Bill seeks taxes from online travel companies

Feb. 22, 2013 @ 12:21 AM

Tennessee State Sen. Doug Overbey (R-Maryville) has introduced legislation that would require online travel companies such as Travelocity and Orbitz to pay more in hotel occupancy tax.

If the legislation passes, online travel companies will be taxed on the amount consumers pay for hotel rooms, rather than on the lower amount the companies pay hotels for rooms.

Supporters of the measure say that in Sevier County, as much as $300,000 in tax revenue is at stake.

"It's to close the loophole that allows online travel companies to avoid paying the same occupancy tax that local hotels and motels pay," said Overbey of the legislation. He represents Blount County and part of Sevier County.

"Another way to look at it," Overbey said, "is that we're updating Tennessee's enabling statute to keep pace with modern technology, because when it was originally passed in the '70s, no one envisioned the Internet or online travel companies. This would be updating it to ensure that the original intent of the occupancy tax is fulfilled."

Overbey says he has not yet heard from anyone who opposes the legislation. "But the folks in Sevier and Blount County who own or operate hotels, or who are in the tourism business, are in favor of it because they see it as leveling the playing field."

Online travel companies oppose the legislation. "Sen. Overbey introduced something very similar last year, and it failed to pass," said Robin Reck, communications director for the Travel Technology Association, which represents online travel companies.

"Our members' view is that this legislation will drive up the cost of travel," said Reck, who characterized the measure as "an illegal service tax."

The measure "would affect every single mom-and-pop travel agency, creating a nightmare for them to remit those new taxes," Reck said.

Online travel companies perform a valuable service for hotels, Reck said. "Many of our members negotiate directly with Tennessee hotels to get discounts on rooms that would otherwise go empty. They put heads in beds."

Online travel companies do not own or operate hotels, Reck noted. "OTCs do not buy, sell or resell hotel rooms. Instead, OTCs facilitate the booking of hotel rooms in Tennessee, ultimately increasing the volume of hotel bookings and boosting the state's tourism and travel industry. This also generates increased tax revenues for the state."

Reck said that her association's members are working to educate lawmakers about the impact of the bill on travel companies. "There seems to be a lot of misinformation about how we operate."