Critics say house bill helps online travel companies avoid taxes
By Tom Flanigan
Tallahassee, FL – Millions of travelers use on-line sites like Expedia and Travelocity to book their Florida vacations. The problem is how those travel companies collect and remit the taxes owed the state from those transactions. Tom Flanigan reports that discussion took up a considerable amount of time this week in the Florida House.
Let's say it's the middle of February and there you are, shivering in Lansing, Michigan. A fun and sun Florida vacation beckons, so you start shopping for online deals. You find your best destination hotel rate on, let's say, Expedia.com. They quote a nightly charge of a hundred dollars for a luxury hotel in Orlando. The regular room rate at that same property is two-hundred dollars. Of course you'll have to pay some taxes, too. The sales tax rate in Orange County where your hotel is, amounts to six-and-a-half percent. So the sales tax you'd pay to Expedia for that hundred dollar hotel room would be six-dollars, fifty cents, right? Maybe not. Online travel companies have been known to charge the customer what the sales tax would be on the retail hotel rate, in this case thirteen dollars because the room usually costs two-hundred dollars a night. The travel company then keeps six and a half dollars for itself and calls it a fee. The companies say they can do that because current law is fuzzy on the matter. Florida and some counties have been calling it tax evasion and have filed lawsuits. So Republican Representative Jason Brodeur helpfully filed a bill in hopes of clearing things up.
"Members, when a law is deemed unclear or in question there are only two ways to remedy the dispute: have a court determine what the legislature intended with the law, or have the legislature pass a bill to clarify what they want the law to be. This bill simply clarifies what we as a legislature intend to tax."
And it's not just the state sales tax that's at issue. Back on the Orange County example again, that county's tourist development tax, commonly known as the "bed tax", is an even six-percent. That's the money the county uses to advance its tourism advertising and marketing campaigns to attract more tourists. It seems some online travel companies may be less than diligent in remitting that money, too. One estimate pegs the loss to Florida counties at somewhere around a-hundred-thirty-one million dollars a year. With all this uncertainty in play, Representative Brodeur says his bill and accompanying amendments would bring much needed clarity to the situation.
"What happens now is when you book, all the taxes and fees are bundled and there are some that are concerned that they may be charging taxes on things they shouldn't be and then keeping it. In the new amendment language, what will be forced to happen in the future is that as you book, you will see taxes separately broken out as a line item so you'll be able to know with confidence that you're paying appropriately and there's no shenanigans going on, for lack of a better word."
Tampa Democrat Janet Cruz worried, if the companies were truly doing something wrong, just putting it in writing wouldn't make what they were doing right.
"What I understand is that this bill favors, by providing a tax break to online travel companies and others who provide similar services, typically based out-of-state, while placing the Florida hoteliers and Florida citizens they employ at a disadvantage."
But the counties that claim the online companies are cheating them out of their bed tax receipts may be on shaky legal ground. That was the word before the House meeting from Andrew Weinstein with the Interactive Travel Services Association, which represents the online firms
"Online companies have not been collecting these type of taxes in the past, so basically there has never been a court in the country that has found online companies have been collecting these taxes and the overwhelming majority of courts that look at this issue have ruled that online companies are not liable for these type of taxes."
So, said Representative Brodeur, his bill would simply maintain the status quo.
"The biggest misconception about this bill is that it provides a tax break. It simply codifies what we've done for the last 40 years so that we do tomorrow the same thing that we did today with the exact same thing we did yesterday, which is we don't tax services."
There were many other questions for the sponsor followed by extended debate. The bill was then rolled over to a final reading and vote. Privately, some in the Florida tourism industry were resigned to probable passage of the measure. At the same time, they hoped future court rulings might go their way.