Tuesday, August 10, 2010

North Carolina Readies For Fair Resolution for OTC’s

Beginning January 1st, 2011, all commercial lodging properties in North Carolina must begin collecting and remitting taxes levied on the rates for guest rooms sold by Online Travel Companies (OTC,) sometimes referred to as OTAs or Online Travel Agents.

Until now, OTC’s have notoriously refused to pay their full share, robbing state and local governments and their residents of the very revenues used to make destinations appealing, the reason visitors rent the lodging rooms in the first place.fairness

Until now, OTC’s have bought guest rooms at deeply discounted, wholesale rates, from lodging companies, but have paid taxes only on the discounted rate not on the rate at which they ultimately resell the rooms, pocketing the rest.

Under the new law, enacted recently by the NC General Assembly, full state sales tax and local room occupancy and tourism development tax will apply to the services provided by OTCs. Designated as guest room “facilitators” OTCs will now be responsible for remitting taxes based on the full sales price of a room, including the fee charged by the OTC for its service (defined in the law as “facilitation fees and any other charges necessary to complete the rental.”)

OTCs will be required to remit the taxes to the local North Carolina lodging property where the room is occupied, both the taxes they collect on the discounted room rental (as they do now) plus sales and occupancy tax on their compensation or “facilitation fee” which is the rate for which they resell the rooms.

This will mean travelers renting through an OTC will pay the same taxes (no more, no less) as those renting directly from the hotel.

Upon receipt of these taxes, each individual hotel property will be responsible for remitting the sales tax to the N.C. Department of Revenue and the occupancy tax to respective local governments (as they do now for the taxes on just the discounted room rate.)

There is liability protection for local lodging properties in the legislation - if they do not receive this new tax revenue from the OTCs, they are not responsible for it.

The new law applies to guest rooms rented by OTCs after January 1, requiring them to remit the additional sales and occupancy tax to the lodging properties located in North Carolina for payment to the State and local government.

Lodging properties harvest demand from visitors drawn to North Carolina communities which are developed in part as destinations by reinvestment of tax revenues levied on visitors to make them appealing and to provide the services they need.

The new law corrects a gross inequity.

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