Companies that buy up blocks of hotel rooms and then sell them for a profit have stepped up their efforts to prevent the imposition of city and state hotel occupancy taxes on the retail price of the room billed to online consumers. A federal court decision in November of 2009 found that such companies should have been collecting city hotel occupancy taxes in Texas on the full retail price of the room. Now the companies are fighting back against that decision, and others like it, on multiple fronts.

First, they’ve recently formed a lobbying group called and are using the group to lash out against a nationwide tide of court decisions finding that the OTCs should have been collecting full hotel taxes all along.

Second, the companies have doubled their efforts to get Congress to overturn state hotel tax laws. The highest priority of the lobbying groups is passage of the so-called Internet Tax Fairness Act (ITTFA), which would prevent the imposition of hotel taxes on the full purchase price to the end user for rooms booked over the Internet, among other things. It is expected that the ITTFA could soon be offered as a Senate amendment to the Small Business Jobs and Credit Act of 2010 (H.R. 5297).

Finally, the OTCs and their “astro-turf” lobbying organizations have resorted to blatantly erroneous rhetoric about their losses in court cases. They blame cities for the “patchwork” of “regulations” that now exist because of state-by-state litigation of the issue, when in fact it was the OTCs wide-spread tax avoidance that gave rise to the need for litigation in the first place. The statutes and ordinances were clear, in other words, but OTCs simply chose not to comply. And here’s a quote from a Web site sponsored by one of these organizations: “Congress must step in and prevent localities from increasing my travel costs by taxing the services provided by online travel companies who facilitate hotel bookings! In a time when the government should be helping to support demand-creating businesses in the tourism industry, consumers don't need yet another tax that makes travel more expensive.” Incredibly, the OTCs are somehow trying to recast their losses in court as a “tax increase” or a “new tax.” This is incredibly misleading.

City officials should not hesitate to discuss this issue with their members of Congress, and to do so quickly.

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Texas Municipal League.

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