New York City hotel service fee tax update


ASTA today issued a clarification to a portion of last week’s member alert on the recently-implemented New York City hotel service fee tax. The revised portion of the alert followds.

Under the new tax computation procedures, whenever a travel retailer purchases New York City vacation packages from other travel sellers and then sells the packages to their own clients without knowing the cost of the hotel component of the package, there are some cases in which it must use the following method of collecting and remitting taxes – “a 15-percent markup on 70 percent of the average retail rate of a similar room … to compute additional rent.” However, this is only the case if the agent is adding an additional markup or service fee.

If, for example, the packager of the tour has already made proper arrangements to pay the additional markup tax, which is already included in the marked-up price quoted to a travel agent compensated solely by commission, and the tour operator will remit the tax to the city as specified in the City’s Statement of Audit Procedures, then travel agents retailing that package do not need to be concerned about the new tax law. ASTA anticipates that tour companies will make clear to agents that the markup taxes are included in the quoted price and need not be paid by the retailer. If you do not have evidence of that practice, you must ask and retain the evidence in writing so later audits by New York City can be answered.

Members should be aware that ASTA is in talks with the city of New York and will keep members updated on any new information as it comes to light.