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SLeve uel8lanco, LxecuLlve ulrecLor
1401 k SL nW, SulLe 302
WashlngLon, uC 20003
202-420-7482
www.neLcholce.org


May 21, 2013
SenaLor 1lm Schaffer, Chalrman
Chlo SenaLe
1 CaplLol Square
Columbus, Chlo 43213-4210

8L: !""#$%&%#' &# )* +, -./&%#' +01,2345 6 78.9&%': 9 ;.< =9> #' !?%# =89@.A.8$

uear Chalrman Schaffer and Members of Lhe SenaLe Ways and Means CommlLLee:
We encourage you Lo re[ecL SecLlon 3739.081 (llnes 114,434-114,471) of P8 39 because lL lmposes an
unworkable new Lax on servlces provlded by Chlo Lravel agenLs and onllne Lravel companles. 1hls
secLlon lmposes a new Lax on Lhe fees Lravel agenLs charge for researchlng, comparlng, and booklng
rooms for Lravelers.
ClLles and sLaLes favor hoLel Laxes slnce Lhey fall mosLly on vlslLors - noL on resldenL voLers. 8uL under
SecLlon 3739.081, Lhls approach would backflre slnce Lhe new servlce Lax would be pald #'45 by Chlo
clLlzens - '#% 65 %"0+,4,"7 from ouL-of-sLaLe. And Lhe Lax would #'45 &$80-% Chlo buslnesses llke
weddlng and convenLlon planners.

Sect|on S739.081 |mposes a new tax on Ch|o c|t|zens
1oday, Chlo does noL lmpose sales Lax or lodglng Lax on servlce fees charged by Lravel agenLs. 1hese
servlce fees compensaLe Lravel agenLs for researchlng and comparlng avallable hoLel opLlons, booklng
Lhe room, and handllng paymenL Lo Lhe hoLel. SecLlon 3739.081 would lmpose a new Lax on Lhese
servlce fees provlded by Lravel agenLs and onllne Lravel companles, a Lax LhaL ls passed on Lo your
consLlLuenLs.

Near|y a|| trave| agents and trave|ers re|y upon on||ne serv|ces to research, compare, and book
reservat|ons
lrom our work on Lhls lssue ln sLaLes, aL ALLC, and aL nCSL, lL's clear Lhere ls some mlsundersLandlng
abouL Lravel reservaLlon servlces and Laxes. 1he charL below shows Lhe flow of servlces, Laxes, and
paymenLs ln a Lyplcal LransacLlon where a Lraveler uses a Lravel agenL or onllne Lravel company Lo
research and book a hoLel reservaLlon.
As shown ln Lhe charL, Lravel agenLs and onllne Lravel companles are provldlng a 7,"+&-, Lo Lravelers.
1hese servlces lnclude comparlsons of raLes and amenlLles aL mulLlple hoLels, plus faclllLaLlon ln maklng
Lhe reservaLlon, processlng Lhe paymenL, and sendlng charges and appllcable Laxes Lo Lhe hoLel
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operaLor. Clearly, Lhls faclllLaLlon servlce ls dlsLlncL from Lhe room provlded by Lhe hoLel where Lhe
Lraveler evenLually sLays.


Sect|on S739.081 a||ows tax co||ectors to |evy the|r occupancy tax on more than [ust hote| rooms
Chlo Lravel agenLs rouLlnely creaLe packages LhaL bundle hoLel rooms, food, Lravel, and evenLs lnLo one
prlce. SecLlon 3739.081 allows Cleveland Lax collecLors Lo lmpose Lhelr occupancy Laxes on all klnds of
goods and servlces when lncluded ln Lravel packages:
Laxl from Lhe alrporL Lo Lhe hoLel
food served aL a hoLel resLauranL
LlckeLs Lo Lhe 8ock and 8oll Pall of lame
golf course, carL, and club renLal
gulded Lour of Cleveland
wlne LasLlngs

Sect|on S739.081's new tax on trave| serv|ce fees wou|d on|y app|y when !?%# /%&%B.'$ book the|r
trave|
1he new Lax lmposed on booklng servlce fees by SecLlon 3739.081 would lmpacL only Chlo's clLlzens and
buslnesses. 1haL's because of Lhe SLreamllne Sales and use 1ax AgreemenL (SSu1A) and Chlo sourclng
rules
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for deLermlnlng Lhe source [urlsdlcLlon for Laxable servlces - when a LourlsL uses a Lravel servlce,
Lhe reservaLlon servlce fee ls sourced Lo Lhe Lraveler's home locaLlon - noL Lo Lhe Lraveler's desLlnaLlon.

