May 24, 2013
/PRNewswire-USNewswire/ -- Americans for Tax Reform (ATR) today reiterated its opposition to the House-passed version of HB 59, the hotel occupancy tax hike.
sent the following letter to the state Senate:
I write urging your strong opposition to provisions in the House-passed version of HB 59 that would expand hotel occupancy taxes beyond their appropriate scope by applying them to services provided by online travel companies.
These provisions in question, found on lines 105728 through 105744 and 106825, would require municipalities to levy lodging taxes based on an amount that includes "the intermediary's services" and would change the definition of "substantial nexus" for state sales and use tax purposes to include "hotel intermediaries." Such a new tax – a tax increase - on tourism is highly discriminatory and unconstitutional.
When a consumer books a hotel room at an online travel site, the room rent and taxes owed are forwarded to the hotel and locality. A fee for service is included in that transaction and retained by the travel site. HB 59 would unjustly apply the high and discriminatory hotel tax to the travel company's service fee, which is well outside the scope of hotel occupancy taxes. Such fees are already taxed as income and would result in excessive double taxation
This tax will also place an undue burden on interstate Internet commerce and expressly violate the Dormant Commerce Clause of the U.S. Constitution.
Well-established legal precedent requires companies to have a physical nexus within a state or locality in order for that jurisdiction to compel businesses to collect and remit taxes. This is a presence that Internet travel companies simply do not have. For this reason, at least nine state and federal courts have already ruled against such taxes across the country; however; this tax provision ignores judicial president and claims that providing this service establishes physical nexus. It clearly does not.
Additionally, the effort disregards the 1998 Internet Tax Freedom Act, which specifically prevents states and localities from applying discriminatory taxes – such as hotel taxes – to electronic commerce.