They don’t sound like they go together, do they?  But if you’ve made a travel purchase lately, take a look at just how much you’re paying taxes and extra fees on the underlying purchase.  You may be surprised, and not pleasantly, to see that those taxes make your purchase substantially more than you originally might have thought.

Now, litigation out of Atlanta may have an additional impact on those travel taxes that we pay.  Right now, the debate is centering on various procedural issues, and for more information about these legal issues, and their nuances, check out what Tax Girl has to say about the litigation.

The underlying issue (behind all the procedural wrangling) has to do with a common re-selling practice.  In this case, a number of online travel firms, including some of the giants in the online travel industry, have adopted a practice on remitting hotel occupancy taxes that is at odds with how the city of Atlanta believes taxes should be charged and remitted.

Re-sellers buy blocks of hotel rooms (airlines seats, tickets, etc.) at a low price and package them for re-sale to us consumers at a higher price.  The difference in cost represents their profit.  The consumer is charged appropriate taxes based on our purchase price. 

Pretty basic, huh?  Well, that’s where this little dispute come in. 

The travel companies have been remitting taxes based on the price the company paid, not the price charged and paid by the consumer, claiming that the difference is a service fee/charge and NOT taxes.

It’s still going to take time for the varying legal issues to wend their way through the legal system, but rest assured that the litigation is being closely followed within the industry.  Any settlement, decision, or judgment adverse to the travel companies could very well mean an increase in “fees” to the consumer.

Yikes!  Can these taxes and fees get any higher?  Apparently, that’s a real possibility.

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Post from: Fly Away Cafe