Sales Tax Slice: This Just Inn: Wyoming Joins Other States in Requiring OTCs to Remit Tax on Full Price of Hotel Rooms


In recent years, states have become increasingly critical of the business model used by online travel companies (“OTCs”), specifically in relation to collecting tax on the discounted price of hotel rooms. New York and North Carolina have passed legislation requiring OTCs to collect tax on full sales price of the hotel rooms. In South Carolina and Georgia, state supreme courts ruled taxes were due on the full rate rather than the wholesale rate.

This month, the Wyoming Department of Revenue issued a notice advising that, effective Jan. 1, 2015, businesses that book Wyoming hotel rooms under the “merchant model” must collect and remit sales and lodging tax on the full sales price paid for the room reservations they sell.

Under the merchant model, a business enters into an agreement with a hotel to market and book hotel lodging services for the business’s customers. The hotel agrees to offer its lodging services through the business at a discounted rate. The business then sells those services to its customers at a higher rate than the discounted rate charged by the hotel. The business books the reservation for the lodging services with the hotel and collects the higher advertised sales price, taxes and fees for the services from its customer.

After the hotel stay, the hotel bills the business the discounted lodging rate and the associated tax. The business then retains the difference between the discounted rate and the higher customer rate, plus any fees. Under this model, taxes are not paid on the full price paid by the customer for the hotel lodging services.

The department’s notice follows a recent Wyoming Supreme Court ruling that sided with the Wyoming State Board of Equalization on a sales and lodging tax issue. In April, the court held that online travel companies operating under the merchant model are considered a vendor and must collect and remit sales and lodging tax on any accommodations in Wyoming the OTC’s made for their customers.

The department went on to explain that upon receiving a sales/use tax license, businesses must purchase the hotel rooms they plan to resell to their customers on a wholesale basis for resale basis (without payment of sales or lodging tax). Businesses must then collect the applicable sales and lodging tax from their customers on the full retail sales price paid for the room reservations.

To purchase on a wholesale for resale basis, businesses must supply the hotel with a properly executed Streamlined Sales and Use Tax Agreement (SSTP) Certificate of Exemption, indicating its most appropriate business type and the reason for the exemption.

Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: What are the economic impacts of such tax impositions on state hotel and tourist industries? 

For more information about this and other state tax issues, sign up for a free trial of the Bloomberg BNA Premier State Tax Library. 

By Mark J. Kennedy

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