Visual Matrix makes it easier for hotels using its Property Management System to adapt to new U.S. state tax laws for OTAs 

March 20, 2023

In 2018, following a landmark U.S. Supreme Court case (South Dakota v. Wayfair), many U.S. states enacted marketplace facilitator laws. The laws shift the burden of collecting and remitting sales tax from the individual seller of a product to the marketplace facilitator, the e-commerce site where the product is being sold. Think Amazon and eBay, or in the case of hotel rooms, Expedia and Hotels.com.

Marketplace facilitator laws were not intended for the sale of hotel rooms and other types of lodging, but more states are extending the laws to OTAs (Online Travel Agencies) as well as hosting platforms that focus on short-term rentals of residential properties.

The situation is made more complex because marketplace facilitator laws vary by state and local jurisdictions may have additional taxes that need to be collected and remitted to local authorities, like a hotel occupancy tax. On top of that, some states allow OTAs to opt out of market facilitator laws since their sellers (hotels) are brick-and-mortar businesses that are already registered with the state. 

How Marketplace Facilitator Laws Affect Your Hotel

If you’re in a state where marketplace facilitator laws apply to OTAs, you’ll need to integrate every prepaid reservation you receive as tax-exempt, so you don’t use sales tax on those reservations because the OTA has already collected it on their end. 

Your OTAs should tell you if they’re subject to marketplace facilitator laws in your state. You can also visit this site that lists marketplace facilitator laws by state. 

If you’re using the Visual Matrix Property Management System (PMS), we recommend you take action now to set up and mark online rate/discount codes as tax-exempt to ensure accurate bookkeeping. 

For our Best Western clients using our cloud software, go here for the step-by-step process for setting up tax-exempt online rate/discount codes through your Channel Manager interface.

For all of our other clients, use our Chat feature or submit a ticket for assistance. When you contact us, include the list of rate codes involved and the taxes to exempt, and we’ll get you set up in no time.  

VM Knowledge Base Quick Links:

  • Setup an Online Rate/Discount Code Tax Exempt Go.
  • Setup an Online Rate/Discount Code Tax Exempt (Best Western) (Cloud) Go.
  • Map a new rate/discount code Go.
  • Night Audit Tax Exempt Report (Cloud) Go.
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