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Taxing Hotel Room Sales by Online Travel Companies: What Should Be the Appropriate Tax Base?

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  • James Mak

    (UHERO, University of Hawaii at Manoa)

Abstract

This essay examines the current dispute between state and local governments in the U.S. and online travel companies (OTCs) over the appropriate hotel occupancy tax base for online hotel bookings. It addresses the question of what should be the appropriate tax base in designing hotel occupancy tax statutes. It argues that the appropriate tax base should be the full rental prices of the hotel rooms paid by consumers inclusive of online travel company markups and service fees and not the discounted net rates paid by the OTCs to their hotel suppliers.

Suggested Citation

  • James Mak, 2012. "Taxing Hotel Room Sales by Online Travel Companies: What Should Be the Appropriate Tax Base?," Working Papers 2012-5R, University of Hawaii Economic Research Organization, University of Hawaii at Manoa, revised Aug 2012.
    • Handle: RePEc:hae:wpaper:2012-5r
    as

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    File URL: https://uhero.hawaii.edu/wp-content/uploads/2019/08/WP_2012-5R.pdf
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    References listed on IDEAS

    as
    1. Bonham, Carl & Fujii, Edwin & Im, Eric & Mak, James, 1992. "The Impact of the Hotel Room Tax: An Interrupted Time Series Approach," National Tax Journal, National Tax Association;National Tax Journal, vol. 45(4), pages 433-441, December.
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    4. Glenn Ellison & Sara Fisher Ellison, 2009. "Search, Obfuscation, and Price Elasticities on the Internet," Econometrica, Econometric Society, vol. 77(2), pages 427-452, March.
    5. Behrens, Kristian & Hamilton, Jonathan H. & Ottaviano, Gianmarco I.P. & Thisse, Jacques-François, 2009. "Commodity tax competition and industry location under the destination and the origin principle," Regional Science and Urban Economics, Elsevier, vol. 39(4), pages 422-433, July.
    6. George R. Zodrow, 2019. "Optimal Commodity Taxation of Traditional and Electronic Commerce," World Scientific Book Chapters, in: George R Zodrow (ed.), TAXATION IN THEORY AND PRACTICE Selected Essays of George R. Zodrow, chapter 9, pages 239-276, World Scientific Publishing Co. Pte. Ltd..
    7. Larry Dwyer & Peter Forsyth (ed.), 2006. "International Handbook on the Economics of Tourism," Books, Edward Elgar Publishing, number 2827.
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    More about this item

    Keywords

    Hotel Occupancy Tax; Online Travel Companies; Merchant Model;
    All these keywords.

    JEL classification:

    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water

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