Does an online travel-booking intermediary have to collect New York hotel occupancy tax on payments consumers make through its website?

Plain-English summary

An Internet-based "Travel Company" lets consumers compare and book hotel rooms (along with flights, cruises, cars, and packages) online. For hotel bookings specifically, the consumer picks a room through Travel Company's site, enters payment information, and is charged an all-in price that Travel Company represents as including the room cost, taxes, and its own service fee. Travel Company then relays the reservation to the hotel; the hotel delivers the actual stay and later invoices Travel Company for the room, separately stating New York sales tax on the amount the hotel agreed to accept. Travel Company pays that invoice (tax included), and the hotel remits the tax to the Department. Critically, Travel Company's contract with each hotel says it isn't a partner or agent of the hotel, Travel Company holds no inventory of rooms and takes on no risk if a room doesn't get booked, and the hotel remains solely responsible for actually providing the room.

The Department worked through who counts as the taxable "occupant," who is the "operator" of the hotel, and who is legally required to collect the tax. The consumer staying in the room is the occupant; the hotel providing the room is the operator; and it's the hotel operator — not Travel Company — that the statute makes responsible for collecting and remitting the tax, because Travel Company doesn't maintain any building for lodging guests, doesn't hold any room inventory, and bears no financial risk tied to renting rooms. The amount Travel Company pays the hotel is taxable rent (already taxed via the hotel's own invoice to Travel Company), but Travel Company's mark-up isn't separately taxed as hotel rent. The Department was careful to flag that this result depends entirely on the specific relationship described: if Travel Company instead acted as the hotel's actual agent, carried its own room inventory, or effectively subsidized the hotel's rent, the answer could come out differently. The ruling also expressly didn't address whether the consumer might separately owe tax on any part of what they paid Travel Company that never got taxed by either party.

What this means for you

Online travel and booking platforms operating a "merchant model" like this one

If your business genuinely never takes on hotel-room inventory risk, never becomes the hotel's agent, and structures its hotel contracts so the hotel remains the sole provider of the room, you may not be the party legally obligated to collect New York hotel occupancy tax — that duty falls on the hotel operator instead, at least on these facts.

Hotel operators partnering with third-party booking intermediaries

Confirm your contracts require the booking intermediary to pay you (and that you separately invoice) sales tax on the amount charged for the room, since you remain the party statutorily required to collect and remit it, regardless of how the consumer's total payment is structured on the booking platform's site.

Accountants and tax professionals

Watch the caveats closely: this specific outcome turns on Travel Company holding zero room inventory, bearing zero booking-risk, and expressly disclaiming any agency relationship with the hotels. A platform that instead functions as an actual agent of the hotel, or that subsidizes hotel rent, could land on the opposite side of the "operator" question — and this opinion doesn't resolve whether a consumer might separately owe uncollected tax on any part of what they paid the booking platform.

Common questions

Q: Who is legally responsible for collecting New York hotel occupancy tax on an online-booked hotel stay?
A: The hotel operator — the entity actually providing the room — not an online booking intermediary that holds no inventory and takes no financial risk on the rooms it lists.

Q: Is the booking company's own markup/service fee taxed as hotel rent?
A: No, under these facts — only the amount the booking company pays the hotel for the room itself is taxed as rent, and that tax is already collected by the hotel from the booking company.

Q: Would the answer change if the booking company acted differently?
A: Yes — the Department expressly noted that if the booking company were instead the hotel's agent, carried its own room inventory, or subsidized the hotel's rent, the conclusions in this opinion might not apply.

