ASTA to Texas – Now is the Worst Possible Time to Tax Travel Agency Services

Published on : Monday, April 19, 2021

Eben Peck, Executive Vice President for Advocacy at the American Society of Travel Advisors (ASTA), releases the following statement on behalf of its 646 Texas member companies calling on the state legislature to reject House Bill (HB) 2889, which would impose new taxes on travel services:

“Now is the worst possible time to be raising taxes on the travel agency sector. As a result of COVID-19 and the governmental response to it, the agency business has come to an almost complete halt and has remained there since March 2020. According to ASTA member surveys, average travel agency business income was down 82 percent in 2020 compared to 2019. Even factoring in the relief programs created by the federal CARES Act and successor legislation, the average travel agency has laid off close to 60 percent of its staff. Given that context, we question the wisdom of the Texas Legislature considering any form of a tax increase on this decimated industry at this moment in time.

“While targeted at the big online travel agencies (OTAs), HB 2889 makes no distinction between online and offline or OTA versus brick-and-mortar agency. The bill defines the price of a room or space in a hotel to include ‘charges for reserving or booking the room or space.’ Thus any fees travel advisors charge their customers for Texas hotel bookings would be subject to state sales and local taxes that they aren’t today.

“This is problematic because as our industry has evolved, advisors are charging service fees to their clients while relying to a lesser extent on commissions from travel suppliers. In 2019 – a year when travel agencies booked $33 billion worth of hotel rooms – 45 percent of agents charged a fee for hotel-only bookings, and 42 percent charged a fee for an air, hotel, and car package. These fees are charged for a service – saving consumers time and money by helping them navigate a travel marketplace that offers an overwhelming number of options. ASTA’s long-held position is that this revenue, already subject to existing federal and state taxes, should not be taxed a third time through taxes traditionally applied on hotel room stays.

“The travel agency business model has evolved in recent years, from one based strictly on commissions to one based on service fees as well. A plain reading of the bill text shows that these agencies, the vast majority of whom are small businesses, would be caught up in this legislation. We would oppose this bill in normal times and oppose it all the more right now, at a time when the travel industry has been brought to its knees by COVID-19. We call on the legislature to reject this measure and instead use the $16.7 billion Texas will get from the federal American Rescue Plan to provide relief for travel-reliant small businesses in the state.” ASTA has launched a grassroots campaign to oppose HB 2889.

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