New York: new hotel tax targets online agencies

Online travel agencies and other hotel resellers will have to start paying higher taxes in New York from September. The legislation defines remarketers as anyone who "reserves, arranges for, conveys or furnishes occupancy, whether directly or indirectly, to an occupant for rent in an amount determined by the room remarketer" and requires all hotel room resellers to pay the 4% state sales tax on the retail rate, not just the wholesale rate.

Source: Travel Weekly; find article here>>.

Alaska Cruise Association lawsuit terminated

Attorney General Dan Sullivan announced last Thursday that the Alaska Cruise Association (ACA) has officially terminated its lawsuit against the state's excise tax on cruise ship passengers.

A stipulation filed with the U.S. District Court for Alaska dismisses with prejudice the lawsuit that was filed against the state last September. In a settlement agreement reached between the state and ACA in April, ACA agreed to dismiss its lawsuit if the governor signed into law a bill passed by the Legislature that reduced the commercial passenger excise tax from $46 per passenger to $34.50 and also provided an offset for passenger taxes paid to local governments.

On June 24, Governor Parnell signed into law Senate Bill 312, passed by the Legislature in April, that contained the elements necessary to trigger dismissal of ACA's lawsuit. The stipulation filed today permanently resolves the legal issues.

Source: State of Alaska Department of Law press release of July 1, 2010

Austria: bonus miles earned through business trips are subject to income tax

In a recently published judgement, Austrian Admnistrative Court (VwGH) decided that bonus miles of a frequent flyer programme earned by an employee on business trips are a taxable benefit arising from the employer-employee relationship, if used for the employee's private purposes: even if only individual persons are eligable to participate in frequent flyer programmes while companies are excluded, miles earned on business trips are occasioned in the context of the employer-employee relationship and therefore constitute income from employment if used privately.

However, these benefits do neither constitute any wage tax liabilities of the employer nor any obligation of the employer to monitor the use of bonus miles.

Income tax therefore must be paid by the employee himself as soon as the bonus miles are redeemed for goods or services. The mere credit of miles doesn't create any tax obligation.

Judgment 2007/15/0293 of April 29, 2010 available in German here>>.

Germany: reference for preliminary ruling of the ECJ in regard to travel agency taxation

German Federal Financial Court (Bundesfinanzhof) filed a reference for preliminary ruling on whether the 'special scheme for travel agents' in Article 26 of Directive 77/388/EEC on the harmonisation of the laws of the Member States relating to turnover taxes also applies to the sale by a travel agent of opera tickets in isolation, without the provision of additional services (Case C-31/10 - Minerva Kulturreisen).

Art 26 of the directive provides as follows:
1. Member States shall apply value added tax to the operations of travel agents in accordance with the provisions of this Article, where the travel agents deal with customers in their own name and use the supplies and services of other taxable persons in the provision of travel facilities. This Article shall not apply to travel agents who are acting only as intermediaries and accounting for tax in accordance with Article 11 A (3) (c). In this Article travel agents include tour operators.
2. All transactions performed by the travel agent in respect of a journey shall be treated as a single service supplied by the travel agent to the traveller. It shall be taxable in the Member State in which the travel agent has established his business or has a fixed establishment from which the travel agent has provided the services. The taxable amount and the price exclusive of tax, within the meaning of Article 22 (3) (b), in respect of this service shall be the travel agent's margin, that is to say, the difference between the total amount to be paid by the traveller, exclusive of value added tax, and the actual cost to the travel agent of supplies and services provided by other taxable persons where these transactions are for the direct benefit of the traveller.
3. If transactions entrusted by the travel agent to other taxable persons are performed by such persons outside the Community, the travel agent's service shall be treated as an exempted intermediary activity under Article 15 (14). Where these transactions are performed both inside and outside the Community, only that part of the travel agent's service relating to transactions outside the Community may be exempted.
4. Tax charged to the travel agent by other taxable persons on the transactions described in paragraph 2 which are for the direct benefit of the traveller, shall not be eligible for deduction or refund in any Member State.

Alaska: cut in cruise tax ratified

The Alaska State Legislature passed a bill that will reduce the state’s cruise passenger head tax from $46 to $34.50, and end a lawsuit the industry filed to overturn the tax. The Alaska Cruise Association signed an agreement last week with the Alaska attorney general to drop the lawsuit if the state passed the measure to reduce the tax.

Source: Travel Weekly; find article here>>.

Kentucky: suit against online travel companies dismissed

Warren County Circuit Court has dismissed a lawsuit filed by the city of Bowling Green against Hotels.com, Orbitz, Expedia and Travelocity claiming that the companies owed back occupancy taxes to the city. The judge agreed with the online travel companies contention that the taxes can be levied only on the physical establishment that provides sleeping accommodations.

