HELENA – Two Montana business groups are joining the online travel companies in an ongoing dispute with the state over hotel bed taxes now that the Department of Revenue is rewriting its rules aimed at the big companies.
The Montana Chamber of Commerce and the Montana Taxpayers Association say the state is overreaching by using the rule-making process to go after the online companies.
Earlier this month the Montana Department of Revenue sued more than a dozen online travel companies, arguing the companies shortchange the state on hotel taxes. The ongoing dispute has involved Gov. Brian Schweitzer, who publicly challenged the corporate leaders at an economic development function in Butte over he summer.
Now the Department of Revenue is getting ready to publish new rules that appear to recast implementation of the hotel bed tax to make it clear that the online travel industry is supposed to pay tax on the retail amount it collects from consumers. The state says the changes are simply being made to bring the rules up to date with current practices, and are nothing more than simple housekeeping.
Lee Baerlocher, a bureau chief with the agency, said the changes have nothing to do with the lawsuit.
Right now, the bed tax is only collected on the wholesale price of the room given to the hotel. The Schweitzer administration argues that the tax should be collected on the amount that online travel companies like Travelocity and Expedia charge the customer.
The industry argues that the difference between the wholesale and retail amounts in online bookings is so small that the tax would only generate an extra $100,000 for the state. The state counters it won’t know what it is owed until its agents can look at the company books.
Jon Bennion, government relations director for the Chamber of Commerce, says it appears to him that the state is trying to use an administrative rule-making process to enact policy that failed in the Legislature.
Bennion also argued that the rule seems like it would apply to Montana-based travel agents, who he thinks would now have to pay more taxes. All of it could hurt the travel industry, he said.
“It is really puzzling to see what the department is doing here that could have a negative impact on tourism in Montana,” Bennion said.
Mary Whittinghill, president of the Montana Taxpayers Association, said she thinks it is clear the law only requires that the owner of the hotels pay the tax on what they collect, not booking agents.
“Our biggest concern is application of the tax law. We don’t think the statue provides for the taxation other than what is described as the money collected by the accommodations provider,” she said.
The Interactive Travel Services Association, an umbrella group for the online travel booking industry, opposed the new rules the agency could implement as soon as next week. It argues that the state doesn’t have justification in law to write new rules that impose the tax on businesses that are neither owners nor operators of hotels.
“The Department of Revenue appears to be trying to overrule the Legislature and make its own policy,” said Andrew Weinstein, spokesman for Interactive Travel Services Association. “Clearly online travel companies neither own nor operate a hotel.”