Stay in a New York City hotel? You’ll pay a hefty taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. for the privilege: 14.75%, plus $3.50 per night. Every locality in the United States has a hotel occupancy tax, and many of them are higher than the sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. on other purchases. Why? There’s no economic rationale; it’s just a way to soak out-of-towners.
At least for most places that hefty rate only applies to the amount paid by the visitor to the hotel. But New York City, seeing an opportunity to extract a bit more from non-voting non-residents, has expanded the hotel occupancy tax to cover online hotel booking services:
Local Law 43 created a new taxable class of entities, “room remarketers,” to encompass travel intermediaries. Besides creating a new class of taxable entities, Local Law 43 further amended the hotel room occupancy tax by redefining the term “rent” and including the new terms “room remarketer,” “net rent,” and “additional rent.” In essence, as a result of the legislation, room remarketers were liable for informing the consumer of the breakdown of the hotel room occupancy tax between the rent and service fees and for the collection of the hotel room occupancy tax on the net rent and the additional rent.
Last year, we put out a paper criticizing the expansion of indefensibly high hotel occupancy taxes to new, non-hotel occupancy things. At least New York City went through the legislative process to do it; many other cities are silently just sending letters claiming that’s how they now interpret the law.
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