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Chlo 8evlsed Code (8.C.) secLlon 3739.033(C)
PAYMENT
$ Hotel Room Charge
+ Anticipated applicable taxes
+ Compensation for Services
= Total Payment
SERVICE
Facilitating
selection,
booking, and
payment
Travel Intermediary
INVOICE
$ Room Charge
+ Applicable Taxes
= Total Invoice
PAYMENT
$ Room Charge
+ Applicable taxes
= Total Payment
ACCOMMODATION
Hotel provides room to traveler
Services model:
! Tax service and accommodation separately.
! Source to where customer receives the service.
MTC proposal:
! Tax service as part of the accommodation.
! Source everything to the hotel location.
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lor example, say Lwo LourlsLs are booklng a hoLel room ln Chlo. Cne llves ln WesL vlrglnla, Lhe oLher ln
Cleveland. 1he WesL vlrglnla LourlsL would '#% pay Lhe Lax creaLed by SecLlon 3739.081 when Lhey
booked Lhrough a Lravel agenL slnce Lhey recelved Lhelr onllne booklng servlces ouLslde of Chlo.
2
8uL,
Lhe LourlsL llvlng ln Cleveland who books Lhrough a Lravel agenL 9#:41 pay Lhe Lax creaLed by SecLlon
3739.081.
1hls new Lax would Lherefore only apply Lo servlces provlded Lo Chlo-based Lravelers. 1he Lax would '#%
apply Lo servlce fees pald by ouL-of-sLaLe Lravelers booklng Chlo hoLels.

Sect|on S739.081's new tax on serv|ce fees wou|d on|y be co||ected by Ch|o-based trave| agents and
Ch|o-based trave| webs|tes
1he requlremenL Lo collecL SecLlon 3739.081's new Lax on booklng servlces could #'45 be enforced
agalnsL Lravel agenLs and webslLes LhaL have a physlcal presence ln Chlo. As noLed above, ouL-of-sLaLe
Lravel agenLs and webslLes already collecL and remlL lodglng Laxes when Lhey make paymenL Lo Lhe Chlo
hoLel operaLor. 8uL ouL-of-sLaLe Lravel agenLs would noL be requlred Lo collecL Lhls new Lax on servlce
fees for provldlng reservaLlon servlces aL Lhe Llme LhaL Lravelers book Lhelr hoLel.
1o conslder anoLher example, say LhaL a WesL vlrglnla LourlsL uses a WesL vlrglnla Lravel agenL Lo book a
Chlo hoLel room. WesL vlrglnla already Laxes Lravel agenL servlce fees provlded Lo sLaLe resldenLs
recelvlng Lhe servlce aL Lhelr home locaLlon. So any WesL vlrglnla-based Lravel agenL or webslLe ls
already collecLlng sales Lax on Lhe servlce fee when booklng WesL vlrglnla Lravelers aL Chlo hoLels. ln
facL, SecLlon 3739.081's new Lax would aLLempL Lo lmpose 1#:64, %0;0%&#' of Lhe same servlce fee pald
by Lhls WesL vlrglnla LourlsL, whlch was probably noL Lhe lnLenLlon of Lhe blll's auLhors.
lease remember LhaL SecLlon 3739.081 would lmpose new Laxes only on Chlo clLlzens, whlle placlng
your ln-sLaLe Lravel servlces aL a compeLlLlve dlsadvanLage Lo ouL-of-sLaLe rlvals.

Sect|on S739.081 |mposes new tax co||ect|on costs on sma|| trave| agents
lf a small Lravel agenL books only one Lrlp for a cusLomer Lo Chlo, LhaL Lravel agenL musL now flll ouL Lax
forms for Lhe sLaLe and local [urlsdlcLlon.
A rlce WaLerhouse Coopers sLudy found LhaL small reLallers under $1 mllllon ln revenue, already lncur
17 cenLs for every sales Lax dollar Lhey collecL.
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lor small Lravel agenLs Lhe cosLs can be ,+,' /&(/," due
Lo Lhe complexlLles of Lhe Lravel based sales Laxes.
We ask you Lo noL lmpose Lhese new cosLs on Chlo Lravel agenLs.

