Travel booking sites present tax issues for county
April 25, 2014
The issue of sales taxes charged for purchases made online has been a hotly debated topic nationally, with local businesses and governments complaining of an unfair advantage for online vendors with the lack of a so-called Internet sales tax.
In Summit County, local coffers are often denied full sales tax revenue on hotel and resort bookings made through travel websites such as Travelocity and Expedia, among others. Summit County accountant Matt Leavitt said he is unsure of how much sales tax revenue the county has lost due to third parties incorrectly calculating the tax.
"[Booking sites] are not always charging the correct sales tax rate. Some haven’t charged at all because of an issue with the online sales tax," Leavitt said. "Sales tax is supposed to be charged at the point of sale, but where is the actual point of sale?"
Leavitt said it depends on the vendor whether the county receives the appropriate sales tax revenue. The American Hotel & Lodging Association says many third-party booking companies calculate sales taxes based on the hotel’s wholesale cost rather than its retail cost.
An example on the group’s website illustrated that, rather than direct hotel booking, which for a $100 room would add $10 in a jurisdiction tax a total of $110 for the consumer. From that total, $100 would go to the hotel and $10 to the local government.
However, what many third-party booking sites may do is take the equivalent of $22 from that $110 transaction, calculating taxes after it collects its service charge. That means the local government only receives $8.80 — 10 percent of the remaining $88 and the hotel receives $80. Thus, both hotels and local governments have come out in opposition to third-party travel sites’ practices.
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Some third-party booking sites properly collect and remit sales taxes, Leavitt said, but added that the problem is part of a broader national issue. He said the Utah State Tax Commission is aware of the problem but added it’s all a matter of how to solve the issue.
Charlie Roberts, a spokesman for the Utah State Tax Commission, said the agency collects sales taxes at the resort or hotel where the purchase is redeemed, but he did not say whether such taxes are based on the wholesale or retail value.
For Vail Resorts’ Epic Passes, good at Canyons Resort and Vail’s other resorts across the country, Summit County is not able to collect sales taxes on those passes sold online, Roberts said.
If an Epic Pass is purchased at Canyons Resort, Roberts said, the county would collect those tax revenues. However, since Vail Resorts is based in Broomfield, Colo., tax revenue from passes sold online would not go to any Utah city or county.
"For sales taxes collected on out-of-state ski resort passes, sales taxes are collected from the location where the sale is made," Roberts said. "In other words, Utah cities and counties would not receive revenue for sales made out of state, even if the product or service is used in Utah."