Source: travelpulse; find article here>>.

California: Ruling on Online Booking Tax overturned

A Los Angeles Superior Court judge has overturned an earlier ruling that would have given the city of Anaheim $21.3 million in back taxes and penalties from online travel companies such as Expedia and Travelocity. (See posting of Feb. 20, 2009)

The city in 2007 had sued the online travel companies for a larger share of hotel-bed fees – so-called transient occupancy taxes – collected through online booking. The law suit was based on the argument that he online companies were collecting taxes from customers on the retail price of hotel rooms, but only paying the city the tax on the wholesale price. However, superior court agreed with the defendants that the plain meaning of this type of occupancy tax stature simply did not cover online-travel companies.

The ruling in the Anaheim case is likely to set a precedent for several similar cases.

Source: The Orange County Register; find article here>>.

USA: Internet travel agents sue New York City over hotel room occupancy tax

A group of major Internet travel firms as well as the American Society of Travel Agents (ASTA) and the U.S. Tour Operators Association (USTOA) filed a law suit against New York City to stop the extension of a hotel tax on their clients. They allege that the law extending the city's hotel room occupancy tax to "third-party travel intermediaries" is "unconstitutional and illegal" as the city "has no inherent power to tax."

Source: marketwatch.com, find article here>>.

European court of Justice: Sardinian regional tax on touristic stopovers infringes Community law

Legislation adopted by the Region of Sardinia introduced, as from 2006, a regional tax on stopovers for tourist purposes by aircraft used for the private transport of persons or by pleasure boats over fourteen metres in length. The tax is payable by natural or legal persons who have their tax domicile outside the territory of the region. With regard to the pleasure boats, the tax applies to undertakings which carry out transport operations for remuneration or free of charge. With regard to the aircraft, on the other hand, the tax is payable only by undertakings which carry out air transport operations free of charge, for reasons connected with their business activities.

In the course of two actions brought against that law by the Italian President of the Council of Ministers, the Italian Constitutional Court made its first reference to the Court of Justice for a preliminary ruling.

In his judgment in Case C-169/08 the Court considered that the difference between residents and non-residents constituted a restriction on freedom of movement since there was no objective difference in their situations which could justify the difference in treatment as between the various categories of taxpayer.

The fact that taxpayers in Sardinia contribute, through income tax, to the activities of the region, even those for the protection of the environment, was irrelevant since the tax on stopovers was not of the same nature and did not pursue the same objectives as the other taxes paid by Sardinian taxpayers.

According to the Court, it is common ground that the tax concerns trade between Member States (since it applies to services provided in connection with stopovers by aircraft and recreational craft and concerns intra-Community trade) and it may distort competition (since it grants an economic advantage to operators established in Sardinia). In addition, the regional tax law which grants certain undertakings exclusion from the obligation to pay the tax in question involves a renunciation by the region of tax revenue which it would normally have received. Lastly, the tax confers a selective fiscal advantage only on enterprises established on the territory of the region, as compared with undertakings which do not have their tax domicile there, since those two categories of undertaking are in a comparable factual and legal situation when they receive stopover services in Sardinia.

Source: ECJ press release 101/09 of Nov. 17, 2009

Florida: law suit against Expedia and Orbitz over hotel taxes

Florida’s Office of Attorney General has sued Expedia and Orbitz, the leading internet travel companies, claiming that these companies violated state law by failing to remit the appropriate amount of taxes on hotel room rentals. The lawsuit states that while Expedia and Orbitz have been collecting taxes from consumers, they have only been remitting a portion on the taxes based on the wholesale rate the online sellers get from hotels, not the retail rate consumers pay.

Source: Attorney General Bill McCollum News Release of Nov. 3, 2009

Alaska: Cruise Association files law suit over passenger head tax

The Alaska Cruise Association filed a federal lawsuit challenging Alaska's head tax on the approximately 1 million cruise-ship passengers who arrive in the state each year. The lawsuit is seeking relief from the $50 fee imposed on each passenger arriving aboard large cruise ships, a fee which was approved by Alaska voters in 2006.

The association argues that the head tax by far exceeds the expenses of services and facilities provided to cruise ships, and in some cases the money is going to fund projects that do not directly benefit cruise-ship passengers.

Source: The Seattle Times; find article here>>.

EU protests against fees imposed on tourists by new US travel bill

The European Union is upset about plans by the United States to implement new travel fees for visa-waiver tourists. The $10 fee is part of the Travel Promotion Act which would be put in place in order to help fund a world tourism project that would increase the number of visitors to the US by better communicating America's security policies and competing for visitors. EU is considering retaliatory stances if this new fee is put into place.

Source: examiner.com; find article here>>.

