Editorials The Missouri solution July 19, 2010 Share 1 -- Missouri's new law about occupancy taxes has several things going for it, not the least of which are clarity and simplicity. The world would be a better place if all tax laws were so easy to understand. To recap: The law states that all hotel occupancy taxes imposed by taxing authorities within Missouri are to be calculated on the amount of money received by the hotel operator, not the gross amount paid by the consumer. If the consumer gives $100 to an online travel agent, and the hotel gets $60 of that, then the tax is paid on the $60. Period. That's clear and simple and it ends, at least in Missouri, the debate about how occupancy taxes are to be calculated for so-called "merchant" transactions, where an intermediary obtains inventory at a discount or wholesale rate and adds a markup. This question has drawn cities, counties, states, hotels and OTAs into protracted litigation all over the country, and we're in favor of anything that puts an end to protracted litigation all over the country. But while Missouri might have a good solution, we're not sure it's the solution. When and if consumers and the consumer press come to understand all the nuances, we can imagine a number of questions. Consider Consumer A, who asks his friendly travel agent to book one night in Missouri at a $200 rate. If the local tax is 8%, the guest pays $16 at checkout. Consumer B, meanwhile, goes to the Web and books one night in Missouri at a website offering a prepaid rate of $200, including tax. Unknown to the consumer, the website has a merchant deal with the hotel, under which the room was offered to the website for a wholesale rate of $100, to which the website added a markup. In this transaction, the hotel pays a tax of $8. Here's a question: What happens if merchant hotel bookings increase, and the local government sees that its 8% tax isn't generating as much revenue as it expected? Will it be tempted to boost the tax rate so that Consumer A will then pay $18? Here's another: What happens when watchdogs from the consumer press get hold of it and talk about saving money on taxes by avoiding travel agents and booking only OTA merchant deals? Here's another: Why should the occupancy tax paid by any consumer be dependent on his or her choice of distribution channel? We think these are troubling questions, and we think they are just troubling enough to ask the other 49 states: Can you improve on what Missouri did? This column appeared in the July 19 issue of Travel Weekly.