legal title to a hotel or other sleeping accommodations or exclusively manages all general daily affairs, operations, and functions of a hotel or other sleeping accommodations.

Tax increases are bad for tourism, and especially so during a major recession.  Online Travel Companies are prepared to stand shoulder-to-shoulder with hotels on opposing tax increases, and on occupancy taxes specifically.

4) States and localities face no loss of tax revenue under ITTFA.

  • States and localities have never applied hotel taxes to travel intermediary service fees and therefore face no loss of tax revenue.  As a recent report by the non-partisan, independent Tax Foundation found, claims of revenue losses are misplaced because the revenue was never to have been gained, so it cannot have been lost.
  • And while state and local governments may need additional revenues, that is irrelevant to whether it is appropriate to apply hotel taxes to travel intermediary service fees. The Tax Foundation found that far from leveling the playing field or collecting taxes already owed, recent state and local lawsuits against online travel companies [are attempts to] impose new taxes in a way not justified by the principles of sound tax policy. 
  • The report also concluded that proposed federal legislation would halt this predation and preserve the status quo of hotel occupancy taxes based only on hotel occupancy, not other services.  

 5) OTCs are not collecting taxes that are not being remitted.

  • OTCs collect tax recovery charge only on rent received by a hotel and OTCs remit all taxes they collect.
  • There have been over 50 lawsuits filed, most of which make the claim that OTCs are collecting tax based on the retail rate, but remitting tax based on the wholesale rate and are pocketing the difference.
  • Despite years of litigation and boxes of discovery and numerous depositions, no court has ever found the claim to be true. Indeed, the two courts who have looked most exhaustively at the issue, Columbus, GA and San Antonio, have both concluded the claim is without merit.

6) Courts are increasingly ruling in favor of OTCs.

  • Six federal courts have now ruled that travel intermediary service fees are not subject to hotel occupancy taxes.  This includes courts in Orange, Texas; Pitt County, North Carolina, Louisville, Kentucky; Columbus, Ohio; and the 4th and 6th Circuit Courts of Appeal. 
  • Similarly, state courts around the country are ruling in favor of online travel companies.  Most recently, a superior court judge in Los Angeles County held that travel intermediary service fees are not subject to hotel occupancy taxes. 
  • Nevertheless, legislation is critical to establish a consistent national standard that ensures a workable tax framework.

 7) ITTFA will not create a precedent for wholesale-retail situations.

  • The business model of intermediaries is not wholesale  retail.
  • The service fees charged by intermediaries are not for hotel rooms, as the 4th and 6th Circuits, and other courts have found, but for value-added services in facilitating hotel bookings, supporting them and promoting them.
  • Intermediaries are independent travel distributors providing a separate service, not unlike a consumer paying for shipping of a purchase via an independent package delivery company.  Tax for the underlying purchase does not apply to the shipping charge.

8) ITTFA will stop Cities from going after hotels to collect TOTs on booking fees and facilitation fees.

  • The  City of San Francisco recently sent a letter to area hotels last month stating that hotels and the online travel companies are jointly responsible for making sure that the city takes in transient occupancy tax (TOT) on the full amount that hotels guests pay to the OTCs.
  • This letter is the exact reason why hotels should support passage of a Federal solution to this crisis. ITTFA will ensure that OTCs are no more liable for hotel room rent than hoteliers want to be responsible for OTC service fees.
  • Large corporate hotels are siding on the side of the localities but they picked the wrong partner in this fight. OTCs create demand locally and help drive table revenue. The chains should be protecting the existing way of doing business and not trying to tax demand creation businesses like OTCs.
  • This proves the need to pass ITFFA. Without ITTFA, hotels are exposed to these sorts of efforts. Hotels need to work with OTCs to bring closure to this issue.

 The Internet Travel Tax Fairness Act

  1. The purpose of the Internet Travel Tax Fairness Act is to promote employment in the travel and tourism industry by ensuring a robust online travel industry through fair and equitable tax treatment.
  2. The Act creates a national standard that will govern the taxation of travel booking services.
  3. To deal with the challenge of over 7000 taxing jurisdictions in the U.S., this Act centralizes taxing authority over travel booking services in the 50 states.
  4. All travel components (hotel, air, etc.) booked by a travel intermediary will remain fully subject to all existing tax levies at the federal, state and local levels.
  5. Localities will continue to be able to levy and collect hotel occupancy taxes on the amount a hotel receives in rent and any other existing levies including car rental and tourist development taxes.
  6. Hotel occupancy taxes (or any other tax) will not be permitted to be levied by a locality on travel booking services (facilitation fees) regardless of whether those charges are itemized or bundled within a transaction.
  7. States, however, will retain the authority to levy taxes on travel booking services, which are currently not generally subject to transaction taxes.
  8. States will retain the authority to levy and collect general business taxes (income taxes) on travel booking companies.
  9. The legislation will not affect any currently pending lawsuit or administrative proceeding.
  10. The legislation does not impact state taxing authority because travel booking services are interstate commerce.
  11. Likewise, no state or locality has ever collected taxes on travel booking services and will therefore not suffer any reduction in tax revenue.
  12. Congress has the authority and duty to protect interstate commerce from unreasonable state and local burdens. Internet transactions are the purest form of interstate commerce.
  13. This legislation does not narrow or expand a taxpayers due process and commerce clause rights under the U.S. Constitution.
  14. The legislation scores at zero and will have no impact on the U.S. Treasury.

 Online Travel Company (OTC) Data Points

  1. OTCs employ 32,000 workers.
  2. In 2008, OTCs booked $39 billion in travel.
  3. Over 125 million people each month shop for travel on OTCs.
  4. In 2008, OTC bookings resulted in the collection of $4.7 billion in Federal, state and local taxes (based on a blended average tax rate of 12%).
  5. OTCs draw visitors to the U.S. from around the globe. OTCs have points of sale in 52 countries and in 73 languages.   
  6. OTCs serve every community in the U.S., booking travelers into every state, city, town and hamlet.
  7. OTCs book travelers into 81,000 hotels worldwide and book flights on 400 airlines.
  8. Online travel sites spend hundreds of millions of dollars each year promoting travel and tourism through advertising and marketing efforts.
  9. Online travel is the largest e-commerce category, accounting for 40 percent of all online spending.
  10. U.S. OTCs are the most successful Internet businesses and have become global brands, dominating online travel worldwide.

For more information: Bobbie Singh-Allen, Executive Vice President/COO, or 916.826.2075.


Headquartered in Sacramento, CLIA is a member lodging and hospitality industry association, providing legislative, educational, marketing, and profit-oriented programs for independent lodging owners and operators.


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