States Try To Squeeze Taxes Out Of Online Travel Sites

For years, Expedia, Orbitz and the like have avoided paying most state sales taxes because their businesses aren’t physically located in those states. But now legislatures and courts are cracking down on online retailers. Will that mean higher costs for travelers?

Online retailers have started running into problems in a number of states in the last few months as courts and state legislatures try to squeeze sales taxes out of them. So far, only five states (Connecticut, Illinois, New York, North Carolina and Rhode Island) require Internet retailers to collect sales tax. But according to Forbes, 12 other states are considering it.

Some sales taxes are paid when a traveler books through an online travel site, but not as much tax is collected as when travelers book directly through a hotel. When you use a travel site, a service charge is taken out of the total amount paid, and taxes are generally assessed on the rate the hotel gets from that travel site, not on the total amount. So states have been largely missing out on a small percentage of those taxes thanks those service fees and middlemen.

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