Mark Pestronk
Q: Our agency has had numerous inquiries recently from established travel agencies that are considering becoming independent contractors (ICs) of our agency. One of the questions that we get quite often is whether they would be exempt from having to register under the state seller of travel laws. In a June 2019 column, "ICs can be exempt from seller of travel laws," you covered just one of the criteria for exemption. Would you please review all the other criteria?
A: California, Florida and Washington state exempt ICs who meet certain criteria. Each state's criteria are different. The other state with a seller of travel law, Hawaii, has no exemptions.
I can't quote and explain all the criteria in the space of this column, so I have done so on a new webpage: www.pestronk.com/exemptions. However, here is a very basic, paraphrased description for each state:
In California, to be exempt, the IC must:
- Do business only as a sole proprietor or one-owner corporation or LLC.
- Have a written contract with a seller registered in California.
- Refrain from selling any travel except through a registered seller.
- Refrain from receiving service fees paid by the traveler.
- Refrain from accepting checks payable to them or processing any credit card charges using their own merchant accounts.
- Disclose to the client that the IC is acting on behalf of a registered seller of travel and provide the name, address, telephone number and registration number of the registered seller on whose behalf the person is acting.
In Florida, to be exempt, the IC must:
- Have a written contract with a registered seller that is in compliance with the law.
- Refrain from receiving fees directly from clients.
- Refrain from having the ability to issue documents.
Unlike California and Washington, exempt ICs must file an annual affidavit and pay a $50 annual fee.
In Washington, to be exempt, the IC must:
- Have a contract with a registered seller of travel.
- Conduct business only in the name of and under the registration of the registered seller of travel.
- Collect money only in the name of the registered seller of travel and have it processed only by the registered seller of travel.
It is important to remember that these laws apply to ICs who sell to clients in the named states, regardless of where the ICs are located. So, an IC working in Maine who sells to Californians must meet the California criteria, including having a registered seller under that law.
My guess is that many ICs do not meet these criteria, and many others operate in a gray area where they may or may not meet them, depending on how you interpret the laws. None of the laws is a model of clarity.
All three states require registered sellers to list all their ICs annually, with no distinction as to whether they meet the criteria, so some registered sellers probably automatically but erroneously assume that everyone listed is exempt.
CORRECTED: This report was updated on May 27 to remove a reference to an Iowa seller of travel law. Iowa no longer has a seller of travel law.