Texas is Latest State Legislature to Propose Taxing Travel Advisors
by Richard D’Ambrosio
Texas is the latest state legislature proposing a tax law that would impact travel agents. Photo: Shutterstock.com.
Texas became the latest state legislature proposing a tax law that would impact travel agents, causing the American Society of Travel Advisors (ASTA) to launch yet another grassroots lobbying campaign to protect the bank accounts of professional advisors.
In an analysis of H.B. 3579, published by the Texas State Legislature’s House Ways and Means Committee, “It has been suggested that the rights and duties of individuals who are or engage with a third party that is not a hotel for the purpose of reserving a room or space in a hotel are unclear with regard to tax calculation, collection and remittance obligations under current law.” This lack of clarity, as the state calls it, has led to a bill that will ensnare small travel agencies.
According to ASTA, the way House Bill 3579 is currently written, the state’s 6% hotel tax would be applied to travel agency “service fees and markups” connected to Texas hotel bookings. The current bill seeks to make the rule effective Jan. 1, 2020.
“While aimed at the big OTAs, the bill makes no distinction between online and offline or OTA versus brick-and-mortar agency, but simply expands the taxable amount of a Texas hotel booking to include ‘charges for reserving or booking the room or space,’” ASTA said in an email briefing Monday.
“If you live in Texas, please take two minutes out of your day to email or call your legislators through our grassroots portal below and fight this new tax. Thank you!”
The U.S. Bureau of Labor Statistics estimates that there were approximately 4,680 travel agents in the state of Texas in May 2018. It isn’t clear how many of those agents are independent owners, and how many are employees working for a travel agency.
Challenging spring
ASTA, its members, and professional advisors across the country have spent a good portion of the first half of 2018 putting out state tax fires around the country, including Connecticut, Nebraska, Utah and Washington.
Eben Peck, ASTA executive vice president, advocacy, told Travel Market Report that the proposed tax laws “were not entirely unexpected — it’s an odd-numbered year and those are years state legislatures typically consider their two-year budgets. At the same time, states are always looking for new revenue, and they think that in targeting the travel industry, they are targeting out-of-town visitors and thus ‘exporting’ their tax burden. The opposite is true — in-state businesses are the ones harmed by this discriminatory taxation.”
In Connecticut, Gov. Ned Lamont has proposed a 2020 budget that includes expanding the state’s 6.35% sales tax to personal and professional services, including “travel arrangement and reservation services.” Agents are still waiting to see if the tax would be applied to agency gross sales or only to service fees and markups charged to clients.
According to ASTA, each of Connecticut’s 236 retail travel agencies would incur an additional $7,600 in annual taxes. Connecticut agencies employ about 1,750 people.
“It has certainly been a challenge this spring, with state tax fights in multiple states,” Peck said. Rallying to ASTA’s numerous calls, members and agents have testified at hearings, placed phone calls and sent emails, and held face-to-face conversations with legislators.
“We are heartened by the response of ASTA members to these campaigns,” Peck said. “We have had multiple members testify in legislative committee hearings this spring and close to 1,800 messages have been sent through our grassroots portal.”
“Put simply, this is why you have a national trade association — we have fought these fights in state after state, and local advisors don’t have to recreate the wheel when they are targeted with tax increases. With our members’ support, we intend to keep fighting these proposals and keep travel advisors the thriving part of their states’ economies they are today,” Peck said.
In Washington state, ASTA and its members helped defeat a business tax proposal that would have resulted in a six-fold tax increase (from 0.275% to 1.5%), and was estimated to cost travel agencies in the state more than $14 million a year. The final version of the law, passed in April, kept the rate for agencies earning less than $250,000 at the 0.275% rate, while the rate for those earning more than $250,000 annually is 0.9%.
Meanwhile, agents in Utah are waiting to see if GOP lawmakers and Gov. Gary Herbert will revisit an unpopular measure that made the rounds of that state capital in March. The so-called “tax reform” bill would have imposed state sales taxes on travel agencies and other entrepreneurs who provide professional services (such as barbers).
Speaking before the House Revenue and Taxation Committee, Brian Hollien, president of Morris Murdock Travel, in Salt Lake City, testified how a tax on agents could drive some clients to purchase travel directly from airlines or hotels, or even from agencies outside of Utah.
Connecticut agency owners have made similar pleas to legislators and staff, debating that state’s proposal in Hartford.






