COLUMBUS — Shelby County Commissioner Julie Ehemann recently testified before the state legislature concerning House Bill 571.
The bill, sponsored by Rep. Dave Greenspan, R-Westlake, 16th District, concerns how online travel agents pay state taxes.
Online agents such as Expedia, Orbitz and Travelocity are referred to in the bill as hotel intermediaries. The current practice has intermediaries purchasing rooms from hotels at one price and selling them to customers at a higher price. The intermediaries charge their customers sales taxes on the amount the customers pay, but they pay the municipalities taxes on the smaller amount that they pay.
In essence, it would like buying a room at a wholesale price and paying tax on the wholesale price, but charging the customer a retail price and collecting a tax from the customer based on the retail price. The intermediaries have thus increased their profits.
Greenspan’s bill would require the intermediaries to pass through all of the taxes they collect.
Ehemann, representing the County Commissioners Association of Ohio, of which she is first vice chairwoman, spoke in support of the bill.
“Over time, state changes to the tax code have caused the permissive sales tax to become the single largest revenue source for most counties’ general funds. House Bill 571 is important for counties because it closes an unintended loophole in the sales tax,” she said. “Although the Ohio Revised Code makes it clear that hotel lodging is subject to the sales tax, it does not specifically address the business practices of online travel agencies (OTAs) that advertise and book hotel rooms and become the merchant of record for consumers.
“OTAs operate in a gray area in which they are only charging sales tax on the portion of a consumer’s payment that they remit to the hotel, and not on the revenue stream they keep for themselves. Given that the OTA may keep 10 to 30 percent of the price of the hotel room, counties are being deprived of sales tax revenues each time a consumer uses an OTA,” she said.
The OTAs, she added, are middlemen seemingly abusing the system for their benefit.
“Consumers are increasingly turning to the Internet to arrange their travel accommodations, so it is vital that the General Assembly close this unintended loophole,” Ehemann said.
An aide in Greenspan’s office told the Sidney Daily News, Friday, that the bill is still in committee and would likely reach the House floor for a vote in late autumn.
There is some controversy about its intent. Some people think it will force intermediaries to increase prices in order to keep their profit lines up. Others think it will raise taxes on consumers.
Rep. Nino Vitale, R-Urbana, 85th District, who represents most of Shelby County, is not in favor of the bill.
“I plan to vote no on this tax hike, as it will depress travel in Ohio and make our economy worse, as well as take more money out of your pockets,” he wrote, Friday, when asked for his views on the measure.
A similar request of Rep. Keith Faber, R-Celina, 84th District, got no response.
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