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OTC’s On the Hook for Bed Tax in Maryland

State and local governments are continually searching for ways to increase revenue through taxation of online companies conducting business within their state or county. One such way is by assessing a rental tax against online travel companies (“OTCs”).

OTCs typically facilitate the rental of a hotel room for vacationers and charge a fee for their services. OTCs play a significant role in the hotel rental business by providing consumers with a variety of choices based on price, location, and other factors. OTCs also provide benefits to hotels through promotion and advertising, and providing the ability for vacationers to rent a room at a lower price. Further, OTCs increase hotel occupancy rates and promote tourism thereby creating revenue for state and counties.

In addition to reaping the benefits of the increased tourism, many state and local governments impose rental tax against the amount OTCs charge transients for rental of hotel rooms. For example, Howard County, which is one of the more affluent areas of Maryland, is one such county to impose rental tax. Specifically, Maryland House of Delegates Bill 209 (“H.B. 209”) recently amended the Maryland Code relating to hotel room rentals in Howard County.

H.B. 209 states that the room rental tax applies to a fee charged by an intermediary who facilitates the rental of the room. The intermediary is defined as a person, other than a hotelkeeper, who facilitates the rental of a room and charges a transient for the rental of a room. OTCs clearly fall within the definition of a person.

The room rental tax applies to the total charge for the rental of a room, including any room rental fee but not including any tax. Interestingly, the room rental fee does not include a commission paid by a hotel to a person after facilitating the room rental.
Another interesting note is that H.B. 209 was initially vetoed by Governor Larry Hogan. The Maryland General Assembly then overturned Governor Hogan’s veto, thereby causing the bill to come into effect.

This law seems to be a direct response to OTC taxation issues throughout the country. Some states, like Florida, have court decisions which have decided that the bed taxes are only on the rate the OTC pays the hotel, not the higher rate paid to the OTC by the customer. Other states, have found exactly oppositely. Maryland seems to be attempting to prevent needless litigation by choosing to tax the higher rate paid by the customer to the intermediary, the OTC. Given the reduced litigation and the increased tax revenue enjoyed by the states and counties, I would suspect similar laws to be the trend nationwide. While the rental tax may seem like a good idea to the Maryland General Assembly, in actuality it could hurt tourism and hotel occupancy due to increased fees that OTCs and their customers must now pay.

Mr. Donnini also regularly represents cigarette, beverage, and tobacco distributors against the Division of Alcohol and Tobacco in connection with refund claims and audit defense. While at Nova Southeastern University, Shepard Broad Law Center, Mr. Donnini was the Notes and Comments Editor of Nova Law Review and Vice President of the Sports and Entertainment Law Society. Prior to attending law school at Nova in 2008, Jerry was an accountant for National Retail Properties, Inc. Mr. Donnini earned his LL.M. in Taxation at New York University. You can contact Mr. Donnini via email at or call 954-642-9390.

Mr. Taylor is a multi-state sales and use tax attorney and an associate in the law firm of Moffa, Sutton, & Donnini, P.A., based in Fort Lauderdale, Florida. Mr. Taylor’s primary practice area is multi-state sales and use tax controversy. Mr. Taylor also practices in the area of cigarette & tobacco tax and general commercial litigation. Mr. Taylor received his law degree from Nova Southeastern University, Shepard Broad Law Center. You can contact Mr. Taylor via email at or call 954-234-2884.

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