Tax on travel agents for NYC hotel sales begins Sept. 1

Despite continuing efforts by ASTA, ASTA members, and its allies to have it rescinded, it now appears that the recently-enacted new tax on travel agency service fees related to hotel sales for hotels in New York City will go into effect on September 1, 2009.

The intent of this ordinance, enacted without notice or hearing, is to impose a 5 7/8-percent tax on certain travel agency income associated with the sale of hotel space in New York City.

The tax applies to the difference between amounts received for booking a hotel room and amounts paid to the hotel operator for the room. It includes “any service and/or booking fees that are a condition of occupancy.” According to published reports quoting Elizabeth Thomas, media specialist for the New York City Law Department: “The provisions of the law are not limited to online travel companies. All payments made to travel intermediaries as a condition of occupancy, including booking fees, will be subject to tax.” The tax for each element of room rent must be separately stated separately on any bill/statement/charge rendered by the retailer, termed a “room remarketer” under the ordinance, to the room occupant.

The only compensation model not taxed by the new ordinance is one in which the agency’s compensation for the sale is pure commission. The application of the ordinance to a “package” consisting of, for example, air, transfers, and hotel for a single price cannot be predicted at this time. The city of New York is planning to issue regulations shortly that ASTA hopes will clarify the application of the tax to packaged components sold at an aggregated price.

The tax is imposed on any party who books or facilitates the booking of hotel rooms through the Internet “or any other means whatsoever.” Such parties must register with the city by September 4, 2009 on a form to be provided by the commissioner of finance. The first tax return is due December 20, 2009 for the quarterly period ending November 30, 2009. Thereafter, tax returns are due 20 days from the last day of February, May, August, and November.

There are no geographical limitations on the application of the tax. It applies to the sale of any hotel room in New York City without regard to where the sale occurred.

The full text of the ordinance is set out on www.ASTA.org.