San Francisco has an easy fix for the wrenching hotel-tax issue: Just have the hotels make sure that the online travel agencies are paying the full amount.
Sounds simple, right?
The city sent a letter to area hotels last month stating that hotels and the online travel companies are jointly responsible for making sure that the city takes in transient occupancy tax (TOT) on the full amount that hotels guests pay to the OTCs.
The OTCs have been remitting the hotel tax on the net rate they get from hotels and not on the full retail rate that consumers pay -- and the OTCs have been sued by cities, including San Francisco, across the country.
The letter, from the San Francisco Office of the Treasurer & Tax Collector to area hotels, states:
"Under local law, the OTCs and hotels are jointly responsible for remitting the correct amount of TOT to the City. To this end, we encourage you to make arrangements with any OTC with which you do business to ensure that the TOT remitted to the City is based on the full amount paid by hotel guests to the OTCs.
"You should ensure going forward, that all OTCs with whom you may be doing business, including those listed below, remit the full amount of the TOT."
The OTCs listed -- some of which no longer are doing business -- are Expedia.com, Hotwire.com, Travelocity.com, Site59.com, Priceline.com, Travelweb.com and Lowestfare.com.
What power do the hotels really have in pressuring online travel agencies to pay more hotel taxes?
The letter puts the hotels in the precarious position of having to cease doing business with their OTC partners -- or risk enforcement action if the OTCs continue to remit occupancy tax on the net rate only.