OTA license and registration requirements: What you need to know

As we’ve discussed before, tax obligations for online travel agencies (OTAs) can be pretty complex. But things can get dicey even before you tackle tax rate calculations or file returns. As a web-based business, you’re likely to get listings for properties across the United States — which means you may be on the hook to register and follow licensing requirements wherever those properties may be.

In order to stay compliant, you need to be armed with the right information. When it comes to licensing and registration, some of the more common questions are:

• Do I need a license as an OTA?
• Do OTAs need to register for sales tax?
• Where do I get my license or register my OTA?

Yes. To run your online travel business, you will need to obtain a business license in the state you operate in.

Several states, like New York or Illinois, have travel licensing requirements for businesses based within their borders. So, it’s important to check with local laws and regulations for your home state.

In a word: Probably. All states with sales tax now have marketplace facilitator laws, and because online travel agencies are marketplace platforms, they are subject to these regulations. 

That said, each state has its own rules for establishing nexus. You aren’t required to register until you reach the threshold for each state, so your actual registrations will largely depend on:

• The place where your business is based
• The location of the property listings
• The number of transactions and/or sales you have in each state

Keep in mind, there are additional ways to establish nexus with a state.

Beyond nexus laws, specific tax obligations also vary from state to state. Some states exempt OTAs from tax obligations on the total sale amount, but still require them to collect taxes on the markup. And where lodging taxes are often assessed at local levels, you’ll need to register with those jurisdictions.

Unfortunately, there’s no one location to apply for all your licenses or register with every jurisdiction. You're responsible for applying for licenses and registering your business with each state and local jurisdiction as required for your business.

While this may be relatively straightforward if your site only features listings in the state you’re based in, it gets a lot more complicated once your listings extend across state lines. If you have a number of listings in multiple locations, it may be worth considering licensing and registration software.

Avalara has a hospitality solution designed to help online travel agencies with a variety of compliance needs, including:

• Business licensing
• Registration
• Sales tax calculation
• Returns preparation and filing

Rather than spend time researching requirements for every state you have listings in, you can let us handle compliance while you focus on growing your business.

Want to know if Avalara is right for your platform? Schedule a call today.