ASTA Battles State Plans to Tax Travel Agent Sales

Initiatives to impose state sales taxes on travel agency gross receipts are gaining momentum across the country, making the issue one of ASTA’s top advocacy concerns in coming months.

“We’re seeing proposals to hit agencies with a 5% tax on gross receipts, which would be devastating,” Eben Peck, ASTA’s vice president of government affairs, told Travel Market Report.

The state sales tax proposals were top of mind for Peck and his colleague Paul Ruden, ASTA’s senior vice president-legal and industry affairs, this week when Travel Market Report asked them to outline ASTA’s advocacy agenda at the federal and state level.

Among ASTA’s other legislative and regulatory priorities are upcoming decisions from the U.S. Department of Transportation (DOT) on airline rules and IATA’s New Distribution Capability plan, they said.

Sales taxes on services
Imposing state sales taxes on services, including travel agency receipts, is “a trend that is catching on, as states look at new ways to address their budget shortfalls,” Peck said.

In Minnesota, a proposal from Gov. Mark Dayton would “broaden the base” of an existing state sales tax, by including services, as opposed to just tangible goods, while reducing the tax rate from 8.5% to 5.5%.

A bill based on the governor’s proposal and introduced by the legislature on Feb. 19 would require travel agencies to pay 5.5% of their gross sales in tax on an annual basis.

Travel agents, among them Gloria Stock Mickelson, chair of ASTA’s Upper Midwest Chapter, testified against the bill before the legislature on Wednesday.

Louisiana eyes tax too
In Ohio, a similar proposal calling for a 5% tax on services was issued this month by Gov. John Kasich. The proposal is currently being considered by Ohio’s General Assembly. As in Minnesota, ASTA is calling on Ohio agents to voice their opposition to the legislators.

Peck noted that while “travel agencies dodged a bullet” in Virginia, where a services tax bill was defeated last year, the issue is likely to crop up in additional states. “We think that Louisiana is very likely to go down this route,” he said.

Upcoming DOT decisions
Two upcoming decisions from DOT, one on transparency surrounding airline ancillary fees and the other on IATA’s New Distribution Capability plan, are ASTA’s major concerns at the federal level, according to Ruden. (See: Agents Groups in Uproar over IATA Distribution Plan, Oct. 22, 2012 and Full Disclosure: Big Impact on Agents From Upcoming DOT Rules, Aug. 15, 2011)

In May, the DOT is expected to issue a Notice of Proposed Rule Making concerning a third round of airline passenger protections. Among issues to be addressed are whether airlines should be required to include data on ancillary fees in GDSs and whether travel agents should be required to disclose to consumers any “incentive payments” they receive when selling air travel.

Following the notification, there will be a 90-day period in which DOT will hear commentary on the proposals, according to Ruden. ASTA has already been active in urging ancillary fee disclosure, persuading several members of Congress to weigh in with the DOT with letters and face-to-face meetings.

Ancillary issue is ‘crucial’
“The dynamic access to ancillary fees is most crucial as it addresses what agents have to sell,” Ruden said.

“As these fees proliferate and account for a bigger piece of the total costs, agents have to be able to inform their customers about the cost and what’s available. They need to do it on a comparative basis, so consumers understand what choices they have.”

As for any new rule regarding travel agent disclosures on incentives, Ruden said ASTA will address the issue when it sees what DOT proposes.

“We don’t see any justification for making agents disclose incentive payments. It’s not evident that they are doing anything to the disadvantage of the traveler,” he said.

IATA’s distribution plan
Also on ASTA’s list of advocacy priorities this year is IATA’s New Distribution Capability plan (NDC). ASTA strongly objects to the plan, Ruden said.

When IATA files NDC with the DOT, “we will be there in full force,” he said. “We don’t know when it will move forward. Why IATA has taken so long to file it is a mystery.”

ASTA’s main argument is that “there is no justification for the global airline industry to impose a single model on the third-party distribution systems, which is the essence of NDC,” Ruden said.

Airport security
Expediting airport security for frequent travelers continues to be a major issue for ASTA, according to Peck.

Currently travelers can enroll for pre-check clearance through frequent flyer programs or the government’s Global Entry Trusted Traveler program, but the process needs to be made more accessible and expanded to more airports, he said.

“We would like it to be possible for travelers to apply directly to TSA,” he said. “Pre-check is a wonderful thing for business and leisure travelers alike, but right now it’s too difficult and confusing to get into the program. It needs to be easier.”