New OTC Tax Remittance Requirement for NC Lodging Operators
Effective January 1, 2011
On January 1, 2011 a new law will go into effect in North Carolina that will require Online Travel Companies (OTC’s) to report and remit additional taxes to lodging operators and for lodging operators to have additional responsibilities for remittance to the state and local governments. You can find the full text of the official notice from the North Carolina Department of Revenue here (.pdf). You will be receiving an official notification from the State of North Carolina in the coming weeks, however to ensure you are better prepared for this change, NCRLA is giving you a summary in advance of this new law going into effect.
The following is a summary of what hotel and motel operators need to know in order to comply with the new legislation.
- The law applies to rooms occupied on or after January 1, 2011 (even if reservation made earlier).
- Online Travel Company must report to hotel the full sales price charged to the customer (this can be by email, fax, electronic file, as agreed between the parties).
- In addition to sending payment for the discounted room rate and the sales & occupancy tax on that rate (as they do now), OTCs must send to the hotel the amount of sales tax and local occupancy tax due on the OTC’s fee or service charge.
- To ensure proper tax collection, the OTC should provide a report to the hotel with the following information:
o Reservation number of each accommodation rental marketed by the facilitator.
o Check in and checkout dates for each rental of an accommodation marketed by the facilitator.
o Invoice number or credit card authorization, as applicable,for each accommodation rental marketed by the facilitator.
o A separate accounting of State tax, county tax by jurisdiction, and local room occupancy tax by jurisdiction, applicable to all accommodation rentals for the prior month.
- Upon receipt of these taxes from the OTC, the hotel must remit the state & local sales tax to the Department of Revenue (using the total receipts, general state rate and applicable local sales tax rate fields on the Form E-500). The hotel must also remit any occupancy tax received to the appropriate local government.
- A hotel is not liable for taxes the OTC does not pay to the hotel, but the hotel is liable and required to pay to Revenue and to the local jurisdiction all sales taxes and occupancy taxes received from the OTC.
As the voice of the lodging industry in North Carolina, NCRLA has worked closely with legislative leadership and NC DOR to insure that NC properties will incur no additional liability in complying with the new legislation. If the OTC’s do report the taxes that they should be rightfully paying, then the entire hospitality industry will benefit with an estimated $1.7 million dollars in additional occupancy taxes collected annually directed towards local tourism marketing to help put more “heads in beds”. It is also important to emphasize again that the entire NC lodging industry is free from liability if OTC taxes are not reported to your property. We are only the second state in the country where OTCs are taxed on their mark-up (New York state is the other).
NCRLA still has issues with parts of this law and we will work hard to clarify this legislation in the next legislative session beginning on January 26, 2011. Much will depend on the OTC revenue reports that the state will receive in late February, but we will be monitoring compliance of this new legislation by surveying our members in January to get an early read on OTC reporting.
Please contact NCRLA President & CEO Paul M. Stone directly with any questions you may have at 1-800-582-8750 or pauls@ncrla.biz.
NC Restaurant and Lodging Association | 6036 Six Forks Rd. | Raleigh, NC 27609 | United States
