The proposal would apply the state sales tax to the service fees of online travel agents that facilitate nearly one million room night reservations in Virginia hotels. The move would not only raise prices for consumers but also jeopardize Virginia hotels’ ability to provide competitive travel deals.
“The Administration has been led by special interest groups to believe that it’s good public policy to trade long-term economic stability for a short-term cash grab,” said Steve Shur, president of the Travel Technology Association. “What Virginia would gain in modest state tax revenue would pale in comparison to the revenue lost from reduced room night bookings. This proposal literally steps over a dollar to pick up a dime.”
State legislatures across the nation—such as those in Maryland, Florida, Texas, Pennsylvania, Utah, Missouri, Connecticut, Maine, and Massachusetts—have examined levying new taxes on travel service providers in recent years, and have overwhelmingly recognized that application of these taxes immediately makes a state less competitive for travel and tourism. Furthermore, dozens of courts across America have considered whether hotel occupancy taxes apply to travel service fees and agree that those taxes do not apply.
While aimed at out-of-state visitors, this new tax would impact thousands of Virginia residents looking to book their in-state travel through online and traditional travel agents. Of the nearly one million room nights booked on OTAs at Virginia hotels, nearly 250,000, or one quarter, are booked by Virginians.
“Instead of making hotel rooms in Virginia more expensive with new taxes, Virginia should be partnering with online travel companies on campaigns that market Virginia hotels, bed-and-breakfasts, and inns to the millions of global travelers who use their platforms,” concluded Shur.