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Montana v OTCs: the fight is over

  • Aug 20, 2015 | Gail Cole

 Online travel companies must collect sales tax on accommodations in Montana.

Do Montana Department of Revenue has contended for years that they do; online travel companies have persistently disagreed.

The issue has made its way to the Montana Supreme Court, which recently ruled in favor of Montana and against the OTCs ... and against Montana in favor of the OTCs. Sound complicated? Let's break it down.


Montana has no general state sales tax but it has imposed a 3% tax on the sales price of accommodations and campgrounds since 2003. A 4% tax was also levied at that time on the sales price of rental vehicles. Additionally, a 4% Lodging Facility Use Tax has been in effect since 1987 and applies to accommodation charges, defined as the “fee charged for lodging by an owner or operator of a facility.”

In 2010, the Montana Department of Revenue sued numerous OTCs for both the sales tax and the lodging facility use tax. The First Judicial District Court ruled in favor of the OTCs on all counts and so the department took the case to the state Supreme Court.

For Montana

OTCs charge fees to reserve lodging and vehicle rentals for clients. The Montana Supreme Court determined that those fees are subject to the sales tax on the grounds that the “plain meaning of the Sales Tax requires taxing OTC fees. It also requires the OTCs, who are ‘sellers’ because they ‘make[ ] sales… of services,’ to collect and remit to the Department taxes on those fees.”

The OTCs are liable for the sales tax on fees dating back to November 8, 2010, when the Department filed suit against the OTCs and “the OTCs were unambiguously on notice that the Department considered them liable for collection of the Sales Tax.”

For OTCs

The court also determined that the state’s 4% Lodging Facility Use Tax does not apply to these transactions on the grounds that the OTCs “are not ‘owners’ or ‘operators’ of the ‘facility’ as required by the statute.”

Read the Supreme Court Opinion for DOR v. Priceline.

Online travel companies have taken numerous states to court over sales and lodging taxes. In some, like Montana, there is now resolution. In others, the battle rages on.

There is an easy way to manage and pay lodging taxes. Learn more.

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.