By Deidre McPhillips
ANNAPOLIS (April 1, 2015)—Maryland has become a battleground for travel industry giants and hotels of all sizes over a bill that would require online travel companies to tax hotel accommodations in accordance with state sales and use taxes.
Currently, online travel companies—like Expedia and Orbitz—break their hotel prices out into room costs and “taxes and fees” for customers. The amount listed under “taxes and fees” is usually very similar to the sales tax a customer would pay for a room booked directly through the hotel.
But the state does not receive any of the revenue from taxes charged by online travel companies, as they do from the hotels themselves. Instead, this is essentially a fee that the online travel company collects.
“About $4 to 6 million a year is paid by hotel customers that is not remitted to the state,” the bill’s sponsor, state Senator Richard Madaleno, D-Montgomery, told the House Ways and Means committee Wednesday. “In no other industry do we charge on wholesale value, not retail value.”
But whether the tax is new or the closure of a loophole is a matter of perspective.
“This bill sends a message to the rest of the country that Maryland has not changed its ways and is not open for business,” said Philip Minardi, director of communications and public affairs for The Travel Technology Association, a Washington-based advocacy group.
Minardi was joined by leaders from local travel agencies and lawmakers from both sides of the aisle—including minority leader Delegate Nic Kipke, R-Anne Arundel, and Delegate Eric Bromwell, D-Baltimore County—on Lawyer’s Mall in Annapolis Wednesday in opposition of the bill. The group was largely focused on the effects the bill would have on Maryland’s small businesses.
“People are already under pressure to watch every penny they spend. Consumers will spend their money somewhere less expensive than Maryland or have less money to spend at restaurants and stores if they do stay,” said Kevin Mitchell, chairman of The Business Travel Coalition, a Pennsylvania-based industry association.
A few counties in Maryland have adopted similar tax laws on a local level, including Worcester County, home to popular vacation destination Ocean City.
“The local laws have not made Ocean City less competitive with neighboring Delaware beaches (that have no sales tax), or you would have heard from them,” said Madaleno.
The bill was passed by the Maryland Senate on March 24 and on Wednesday was awaiting a report from the committee before heading to the House of Delegates.