Federal Court Dismisses Online Travel Hotel Tax Suit

The U.S. Court of Appeals for the Fourth Circuit has dismissed a suit brought forth by Pitt County, North Carolina (Greenville, NC is located there for those who are NC-challenged) to charge online travel sites such as Expedia and Travelocity for hotel occupancy taxes.

The ruling used an NC state sales tax statute for support of its decision. G.S. 105-164.4 says that online travel sites are not hotel retailers that could be subject to the tax.

This is good news for consumers, as they would essentially be taxed twice. If the ruling had gone the other way, no doubt the taxes would be passed onto the consumer.

Art Sackler, Executive Director of the Interactive Travel Services Association said, “Online travel companies work hard to bring visitors and tourism dollars to cities and hotels around the country. Since they do not manage or operate hotels, motels or other lodging establishments, the online travel companies are not liable for occupancy taxes on the reservation services they provide to the local tourism industries.”

Pitt County’s real problem is having enough to attract tourism dollars in the first place. East Carolina University is likely the biggest tourism money maker, but a weak football season could hinder the number of dollars spent there.

Promoting ECU’s medical center is a more consistent means of bringing in the dough. Also, offering incentives for companies to operate in the county (i.e. research + university = good) could give an overall boost to the tax revenue. Good companies could also boost travel tax dollars when people travel to make business deals go down in the home of the purple and gold Pirates.

Still, cities around the country seem intent on addressing the problem from the wrong end. And different court districts are bringing different decisions. A judge in Texas granted a motion to file suit by San Antonio. Houston is also going after online travel taxes.

Related Reading:
Newegg Defies State of New York with New Tax Policy
The Internet Sales Tax Time Bomb
Why We Hate Web Sales Taxes

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