Legislation addressing taxation of room rentals by online travel companies moves forward

February 16, 2021

SB 1398 (Norment) addresses a long-standing issue with the collection of sales and use and lodging taxes on accommodations arranged by an intermediary, such as hotel stays booked through an online travel company.  The legislation would require sales and use and transient occupancy taxes to be calculated based on the total charges or the total price paid by the consumer for use of the accommodations.  If an online travel company charges the customer for the room and also imposes an accommodations fee, taxes must be collected on the entire amount paid, including the accommodations fee (which has not previously been subject to these taxes).  Revenues derived from imposing the state sales and use tax on the accommodations fee (after required distributions specified in current Code, including K-12 education and transportation) would be appropriated to the Virginia Tourism Authority for the provision of grants to promote tourism in Virginia.  Local governments, destination marketing organizations, or regional attractions marketing agencies could qualify for grants.  Local governments also stand to benefit through the receipt of additional sales and use and transient occupancy tax collections.  VACo supports this legislation.  The bill was reported by the House Finance Committee on February 15 and now heads to the House floor.

VACo Contact:  Katie Boyle

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