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Maryland Clarifies Taxable Price of Accommodations

 Maryland: Online travel companies must remit sales tax on the amount paid by the consumer.

Updated 7.11.2016

An Online Travel Company (OTC) such as Expedia or Travelocity can be said to act as an “accommodations intermediary” — they facilitate the sale of accommodations for lodging providers. Their existence has perhaps simplified the process of finding and booking lodging for many consumers, yet it has complicated state taxation of lodging services.

OTCs typically pay a discounted rate for hotel/motel/inn rooms and then sell them to consumers at a higher rate (usually the rate a consumer would pay if booking directly through the hotel). The question then arises: should states collect sales tax on the amount the consumer pays for the lodging or the amount the OTC pays for the lodging? How is the taxable price defined?

In Maryland, OTCs have been remitting taxes based on the reduced rates, although they have collected tax based on the rate paid by the consumer. They have retained the difference, estimated to be between $3 and $5 million annually.

Hotels and other lodging establishments, on the other hand, have been collecting and remitting tax on the retail rate charged to the consumer. The issue of fairness has been raised, particularly since Marriott International, Inc. is headquartered in Bethesda, Maryland and has 75 hotel properties in the state.

In the spring of 2015, legislators enacted Senate Bill 190, which amends the definition of “taxable price” as follows:

  • “’Taxable price’ includes, for the sale or use of an accommodation facilitated by an accommodations intermediary, the full amount of the consideration paid by a buyer for the sale or use of an accommodation, but not including any tax that is remitted to a taxing authority.”
  • “’Taxable price’ does not include, for the sale or use of an accommodation facilitated by an accommodations intermediary, a commission paid by an accommodations provider [e.g., a hotel] to a person after facilitating the sale or use of an accommodation.”

Legislators are calling this a clarification of current law. According to the Maryland Comptroller, it already has the authority under current law to collect sales tax on the full price charged to consumers. Online travel companies, however, are calling it a new tax on travel services.


Governor Larry Hogan vetoed SB 190  in May 2015, although he did not condemn the legislation. His veto message explained his position:

“The interpretation of current law as to whether accommodations intermediaries are required to collect and remit sales taxes on the amount paid by the consumer is actively being litigated by the Comptroller of Maryland (Travelocity v. Comptroller). The General Assembly should respect the long-standing practice of not passing legislation that would directly affect matters being litigated in a pending court case.”

The case is Travelocity.com, LP v. Comptroller of the Treasury, Md. Tax Ct. Docket No. 12-SU-OO-1184.

Veto overridden

On January 21, 2016, members of the House and Senate voted to override the veto of SB 190.

In response to the news, Philip Minardi of the Travel Technology Association says, “Maryland’s tourism economy will pay the price. Maryland taxpayers who travel in-state will pay for these taxes in the form of higher room rates.” Susan Jones of the Ocean City Hotel-Motel-Restaurant Association also voiced concerns over the bill: “Seventy-five percent of our members are independent hotels. This is going to impact a lot of people because the OTCs won’t raise the franchise commission rates, they’ll do it to the independents.”

Governor Hogan shared a different perspective last May: “It doesn’t cost Maryland taxpayers anything at all. The online companies are charging a fee, a tax if you will, and not remitting it to the state. The consumers are already paying the money and the OTCs are skimming it off the top” (The Dispatch).

The legislation (Chapter 3 of the Acts of 2016) took effect on February 20, 2016. Additional information.

Read more about online travel companies and sales tax.

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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.