Scavello: Senate Approves Bill to Close Sales Tax Loophole with Online Travel Companies

Harrisburg – The Senate approved legislation Tuesday championed by Senator Mario Scavello (R-40) to close a loophole in the collection of the state sales tax from online travel companies (OTC’s).

Online travel companies, such as Orbitz, Travelocity, and Expedia, contract with hotels to purchase rooms at a mutually agreed upon wholesale price. These rooms are then resold online to the consumer.

Traditionally, when a hotel room is sold to a consumer, the hotel collects and remits the state sales tax on the full retail rate charged for the room. Currently, OTC’s collect and remit the sales tax on the room rental rate they negotiated with the hotel, not the full rate that the consumer pays.

House Bill 1511 would apply the state sales tax to the full price paid by the consumer at point of sale for booking the hotel room, inclusive of any additional fees or markups that an online travel company charges customers for booking the hotel room.

“This is not a new tax, but rather a change in the application of the sales tax to ensure online travel companies are remitting the full amount of tax owed to the state,” Scavello said. “It is estimated that closing this loophole at the state level in the Tax Code will garner approximately $20 million for statewide tourism efforts, which will aid our region and fuel local economies across the Commonwealth.”

Travel organizations throughout the Commonwealth, including the Pocono Mountains Visitors Bureau, support the legislation. The bill was returned to the House of Representatives for consideration of Senate amendments.

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CONTACT: Christine Zubeck (717) 787-6123