Citations and references

Statutes and rules:

• Tax Law § 1101(c)(1)-(4), (6) (hotel occupancy definitions: hotel, occupancy, occupant, operator, rent)
• Tax Law § 1105(e) (hotel occupancy tax)
• Tax Law § 1131 (persons required to collect tax; customer definition)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2004.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a04_6s.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Technical Services Division

TSB-A-04(6)S
Sales Tax
March 17, 2004

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S030422D

On April 22, 2003, the Department of Taxation and Finance received a Petition for Advisory
Opinion from McDermott Will & Emery, 50 Rockefeller Plaza, New York, NY 10020. Petitioner,
McDermott Will & Emery, furnished additional information with respect to the Petition on July 31,
2003 and September 8, 2003.
The issue raised by Petitioner is whether a company (“Travel Company”) acting as an
intermediary between hotel operators and consumers to facilitate the booking of, and the payment
for, hotel accommodations is required to collect New York State sales tax on payments made by
consumers.
Petitioner submitted the following facts as the basis for this Advisory Opinion.
Travel Company is an Internet-based travel related services company that provides
consumers with access to various travel services, including airline and cruise tickets, hotel
accommodations, car rentals, and vacation packages, as an alternative resource intended to replace
the services provided by traditional travel agents.
To compare the travel offerings of multiple suppliers via the Internet, Travel Company
provides consumers with information regarding travel-related offerings that enables consumers to
make informed decisions as to which offering best suits each consumer’s needs. Travel Company
derives no revenue from the provision of these information services.
Travel Company also provides consumers with the ability to use Travel Company’s Internet­
based portal to request that Travel Company act to facilitate a consumer’s purchase of travel related
services, including hotel accommodations. Travel Company derives revenue from the provision of
these services.
Travel Company acts as an intermediary between hotel operators and consumers for the
booking of and payment for hotel accommodations. To facilitate the provision of hotel
accommodations to consumers, Travel Company enters into agreements with various hotel operators
which govern, among other things, the collection of information regarding the room
accommodations to be made available to consumers and the booking of and payment for such
accommodations by Travel Company on behalf of consumers. The contract provides that it should
not be construed as creating a partnership or agency relationship between Travel Company and the
hotel. The contract between the hotel and Travel Company also provides the amount that the hotel
is willing to accept for the rooms offered, including provisions acknowledging that applicable taxes
are to be charged by the hotel to Travel Company. Petitioner further notes that there is nothing in
the terms of the agreement which constitutes a sale or rental of rooms from the hotel to Travel
Company.

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Petitioner contends that Travel Company does not itself acquire any possessory rights with
respect to hotel accommodations, which are provided to consumers exclusively by hotel operators.
Travel Company does not have any inventory risk with respect to the hotel accommodations that are
listed by Travel Company on its Internet-based portal. The hotel operators with which Travel
Company contracts determine the number of hotel accommodations that will be made available to
Travel Company for listing on the Internet, and those accommodations are then listed by Travel
Company on a nonexclusive basis. The terms of the agreement provide that Travel Company bears
no risk for failure to book any rooms. The hotel operators may accept bookings for accommodations
from sources other than Travel Company. The hotel operator is solely responsible for the delivery
of hotel accommodations to the consumer.
A typical hotel transaction for hotel accommodations in New York State flows as follows:
1.

A consumer uses Travel Company’s Internet-based search engine and portal to select
the desired hotel accommodations using the computer-based information resources
made available by Travel Company. The hotel offerings show the total amount
which would be due to Travel Company for the hotel accommodation, which amount
is represented to include all taxes and fees.

2.

After selecting the desired hotel accommodations, the consumer provides Travel
Company with his or her personal identifying and payment information using Travel
Company’s Internet-based portal.

3.

Travel Company charges the consumer’s credit card for the hotel accommodations
selected, which includes Travel Company’s fees.

4.

Travel Company sends the consumer a confirmation by e-mail, acknowledging the
dates, price, and hotel accommodations requested by the consumer.

5.

Travel Company transmits the consumer’s request for hotel accommodations to the
operator of the hotel containing the accommodations requested by the consumer to
reserve the accommodations on behalf of the consumer.

6.

The hotel operator may confirm the consumer’s booking of accommodations to
Travel Company.

7.

Upon arrival at the hotel for check-in, the hotel operator requests identification from
the consumer and informs the consumer that the room has been arranged through
Travel Company and that no further payment is required for the hotel
accommodations.

8.

At check-in, the hotel operator will request a credit card “imprint” from the
consumer to guarantee payment of any “incidental” charges, such as charges for

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telephone usage, pay-per-view cable television, mini-bar food or beverage
consumption.
9.