USA: questions remaining about NewYork's hotel remarketer’s tax

The hotel remarketer tax will require any reseller of a New York hotel room to remit a tax based on the full amount paid by the customer, including service fees and charges. A representative of the city’s law department said a statement of audit procedure will provide more information about the law and give guidance related to more specific business models, including guidance on unbundling packages.

According to the memorandum, the tax on net and additional hotel room rent will apply to New York hotel rooms booked on or after Sept. 1. Hotel room resellers must complete and file a "certificate of registration" with the finance department by Sept. 3.

Source: Travel Weekly; find article here>>.

Israel: Netanyahu stops VAT on tourism

To the dissatisfaction of the Treasury, Prime Minister Netanyahu cancelled the recommendation for the imposition of a 16.5 percent VAT on the purchase of foreign tourist services in Israel. The heads of the tourism industry said that the Prime Minister has made the correct decision at a time when the number of foreign tourists coming to Israel was falling.

Source: eTurboNews; find article here>>.

UK: new departure tax detrimental to tourism?

ETOA, which represents inbound European tour operators warns UK government to go ahead with plans to increase Air Passenger Duty (APD) next November while the Netherlands and Belgian governments have this month abolished departure taxes in an effort to give a stimulus to tourism through their international airports. ETOA fears that APD could make the UK an expensive destination for the start and end of group tours to Europe and the country would be looking increasingly like an optional add-on than a key element of a visit to Europe for many in-bound long-haul travelers.

Source: eTurboNews; find article here>>.

IATA Welcomes Abolition of Dutch Tax

The International Air Transport Association (IATA) welcomed the decision by the Dutch Government to abolish the recently introduced departure tax as part of its economic stimulus package. The tax added a cost of between EUR 11.25 to EUR 45 for every passenger departing from Dutch airports.

Source: IATA press release No 12 of 27 March 2009; find full text here>>.

USA: Georgia Supreme Court prolongs court case on Atlanta tax suit against online travel firms

The Georgia Supreme Court on Monday revived a hotly contested lawsuit by the city of Atlanta against online travel companies that claims the firms are illegally pocketing millions of dollars in hotel tax revenue. The city filed suit in 2006 against 17 Internet travel reservation companies, including Expedia, Travelocity.com, Hotels.com, Priceline.com and Obitz. The suit seeks to recoup hotel and occupancy taxes. In a 5-2 decision, the court told a Fulton County judge to decide whether the online companies are subject to the tax.

Source: eTurboNews, find article here>>.

California: tax ruling against online travel companies

After years of underpaying transient occupancy taxes on hotel rooms, U.S. top online travel companies are being forced to pay the City of Anaheim the difference, plus penalties and interest, said a spokesman for the city's legal counsel. The US$21.3 million ruling is expected to influence a host of similar suits filed on behalf of local governments throughout the country.
At issue in the case was the companies' tax liability per the Anaheim Municipal Code - and the assessment of taxes owed over an undetermined period of time. According to the hearing officer, the defendants in the case will be required to pay the 15 percent transient occupancy taxes on the difference between the wholesale and retail rates of hotel rooms they purchased and resold in Anaheim between 2000-2008, as well as all service fees associated with the transactions.

Source: eTurboNews; find article here>>.

USA: Online travel companies win at federal appellate court in hotel occupancy tax case

The Interactive Travel Services Association announced that a federal appellate court has affirmed the dismissal of a suit brought by Pitt County, North Carolina, which claimed that online travel companies, including Hotels.com, Expedia, priceline.com, Orbitz, and Travelocity are responsible for paying the county's hotel occupancy tax.
The US Court of Appeals for the Fourth Circuit's decision of Jan. 14, 2009, rejecting Pitt County's tax claims is the first appellate decision by any federal or state court nationwide on the merits of the occupancy tax issue. In rejecting Pitt County's appeal, the court ruled that under the clear language of the county's occupancy tax ordinance and North Carolina's state sales tax statute (G.S. 105-164.4), the online travel companies are not lodging "retailers" subject to the tax.

Source: press release of Jan. 15, 2009; find full text here>>.

UK: government to raise air passenger tax

According to a pre-budget report by Her Majesty's Revenue and Customs (HMRC), U.K.'s air passenger duty for coach travelers flying from the United States will increase from 40 to 45 British pounds (from about $60 to $68) late next year. HMRC proposes even larger increases for the following year -- a 60-pound charge for transatlantic coach travelers and 120 for passengers in premium classes.

The Air Transport Association (ATA), a trade organization representing US airlines, and the Association of British Travel Agents (ABTA) critizise the tax increases and are concerned about a negative effect on demand.

Source: Travel Weekly; find article here>>.

The pre-budget report on air passenger duty is availabale for download in pdf here>>.