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OTC Issue Report: Center on Budget and Policy Priorities

State and Local Governments Should Close Online Hotel Tax Loophole and Collect Taxes Owed

by Michael Mazarov

Download: OTC Issue Report: Center on Budget and Policy Priorities
(PDF, 250 Kb)

Online travel companies (OTCs) normally calculate state and local hotel occupancy taxes based on the wholesale cost they pay to a hotel for a room, rather than the retail price they receive from the customer. The result is lower taxes collected by state and local jurisdictions for rooms booked through an OTC, rather than directly with a hotel.

This report outlines the OTC collection and remittance issue and gives an in-depth look at how individual states are affected while discussing how they can close the tax loophole and begin recovering these funds.