M|n|ma| revenue generated
lor reasons explalned above, every sLaLe, clLy, and counLy LhaL has enacLed a slmllar new Lax has falled
Lo galn Lhe anLlclpaLed Lax revenue.
llrsL, as dlscussed above, because of Lhe sourclng law ln Chlo, Lhe servlce Laxes could noL be lmposed on
any ouL-of-sLaLe Lraveler. Second, Chlo Lax collecLors do noL have auLhorlLy Lo force ouL-of-sLaLe Lravel

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noLe LhaL Lhe ouL-of-sLaLe LourlsL sLlll pays Lhe Cleveland occupancy Lax when Lhey book Lhe room.
3
<+0&4064, 0% hLLp://www.neLcholce.org/wp-conLenL/uploads/cosL-of-collecLlon-sLudy-ssLp.pdf.
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agenLs Lo collecL Lhese new servlce Laxes slnce sLaLes can only lmpose collecLlon obllgaLlons on
buslnesses wlLh a physlcal presence.
So when you conslder Lhls Lax, please conslder wheLher Lhe mlnlmal Lax revenue ls worLh Lhe harm Lo
Chlo's Lravel agencles and Lravel webslLes.

Avo|d the conf|at|on of trave| serv|ces and |odg|ng prov|ders
8y malnLalnlng Lhe Lrue dlsLlncLlon beLween Lravel servlce provlders and hoLel operaLors, you can help
Chlo's Lravel and Lourlsm lndusLry focus on servlng Lravelers and creaLlng [obs - noL on collecLlng
nomlnal new Laxes from Lhe sLaLe's own clLlzens.
lnsLead of passlng SecLlon 3739.081 we suggesL amendlng lL Lo clarlfy when an occupancy Lax applles.
We suggesL subsLlLuLlng Lhe exlsLlng blll LexL wlLh Lhls language from Mlssourl law:
Any Lax lmposed or collecLed by any munlclpallLy, any counLy, or any local Laxlng enLlLy on or
relaLed Lo any LranslenL accommodaLlons, wheLher lmposed as a hoLel Lax, occupancy Lax, or
oLherwlse, 7/044 08845 7#4,45 %# 0$#:'%7 0-%:0445 ",-,&+,1 65 %/, #8,"0%#" #= 0 /#%,4, moLel,
Lavern, lnn, LourlsL cabln, LourlsL camp, or oLher place ln whlch rooms are furnlshed Lo Lhe
publlc.
>'1," '# -&"-:$7%0'-,7 7/044 0 %"0+,4 0(,'% #" &'%,"$,1&0"5 6, 1,,$,1 0' #8,"0%#" #= 0 /#%,4,
moLel, Lavern, lnn, LourlsL cabln, LourlsL camp, or oLher place ln whlch rooms are furnlshed Lo
Lhe publlc unless such Lravel agenL or lnLermedlary acLually operaLes such a faclllLy. ...
2/&7 7,-%&#' &7 &'%,'1,1 %# -40"&=5 %/0% %0;,7 &$8#7,1 07 0 /#%,4 %0;. #--:80'-5 %0;. #" #%/,"9&7,.
7/044 08845 7#4,45 %# 0$#:'%7 ",-,&+,1 65 #8,"0%#"7. 07 ,'0-%,1 &' %/, 7%0%:%,7 0:%/#"&?&'( 7:-/
%0;,7."
4

We appreclaLe your conslderaLlon of our vlews, and please leL me know lf l can provlde furLher
lnformaLlon.
Slncerely,

SLeve uel8lanco
LxecuLlve ulrecLor, neLCholce

Carl M. Szabo
ollcy Counsel, neLCholce

cc: Members of Lhe CommlLLee

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-#'+,'&,'-,. -/#&-, 0'1 -#$$,"-, #' %/, 3,%A B,0"' $#", 06#:% 3,%*/#&-, 0% 999A',%-/#&-,A#"(



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Mlssourl P8 1442 (2010), slgned lnLo law !uly 2010 (emphasls added).