mayorbloomberg2
8 years ago
 

Online travel agencies, ASTA, USTOA sue NYC on new hotel tax law

mayorbloomberg2MarketWatch reports — and I have now confirmed — that major online travel agencies, plus ASTA and the U.S. Tour Operators Association, filed a lawsuit against New York City over its new law that holds intermediaries responsible for the tax on the retail rate when they sell hotel rooms using the merchant model.

This marks the first time that tour operators have taken sides in the OTAs’ national battle with cities and counties about the hotel tax issue.

The law, which went into effect in September 2009, says “room remarketers” are responsible for the full rent, meaning they would remit tax on the net rate to the hotels, as OTAs customarily do, and then pay tax on the remaining rent, including service fees, directly to the NYC tax commissioner.

And the law defines rent thusly: “The consideration received for occupancy valued in money, whether received in money or otherwise, including all receipts, cash, credits, and property or services of any kind or nature, including any service and/or booking fees that are a condition of occupancy, and also any amount for which credit is allowed by the operator or room remarketer to the occupant, without any deduction therefrom whatsoever.”

The travel agency association, ASTA, has long sided with the OTAs in arguing that the dozens of suits by cities and and counties suits against the OTAs across the U.S. are unjust because intermediaries are agents of hotels and don’t control room inventory.

Tour operators have so far not been targeted in the lawsuits, but many people, including some tax commissioners, have pointed out that their wholesale model works in a similar manner to the OTAs’ merchant model.

The suit against the NYC tax law marks the first time that the USTOA actively has become involved in the fray.

The NYC law is a major challenge for travel agents and tour operators because of the size of the city’s hotel business and New York’s place as a tourism destination.

MarketWatch says the OTAs involved in the suit include Expedia, hotels.com, Orbitz Worldwide, Priceline and Travelocity, and that the plaintiffs allege that the new NYC tax is “unconstitutional and illegal” and that the city “has no inherent power to tax.”

UPDATE: Here are a few more details about the suit, a copy of which I now have.

The suit was filed Dec. 21, 2009, in New York state Supreme Court.

Here are the plaintiffs:

EXPEDIA, INC., HOTELS.COM, L.P., HOTWIRE, INC., ORBITZ, LLC, TRIP NETWORK, INC. (D/B/A CHEAPTICKETS.COM), TRAVELOCITY.COM LP, PRICELINE.COM INCORPORATED, AMERICAN SOCIETY OF TRAVEL AGENTS, INC., and UNITED STATES TOUR OPERATORS ASSOCIATION,

And, the defendants are:

THE CITY OF NEW YORK DEPARTMENT OF FINANCE and THE CITY OF NEW YORK.

The defendants seek a judgment that the new NYC law is not constitutional because the state — and not the city — has the authority to impose taxes. In addition, the defendants argue that even if the court finds the new law is constitutional, then it doesn’t apply to them because they are intermediaries and don’t control hotel inventory.

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Dennis Schaal

About the Writer :: Dennis Schaal

Dennis Schaal was North American editor for Tnooz.

 

Comments

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  1. Demetrius Villanueva

    Very informative. Keep them coming….

     
  2. Hotel Merchant Tax Creates Confusion for Destinations, Hotel Chains, Online Travel Agencies and Legal System | Views from a Corner Suite

    […] Society of Travel Agents (ASTA) and the United States Tour Operators Association (USTOA) are suing New York City in New York State Supreme Court over the update to the hotel occupancy tax […]

     
  3. RobertKCole

    Just wrote a long blog post on the disaster known as hotel merchant tax lawsuits, plus my thoughts on what needs to happen to get everyone out of this mess. Here is the link: http://bit.ly/8e40wz

    NYC deserves to get sued – the tax on packages is totally indefensible – that’s why the Tour Operators have joined the cause.

    NYC could have re-written the law to have the merchant tax apply to standalone hotel bookings, but NYC got both sloppy and greedy when they put it in writing.

     
  4. Rob

    Sounds like a half arsed way to not collect tax if you ask me.

     
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    Social comments and analytics for this post…

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    […] This post was mentioned on Twitter by Dennis Schaal, PLing. PLing said: OTAs getting support, good stuff Rt @denschaal: Online travel agencies, ASTA, USTOA sue NYC on new hotel tax law-Tnooz http://ping.fm/1qTTM […]

     
 
 

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