Senate bill forces online travel companies to pay full bed tax

If Sen. Dick Barrett’s bill passes, it allocates the lodging facility tax collected from the online travel companies to the state’s general fund. Proponents of the bill say it would be a revenue producer for the state. (Freddy Monares/UM Legislative News Service)

By Freddy Monares/UM Legislative News Service

HELENA – A bill in the Montana Senate would reverse a 2015 Montana Supreme Court decision that allowed online travel companies, like Expedia and hotels.com, to avoid a part of the state’s bed tax.

Senate Bill 373 would make online travel companies pay a 7 percent tax, which is comprised of both a sales tax and a lodging facility use tax.

Tuesday was the Senate Taxation Committee’s first hearing of testimony on the bill.

In 2015, the high court ruled that the online services only had to pay the three percent sales tax since the companies were not owners or operators.

“That language was inconsistent with the real policy intent of the Legislature,” said Sen. Dick Barrett, D-Missoula, who is carrying the bill.

If the bill passes, it allocates the lodging facility tax collected from the online travel companies to the state’s general fund. Proponents of the bill say it would be a revenue producer for the state.

Mike Kadas, Director of the state Department of Revenue, supported the bill.

“Because of the budget situation this year, we changed so that this new money would actually go to the general fund,” Kadas said.

But opponents of the bill say the estimated revenue might not happen.

Steve Shur, President of the Travel Technology Association, opposed the bill.

“These taxes also provide a disincentive for travel agents to steer travelers to Montana,” Shur said.

He said studies have shown that slight increases in prices for hotels results in decreases in bookings.

“By imposing bed taxes on the fees of travel agents would be diminished by the lost revenue from having fewer visitors,” Shur said.

Freddy Monares is a reporter with the UM Legislative News Service, a partnership of the University of Montana School of Journalism, the Montana Broadcasters Association and the Greater Montana Foundation.