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Senate of Pennsylvania
Session of 2017 - 2018 Regular Session


Posted: February 15, 2017 11:48 AM
From: Senator Guy Reschenthaler and Sen. Lawrence M. Farnese, Jr.
To: All Senate members
Subject: Hotel Occupancy Tax Reform for Online Travel Companies
In the near future, we intend to introduce legislation to update and clarify the collection of the hotel occupancy tax from Online Travel Companies (OTCs).

Online travel companies, such as Expedia, Orbitz, and Travelocity, work by contracting with hotels to sell room inventory at a mutually agreed upon wholesale price.

However, OTCs do not currently pay the hotel tax on the full retail rate they charge to their customers. OTCs collect and remit the hotel occupancy tax based on the room rental rate they negotiated with the hotel, not on the larger amount with their fees or service charges included.

The current practice gives OTCs an advantage over hotels that have to collect and remit sales tax on the full retail rate charged to consumers as the taxable price.

This legislation would simply level the playing field regarding the collection of the hotel occupancy tax by applying the hotel occupancy tax to any additional fees or markups that an online travel company charges customers for booking a hotel room.

This legislation would also serve to facilitate modernization of the Pennsylvania Tax Code. When Part V of the Tax Reform Code of 1971 was written, imposing an excise tax (a.k.a. “occupancy” tax) of 6% on the rent charged for the occupancy of a hotel room, the internet and OTCs did not exist. This legislation seeks to reassert the original intent of the General Assembly by closing the unanticipated loophole in the Tax Code and restore an equitable application of the Code across the entire industry.

Travel-related organizations throughout the Commonwealth, such as the Pennsylvania Restaurant and Lodging Association, Visit Pittsburgh, the Greater Philadelphia Hotel Association, Visit Philadelphia, the Philadelphia Convention & Visitors Bureau, and the Pocono Mountains Vacation Bureau support this legislation.

We hope you will join us in co-sponsoring this legislation. Please contact my office with any questions at 717-787-5839.