The hotel operator provides hotel accommodations to the consumer as requested by
the consumer through Travel Company.

10.

At checkout, the consumer is charged by the hotel operator for any incidental
services provided by the hotel operator.

11.

After the hotel accommodations are provided by the hotel operator to the consumer,
the hotel operator invoices Travel Company for the hotel accommodations, including
separately stated New York State sales tax measured by the agreed amount charged
by the hotel operator to Travel Company.

12.

Travel Company reviews the invoice submitted by the hotel operator for the hotel
accommodations and New York State sales tax.

13.

Travel Company remits payment of the invoice submitted by hotel operator,
including New York State sales tax.

14.

The hotel operator reports and remits the New York State sales tax collected from
Travel Company to the Department of Taxation and Finance.

The amount charged by Travel Company to a consumer for facilitating the booking of and
payment for hotel accommodations and identified as being attributable to hotel accommodations will
exceed the amount invoiced by the hotel operator and paid by Travel Company for the hotel
accommodations delivered to the consumer. The amount charged by Travel Company to a
consumer for facilitating the booking of and payment for hotel accommodations is represented to
include all taxes and the fees to Travel Company to process the booking request. The amount
identified as being attributable to “taxes and service fees” is described to the consumer in a written
disclosure as a recovery charge to reimburse Travel Company for amounts paid by Travel Company
to the hotel operator for sales, use and other transaction based taxes. Service fees are additional
amounts collected by Travel Company to cover costs incurred by Travel Company in providing
travel related services.
Applicable law and regulations
Section 1101(c) of the Tax Law provides, in part:
When used in this article for the purposes of the tax imposed under subdivision (e)
of section eleven hundred five, the following terms shall mean:

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(1) Hotel. A building or portion of it which is regularly used and kept open as such
for the lodging of guests. The term “hotel” includes an apartment hotel, a motel, boarding
house or club, whether or not meals are served.
(2) Occupancy. The use or possession, or the right to the use or possession, of any
room in a hotel.
(3) Occupant. A person who, for a consideration, uses, possesses, or has the right to
use or possess, any room in a hotel under any lease, concession, permit, right of access,
license to use or other agreement, or otherwise.
(4) Operator. Any person operating a hotel.
*

*

*

(6) Rent. The consideration received for occupancy valued in money, whether
received in money or otherwise.
Section 1105(c) of the Tax Law imposes sales tax upon the receipts from every sale,
except for resale, of certain enumerated services.
Section 1105(e) of the Tax Law imposes sales tax on:
The rent for every occupancy of a room or rooms in a hotel in this state, except that
the tax shall not be imposed upon (1) a permanent resident, or (2) where the rent is not more
than at the rate of two dollars per day.
Section 1131 of the Tax Law provides, in part:
Definitions-When used in this part IV,
(1) "Persons required to collect tax" or "person required to collect any tax imposed
by this article" shall include: every vendor of tangible personal property or services; every
recipient of amusement charges; and every operator of a hotel. . . .
(2) "Customer" shall include: every purchaser of tangible personal property or
services; every patron paying or liable for the payment of any amusement charge; and every
occupant of a room or rooms in a hotel.
Opinion
Travel Company is an Internet-based travel related service company that provides consumers
with access to various travel services. Travel Company provides consumers with information

