New Transient Rentals Tax Issues  
Online reservations. The text of SB 2218 (D-Margolis), proposing important changes to the Florida transient rental tax, was just released this week. The proposal is driven in large part by the growing online reservations business, and concern that the State is getting tax only on the discounted price paid by the electronic reservation agent, rather than the full amount paid for accommodations by the customer. Local governments are very much behind the push to see that tax is paid against any “markup” or “service charge” such agents add to the underlying, discounted hotel or motel prices.

The bill would add to the description of those business privileges which trigger the tax under Florida Statutes § 212.03 “any activity in which a person offers information about the availability of accommodations to a customer, arranges for a customer’s occupancy of the accommodations, or establishes the total rental price the customer pays for the accommodations, and collects the rental payments from the customer.” Such a person is referred to as a “remarketer.” Transient rentals tax, and local option surtaxes imposed pursuant to ss. 125.01104 and 125.0108, would imposed against the “total rent” or “total consideration” paid for the rooms, including any service charges or fees added by the reservation agent, even if separately stated and even if for services provided by a third party. Mandatory fees for communications services provided to guests would not be included in the tax base, nor would other separately itemized, optional services not “intrinsic to occupancy.”

Remarketers may elect to remit taxes on a “dual-remittance system,” upon registration with the Department, remitting taxes on the amount they pay to the owner/operator to the owner/operator for remittance by that party, and remitting tax on the balance (the markup) directly. Alternatively, the remarketer may remit tax to the owner/operator, at the time it pays the discount rate, on the total rent, but must disclose to that owner/operator the total rent paid by the guest. Without disclosure, the remarketer must remit tax on 135% of the discount rate, or a lower contractually-established maximum, to the owner/operator.

The treatment, in s. 212.04(1)(d), of travel agents selling vacation packages is preserved, with the proviso that to be deemed a “travel agent” for this purpose, the seller must register as a “seller of travel” with the Department of Agriculture and Consumer Services pursuant to Florida Statutes § 559.928, or secured a letter from exemption from registration from that Department. The statutory treatment of vacation packages sold by travel agents is this: 1) a vacation package must include at least two components, such as admission, lodging, meals, etc. and admission must be on the included components; 2) the travel agent must pay tax on the purchase of taxable components; 3) the price of the package components may not be itemized by the travel agent, i.e., the sale must be solely for the aggregate vacation package price; and 4) members of the same controlled group of corporations must effect inter-company transactions on an arms’ length basis.

The Department would generally audit the new tax on markup collected by “remarketers” of accommodations, including locally-administered surtaxes, except when the remarketer does business exclusively within a single county that self-administers the tourist development tax, tourist impact tax or convention development tax. Such counties are prohibited from auditing on contingent fee basis and must conform to AICPA and other auditing standards. Amnesty provisions are included for tax on transient rentals made before July 1, 2004. These were included because a number of online reservation agents either did not believe they were constitutionally subject to Florida’s tax jurisdiction or because they considered the markup to be a non-taxable service rather than a charge for the privilege of occupying the accommodations in question.

This bill does not have a House companion and faces an uncertain future. Its sponsor is the Chair of the Senate Finance & Tax Committee and the bill was the product of discussions among various industry and government representatives, State and local. There does not, however, appear to be wholesale support for its passage among the interested and affected parties. Moreover, the House has thus far stood firmly against measures which impose new taxes or might even be characterized as doing so.

Reward points. The Department is having a workshop on April 2, 2004 concerning the sales tax treatment of reward point or similar discount programs offered by transient rental accommodations, including hotels and motels, to reward customers for their patronage. The workshop indicates a clear interest on the Department’s part, and that of local governments applying tourist development, tourist impact or convention development surtaxes, in applying tax to the price of accommodations without reduction for rewards or discounts.

Posted: 2004-04-02 00:00:00.0

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