The Florida Supreme Court's recent decision in favor of online travel companies in a major hotel room tax case will likely lead to tax revenue losses for some local jurisdictions but is expected to have positive results for Florida's tourism industry and, by extension, the statewide economy.
Specifically, the decision in Alachua County v. Expedia addresses whether online travel companies, or OTCs, including Expedia, Hotels.com and the other major hotel booking company websites, must pay hotel room taxes on the amount of their markups.
For example, let's say that an OTC pays a hotel $100 for one room night, then its customer pays $150 for the room. The OTC pays the hotel tax on the $100 it pays for the room, at a combined state and county tax rate of about 12 percent (the rate varies from county to county), or $12 in this example. The issue decided by the court is when the OTC's customer pays $150 for the room, is the room tax due on the $50 markup, in this example, an additional $6 per night?
From the dawn of the Internet travel industry, OTCs have not paid the hotel room tax on their markup, on the theory that they are not selling a hotel room, but rather providing a travel agent type of service, which is not taxable.
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