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regarding travel related offerings that enables consumers to compare the travel offerings of multiple
suppliers.
Travel Company also provides consumers with the ability to use Travel Company’s Internet­
based portal to request that Travel Company act to facilitate a consumer’s purchase of travel related
services, including hotel accommodations. Travel Company provides various hotel offerings on its
Web site from which a consumer may choose. The hotel offerings show the total amount which
would be due to Travel Company for the hotel accommodations, which amount is represented to
include all taxes and the fees to Travel Company to process the booking request. If the consumer
decides on accommodations, he or she can request Travel Company to book the accommodations.
Once the consumer has selected the desired hotel accommodations, the consumer provides Travel
Company with his or her personal identifying and payment information using Travel Company’s
Internet-based portal. Travel Company charges the consumer’s credit card for the hotel
accommodations selected, including in such charge Travel Company’s charges for taxes and service
fees. The amount paid to Travel Company is represented to the consumer as being all inclusive;
encompassing the charge for the occupancy, Travel Company’s fees for processing the request and
applicable taxes which are to be paid to the hotel operator. Travel Company transmits the
consumer’s request for hotel accommodations to the operator of the hotel. Petitioner states that
Travel Company does not itself acquire any possessory rights with respect to hotel accommodations,
which are provided to consumers exclusively by hotel operators.
Upon arrival at the hotel for check-in, the hotel will require the consumer to provide
identification and a credit card imprint, verifying his or her identity for the Travel Company booking
and to guarantee payment of incidentals. After the hotel accommodations are provided by the hotel
operator to the consumer, the hotel operator invoices Travel Company for the hotel
accommodations, including separately stated New York State sales tax computed on the charge for
accommodations. Travel Company reviews the invoice and remits payment to the hotel operator.
The hotel operator remits the New York State sales tax collected from Travel Company to the
Department of Taxation and Finance.
To provide this service, Travel Company enters into agreements with various hotels in which
the hotels agree to be included in Travel Company’s Web site. Petitioner contends that the
agreement between Travel Company and the hotel does not create a partnership or agency
relationship. The agreement between the hotel and Travel Company further establishes the amount
that the hotel is willing to accept for the rooms offered, including the applicable taxes to be charged.
Section 1105(e) of the Tax Law imposes sales tax on the rent for every occupancy of a room
or rooms in a hotel in this state. Section 1101(c) of the Tax Law provides that a hotel is a building
or a portion of it which is regularly used and kept open as such for the lodging of guests, and that
an operator is any person operating a hotel. Occupancy is the use or possession or the right to the
use or possession of any room in a hotel and rent is the consideration received for occupancy. See
section 1101(c)(2),(6) of the Tax Law. Section 1131 of the Tax Law provides that it is the operator
of a hotel that is a person required to collect tax, and that the term “customer” includes every
occupant of a room or rooms in a hotel. Under the circumstances presented, it is the consumer who

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is the occupant, it is the consumer’s use of the room that constitutes a taxable occupancy and it is
the hotel operator which provides such occupancy to the consumer. The amounts paid by Travel
Company to the hotel operator constitute rent subject to tax with respect to the occupancy provided
the consumer. The hotel operator is the person required to collect the tax based on the amount of
rent charged for such occupancy.
Travel Company itself does not maintain any buildings or portions thereof for the lodging
of guests. Travel Company neither maintains any inventory of rooms for rent nor has any financial
responsibility for the rental or failure to rent rooms listed on its Web site. Thus, it does not appear
that Travel Company is an “operator of a hotel” as such term is used in Article 28 of the Tax Law.
Further, Petitioner represents that Travel Company is not the employee, agent or representative of
any of the hotel operators whose rooms are advertised on Travel Company’s Web site. As provided
for in section 1131 of the Tax Law, the hotel operator is required to collect the tax. Therefore, since
Travel Company is not the operator of a hotel, Travel Company is not required to collect tax under
section 1131. The fee paid by Travel Company to the hotel is a charge for hotel occupancy which
is subject to tax. As provided for in section 1131 of the Tax Law, the hotel operator is required to
collect sales tax on rent received for the hotel occupancy from Travel Company when it remits
payment for such occupancy by the consumer.
This Advisory Opinion does not address whether the consumer may owe additional tax with
respect to any portion of the total amount paid by the consumer to Travel Company for occupancy
on which tax has not been collected or remitted by Travel Company or the hotel operator.
If an agency or representative relationship other than that described in this Advisory Opinion
existed between Travel Company and the hotel operators; or Travel Company and the hotels were
related such that Travel Company’s fee subsidized the hotels’ rent from occupancy; or Travel
Company maintained an inventory of hotel rooms for rent for its own account, the conclusions in
this Advisory Opinion might be different.

DATED: March 17, 2004

NOTE:

/s/
Jonathan Pessen
Tax Regulations Specialist IV
Technical Services Division

The opinions expressed in Advisory Opinions are
limited to the facts set forth therein.