Orbitz, Expedia and Lodging Tax: It Doesn’t Add Up

Posted October 22, 2010 in Consumer Law by Arthur Buono

Cities and online travel services are waging a nationwide battle over local lodging taxes. You pay them whenever you stay at a hotel. They can be very hefty. You pay them, and the question is, who gets to keep them?

  • Cities battle Orbitz, others over lodging tax
  • Tax applies to what the hotel gets for the room, not what you pay
  • If the hotel doesn’t get all you pay, shouldn’t you keep the avoided tax?
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Who Keeps the Taxes You Don’t Pay?

Of course the taxing authority gets to keep the taxes you pay. But the authority’s taking a hit every time you book a room through an agency like Expedia, Orbitz, or Hotels.com. That’s because when you do, the hotel only gets part of what you pay. The travel service takes its share. And the travel service doesn’t pay the lodging tax on its share.

Since you pay the same total amount for your lodgings whether you book through the hotel or online, the argument goes, you shouldn’t care. You should care, because if you look closely, you pay less in taxes if you book through an online service. Here’s the scenario:

  • Quoted room rate = $100, lodging tax = 10%
  • Book via Hotel: Hotel gets $100, charges $10 tax = you pay $110
  • Book via Service: Hotel gets $80, charges $8 tax, Service gets $22 = you pay $110

The problem you may see here is not necessarily that the city earns $2 less in tax. The heck with the city, you’re not coming back. It’s that you’re not benefitting from the lower tax. The service is. Who pays the tax? Not the hotel, they simply collect it from you. You pay the tax. And when the room is quoted to you through the service at $100 per night, plus tax, don’t you feel foolish and maybe ticked finding out that $2 of what you thought was $10 in tax actually went to the service? How do you like paying $102 for a $100 room?

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