Editorial: An issue of fairness

Tax inequity for online travel companies should be remedied
Feb. 01, 2013 @ 08:52 AM

It seems inherently unfair that an online company would receive a nice tax benefit, while a locally based company that creates jobs and supports local government would not. That is the situation when it comes to the travel business.

Sen. Doug Overbey, R-Maryville, is trying to fix that inequity. He is preparing legislation that would force online travel companies such as Travelocity and Expedia to remit more in taxes when they make a sale involving local consumers. The legislation would allow counties and municipalities to collect hotel-motel taxes based on the amount consumers pay for rooms. Currently online travel companies (OTCs) remit tax on the lower amount they pay hotels for rooms, not what the consumer actually pays. OTCs negotiate with lodging businesses for lower room rates, then sell rooms to consumers at a markup.

“This is to address what you might call a loophole,” said Overbey, who noted that Tennessee’s legislation enabling the hotel-motel tax dates back to the 1970s and does not account for online businesses. “The consumer is not the online travel company, it’s you and me. Whatever price we pay is the price on which the hotel-motel tax should be charged.”

“It’s our tourism industry and our counties that are getting shorted,” said Greg Adkins, CEO of the Tennessee Hospitality Association, which represents hotel owners. “And when a county gets shorted on the lodging tax, a lot of that money would have gone to tourism promotion.”

For Sevier County, as much as $300,000 is at stake, Adkins said, and $8 million to $10 million statewide.

As expected, the online travel companies are fighting back. Their opposition led Overbey to withdraw his bill last year, but he vows to push for it this year. Online travel companies are represented by the Travel Technology Association. After Overbey’s previous bill stalled, the group’s president, Joseph Rubin, said, “We hope the bill supporters now recognize they were led astray by interest groups looking to use public policy as a competitive tactic to increase room rates for travelers ...  taxpayers and the travel industry would be harmed by this tax increase.”

“What makes a difference to me,” Overbey said, “is that folks in Sevier County, who are actually on the ground engaged in the hospitality industry, see this as a matter of competitive fairness for them.”

It is an issue of fairness. Let’s hope Overbey’s fellow legislators see it that way as well.