For states hoping to boost their economies through tourism, travel taxes are a dicey issue. For the state of Maryland, which has competition galore in the form of nearby Washington, DC, a proposed travel tax is becoming a serious point of contention for tourism-related business interests.
New bills recently introduced in Maryland’s Senate and House of Delegates propose to implement tax increases that include a six percent levy on the service fees of travel agents, both online and brick-and-mortar, and on travel-related services. Detractors worry that the taxes will drive up the costs of hotel rooms and send tourists and travelers to nearby Virginia, Delaware or Washington, DC, none of which have similar travel taxes in place.
The two pieces of legislation, the Maryland Senate's S.B. 190 and companion in the House of Delegates H.B. 1065, are being pushed by their sponsors to close a tax loophole, they say. The travel industry says the tax could be catastrophic for the state, particularly when it comes to leisure travelers, who are highly price sensitive. Travel Technology Association (TTA) president Steve Shur, writing for the Baltimore Sun, cited a study that found that a one percent increase in hotel room rates can result in a two percent reduction in bookings. He also attempted to refute the notion that travel agents would be able to absorb the tax since they are able to buy hotel rooms in bulk at highly discounted rates.
“The reality is simple, and the numbers are staggering: Just last year, online travel agents helped travelers from around the world book well over one million room nights in Maryland hotels,” wrote Shur. “Of those, over 25 percent, or over 250,000 room nights, were booked by Marylanders in Maryland properties. These new taxes are not new taxes on out-of-state companies; they are taxes on Maryland travelers and Maryland small businesses.”
Neighboring Virginia recently evaluated the possibility of implementing a tax on travel services, but ultimately declined because legislators feared the impact on state tourism. Maryland’s travel and tourism groups, including the TTA and the American Society of Travel Agents (ASTA) are asking Governor Larry Hogan to veto the legislation. It’s still unclear whether Hogan plans to sign.
“As travelers begin to book travel for upcoming Memorial Day and spring break vacations, many will turn to online travel agents to dream, search, compare and book travel options,” wrote Shur. “If Annapolis passes these new taxes, and Gov. Larry Hogan signs them into law, Maryland's entire travel economy will suffer, as will the communities that rely on the business generated by travel and tourism.”
The legislation, should it pass, could also put efforts in the state to attract large youth sports tournaments to Maryland’s lower shore. The Mid-Atlantic Amateur Sports Alliance, which was founded last year, has a stated goal of establishing Wicomico County and Ocean City as a premier location for large youth amateur sporting events.
Update: On Friday, May 22, 2015, Maryland Governor Larry Hogan vetoed the travel tax companion bills from the State Senate and House of Delegates. Hogan said he was vetoing the legislation because the state comptroller’s office is embroiled in a legal battle with Travelocity over how to interpret the current law.
“The General Assembly should respect the long-standing practice of not passing legislation that would directly affect matters being litigated in a pending court case,” Governor Hogan said in a letter to Senate President Thomas V. Mike Miller Jr.