Online Travel Industry Having Tax Problems

There seems to be a few cities in Texas that want the online travel industry to ante up millions of dollars in lost tax revenues - and there is a possibility this could move to the other states. Houston and San Antonio - guess Dallas would be next if the decider is towns with NBA teams - have filed suit against online travel companies for not paying the right amount of occupancy taxes dues.

"Hotels in Houston must remit to the city the hotel-occupancy tax of 7 percent, based on the price at which they sell rooms. The city uses the money to promote tourism and to pay off debt for Reliant Stadium, Toyota Center, Minute Maid Park and the Hilton Americas convention hotel".

'The city took in more than $57 million in the occupancy taxes in 2007," a Houston City official told the Houston Chronicle.

"On Tuesday, a federal judge granted San Antonio's motion for class-action certification in its lawsuit against 16 companies including,, and Orbitz. The San Antonio suit alleges the online companies collect hotel tax at the retail rate but only pay taxes on the bulk wholesale rate they are charged, " WebProNews reported

Obviously the travel industry is claiming increased costs will have an impact on tourism. That is absolutely true, while the local governement may not collect the taxes and does lose - the money comes in the pockets of those who visit and thus the average spend of the customers will be less. So maybe the local chamber of commerces should think about that and talk to the mayor.

Bookings will be down slightly because of higher prices - even though the prices will just increase across the board so people will not recognize the jump. Either way in a time of high gas prices actions like this will only hurt the travel industry as a whole. There are not many travel agencies left and few would be looking to invest in one right now.

About the author

Frank Watson has been involved with the Web since it started. For the past five years, he headed SEM for FXCM -- at one time one of the top 25 spenders with AdWords. He has worked with most of the major analytics companies and pioneered the ability to tie online marketing with offline conversion.

He has now started his own marketing agency, Kangamurra Media. This new venture will keep him busy when he is not editing the Search Engine Watch forums, blogging at a number of authoritative sites, and developing some interesting online community sites.

He was one of the first 100 AdWords Professionals, a Yahoo and Overture Ambassador, and a member or mod of many of the industry forums. He is also on the Click Quality Council and has worked hard to diminish click fraud.