HomeMy WebLinkAbout2010-07-13; City Council; 20301; ONLINE TRAVEL COMPANIES TAXESCITY OF CARLSBAD - AGENDA BILL
AB#
MTG.
DEPT.
20,301
7/13/10
CA
OPPOSITION OF ONLINE TRAVEL
COMPANIES EFFORTS SEEKING
FEDERAL LEGISLATION THAT WOULD
LIMIT STATE AND LOCAL
GOVERNMENTS ABILITY TO COLLECT
TAXES
DEPT. DIRECTOR
CITY ATTORNEY
CITY MANAGER
RECOMMENDED ACTION:
Adopt Resolution No. 2010-183 opposing the Bill under consideration by the Senate which
would limit state and local government's ability to collect transient occupancy taxes ("TOT's")
from Online Travel Companies ("OTC's") by not only exempting OTC's from remitting taxes on
the full retail price for the room but may also exempt the payment of any hotel occupancy tax on
rooms booked by OTC's.
ITEM EXPLANATION:
Online travel companies such as Expedia, Priceline, Travelocity Orbitz and Hotels.com are
collecting state and local government occupancy taxes but only remitting a fraction of those
taxes to state and local government. They charge the consumer taxes based on the full retail
rate and remit to state and local government the taxes based on the discounted rate of the
room (rate paid to hotel) and pocket the difference.
The OTC's are now working hard to have their tax exemption provision included in the Small
Business Tax Bill when it is taken up in Senate. The amendment to the Small Business Tax
Bill, should it pass, would exempt all hotel occupancy tax claims initiated or filed after the
effective date of the amendment. Additionally, the wording of the provision may be open to a
broader interpretation that may make it difficult to collect any occupancy taxes from the OTC's.
The U.S. Conference of Mayors urges cities to pass resolutions opposing any legislation that
would grant OTC's a tax exemption that terminates existing obligations, or bars future
obligations to pay hotel taxes to state and local governments, or otherwise restrict legal actions
filed by them.
FISCAL IMPACT:
TOT's represent approximately 11% of Carlsbad's General Fund or about $12 million which
could be placed in jeopardy if this bill is enacted into law.
DEPARTMENT CONTACT: Ron Ball 760-434-2891 ron.ball@.carlsbadca.gov
FOR CITY CLERKS USE ONLY.
COUNCIL ACTION: APPROVED
DENIED
CONTINUED
WITHDRAWN
AMENDED
Xnnnn
CONTINUED TO DATE SPECIFIC
CONTINUED TO DATE UNKNOWN
RETURNED TO STAFF
OTHER -SEE MINUTES
D
D
D
D
Page 2
ENVIRONMENTAL IMPACT:
This action does not constitute a "project" and is not subject to review under the California
Environmental Quality Act regulation 15060(c) (3).
EXHIBITS:
1. Resolution No. 2010-183
1 RESOLUTION NO. 2010-183
2 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
CARLSBAD, CALIFORNIA, OPPOSING ONLINE TRAVEL
3 COMPANIES ("OTCs") EFFORTS SEEKING FEDERAL
4 LEGISLATION THAT WOULD LIMIT STATE AND LOCAL
GOVERNMENTS ABILITY TO COLLECT TAXES
5
WHEREAS, many hotels contract with online travel companies ("OTCs") in
6
order to increase the occupancy of their hotel rooms, and provide OTCs a discounted
7
rate for each room they book online; and8
o WHEREAS, OTCs charge consumers the full retail rate of a room and
10 collect taxes based on that retail rate and typically charge consumers a processing fee;
11 and
12 WHEREAS, OTCs collect taxes based on the full retail rate that the
13 consumer pays for the room, but they only remit to state and local governments hotel
14 occupancy taxes based on the discounted rate of the room and pocket the difference;
and
16
WHEREAS, the minimum annual revenue loss that state and local
17
governments are estimated to realize from OTCs will exceed $1 billion and increase to18
$8.5 billion if hotels, in order to avoid being left in a competitively disadvantaged
2Q position, adopt the OTCs' business model of booking rooms online and pocketing a
21 portion of local revenues; and
22 WHEREAS, many local governments have filed lawsuits and initiated other
23 collection actions against OTCs to compel them to submit taxes to local governments
based on the full retail room rate charged to the consumer, and more than 40 lawsuits
25 are pending nationwide along with an unknown number of administrative collection
26
efforts ; and
27
28
1 WHEREAS, OTCs are seeking federal legislation that would limit state and
2 local governments ability to collect taxes from OTCs by not only exempting OTCs from
•j remitting taxes based on the full retail price of a room but may also exempt the payment
4 of any hotel occupancy tax on rooms booked by OTCs.
5
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of
6
Carlsbad, California, as follows:
7
0 1. That the above recitations are true and correct.o
9 2. That the City Council of the City of Carlsbad urges our congressional
representatives to oppose any legislation that would grant OTCs a tax exemption that
10 terminates existing obligations, or bars future obligations to pay hotel taxes to state and
local governments, or otherwise restrict legal actions filed by them.
11 3. That the City Clerk is directed to send a copy of this resolution to U.S.
12 Senators Dianne Feinstein and Barbara Boxer and Congressman Brian Bilbray.
13 //
14 //
15 //
16 „
17 //
18
19
20
21
22 "
23 "
24 //
25 //
26 //
27
28
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council
of the City of Carlsbad on the 13th day of July, 2010, by the following vote to wit:
AYES: Council Members Lewis, Kulchin, Hall, Packard and Blackburn.
NOES: None.
ABSENT: None.
ATTEST:
XJ> AjLAl^J
l/ORRA\NE M. WOOD, Gfity Clej)<
(SEALV ^
City of Carlsbad
Office of the Mayor
July 14,2010
The Honorable Barbara Boxer
United States Senate
112 Hart Senate Office Building
Washington, D.C. 20510
Re: Opposition to Potential Legislation Undermining Local TOT Collection
Dear Senator Boxer:
On behalf of the City of Carlsbad, we request your strong opposition to any legislation that
would undermine the ability of our city to fully collect local transient occupancy tax (TOT) from
online travel company sales.
In their latest attempt to avoid paying cities the full amount of TOT owed to them, the corporate
association of online travel companies launched a misleading website at www.travelersfirst.org,
which encourages travelers to take action against proposed increases on fees and taxes. The
website misleads travelers into believing that local governments are attempting to levy additional
taxes on travelers and encourages them to send a form to their Congressman or Senator. In
reality, the online hotel companies are retaining tax dollars that are owed to local agencies, and
are lobbying hard to get pre-emptive legislation to protect themselves against ongoing lawsuits.
This proposed action would not be fair to local governments throughout the country and
particularly to the City of Carlsbad. These funds are very important to our community and
support vital local services. In these challenging budget times, these revenues are even more
critical. TOT has been a part of Carlsbad's history for the last half-century and they were
increased by the citizens in two steps at the ballot box within the last decade or so. All visitors
booking directly with Carlsbad hotels contribute their share of TOT in the City of Carlsbad and it
would not be fair to allow online travel companies to keep taxes that were collected on behalf of
the City. Fairness is the hallmark of any proposed legislation and any legislation that attempts to
mislead the public and keep taxes which rightfully belong to the communities in which they are
collected deserves to be defeated if and when it comes before you.
12OO Carlsbad Village Drive • Carlsbad, CA 92OO8-1949 • (76O) 434-283O - FAX (76O) 72O-9461