Dear
Council Member:
On behalf of the National Taxpayers Union’s members in the District of
Columbia, I urge you to reject the Payment of Full Hotel Taxes by Online
Vendors Clarification Act of 2010 (District Council Bill 18-655). This
legislation would impose a new tax on what the bill defines as remarketers, or
online travel companies (OTCs) such as Expedia, which would threaten the
District of Columbia’s important tourism sector. Instead of new taxes, the
District should examine its existing programs to find savings.
Contrary to popular belief, OTCs such as Expedia, Orbitz, and Travelocity do
not own or operate hotels. Instead, OTCs merely facilitate transactions between
the hotels and customers, collecting a fee directly from the customer for the
facilitation service, similar to the services provided by travel agents.
Because OTCs neither possess nor maintain hotel rooms, they are beyond the
scope of hotel occupancy taxes. Furthermore, the non-partisan, Washington,
D.C.-based Tax Foundation and numerous courts that examined the issue have
found no evidence that OTCs collect and “pocket” hotel taxes from customers.
As with OTC tax schemes elsewhere, the tax that would be imposed by District
Council Bill 18-655 threatens the District’s important tourism sector. Further,
there are doubts that a tax on OTCs will raise the projected revenues. Smaller
hotels, such as bed-and-breakfasts, use OTCs to compete against the larger
chain hotel operations. A tax on OTCs will divert bookings, from both large and
small operators, to neighboring cities such as Arlington, Alexandria, and
Bethesda, which will deprive the District of hotel tax revenue and badly needed
economic activity that visitors to our nation’s capital provide. This is not
idle speculation; to give just two examples, hotels in Columbus, Georgia and
South San Francisco, California lost business after their governments imposed a
tax on OTCs.
The time has come for the District Council to stop piling on more
taxes, making job losses worse, and threatening an important part of the local
economy to delay the inevitable necessary reforms to an unsustainable
government. Just as hard-working Washingtonians have tightened their belts in
the midst of this economic downturn, the Council should confront the tough
decisions on spending rather than raising taxes. That vital process can move
forward by rejecting the proposed tax on OTCs.
Sincerely,
John
Stephenson
State Government Affairs Manager
Letter
