LA Sues Hotel Booking Websites Over Tax Issue

from the pocketing-a-few-extra-tax-dollars dept

When travel sites offer rooms to end users, they’ve often prenegotiated a lower rate from the hotels in question. When they do so, they pay tax based on the rate at which they paid for the room — which seems reasonable. However, when they turn around and sell the room to someone on their site, they charge tax based on the higher selling price. So, where does that extra tax revenue go? Right into the pockets of the online travel sites — and not into the government coffers who set up the tax in the first place. It appears that someone in LA finally realized this, and decided they want that extra tax money and have sued all the big name hotel booking sites over the issue.

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Comments on “LA Sues Hotel Booking Websites Over Tax Issue”

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That is not correct. With Sales tax the reseller is required to pay the state all the tax it collects. First they pay the Hotel tax on the amount they agree to, say $100 and then $6 for tax for a total of $106 to the Hotel. Then they resell that to the consumer for say $200 and $12 in tax. When the reseller files it’s sales tax return they will show they collected $200 in sales and $12 in tax. They will then deduct $100 from the gross sale because it was purchased retail. As well as take a credit for the $6 in tax they paid to the hotel.
So if you do the math on tax the Hotel pays $6 tax to the state. The reseller pays $6 to the hotel and $6 to the state and then the Customer pays $12 to the hotel. Everything balances out. None overpaid tax on anything.
Ok now lets look it it the other way. Lets say the Hotel sells it to the reseller with no tax for $100. The hotel will file return which would state $100 gross sales. And then claim the $100 as credit because it was sold to an approved reseller. The hotel would pay no tax. The reseller then sells it for $200 and collects $12 in tax. Wehn they file their return it will show $200 in sales and $12 collected in tax. they would then send a check for $12 to the state for the sales tax.
If you are going to complain about something, look at car sales. Everytime it is sold tax has to be paid. So say I buy a Hummer for $100k in 2005. I’ll pay say $6k in taxes. Then I trade it in a year later for a prism cause I can’t afford the gas on the pig. Well the dealer will sell it again and say this time it fetches $80k in 2006 that generates about $5k in taxes. Now lets assume this happens every two years and the price drops 20% each time it’s resold. 2008 sale price (SP) $64k tax $4k. 2010 SP $51k tax $3k. 2012 SP $41k tax $2k. 2014 SP $33k tax $2k. All amounts rounded for ease of calculating. So we have ONE vehicle when new was $100k and in nine years the state collected $22k in taxes. By the law this applies to almost everything that is resold. Why should the state get paid mutiple times on the same item.?

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