A Senate committee killed Wednesday a proposed change in the state’s hotel-motel tax statute that was depicted by opponents as tax increase and by proponents as closing a loophole.
Seven members of the Senate State and Local Government Committee voted against SB212, sponsored by Sen. Doug Overbey, R-Maryville. Only one, Committee Chairman Ken Yager, R-Harriman, voted for it.
The bill would apply hotel-motel taxes, collected by many city and county governments, to the price paid by the customer for a room. As things stand now, the tax is applied to the amount of money the motel owner receives for the room.
The difference between those two amounts is typically the fee charged by an online booking company, which, for example, may charge the customer $100 and remit $90 to the motel owner. A federal court decision last year interpreted the wording of current law to exempt the online booking companies’ fee from the tax.
Motels operators and local governments that benefit from the revenue – legislative staff estimates they would receive about $1.5 million in new revenue if the bill passed – support the measure. Online travel companies opposed it.
Overbey told the committee that a “piece of trash” mailer sent to constituents attacking him and other sponsors of the measure marked a new tactic in trying to influence the outcome of a vote in the General Assembly.
“This is not the way we conduct business in the state of Tennessee,” he said. “Rather than making decisions on the merits, we are reacting to mailouts during the legislative session.”
The mailer was sent by Americans For Fair Taxation, a Washington-based group headed by anti-tax crusader Grover Norquist. It accuses Overbey of raising taxes on tourism and declares this will threaten the tourist industry in Tennessee.
Overbey said it is “absolutely false” to say the bill would raise taxes. The current state hotel-motel tax law was written in the 1970s, before the advent of the Internet when there were no online booking agencies, he said. That means the bill can be argued either as updating state law to reflect or as closing a loophole.
During debate on the bill, opponents repeated the contention that the bill does amount to a tax increase. They also argued that the bill would mean Tennessee residents staying in a Tennessee motel would pay the increased tax, but out-of-state residents would not – a proposition also rejected by proponents.