North Carolina Hotels Must Collect and Remit New Taxes From Online Travel Companies Starting Jan. 1, 2011

The North Carolina General Assembly has recently enacted a new law (Senate Bill 897) that requires state sales tax and local occupancy taxes to be paid on the full "sales price" of hotel rooms, including any facilitation fees and other charges necessary to complete the sales transaction. Online travel companies (OTCs) are considered "facilitators" (entities "that contract with the provider of an accommodation and accept payment from the consumer") under the new law, which means they will be required to pay their portion of taxes on their share of the rooms' sales price as well.

More specifically, the OTCs will be required to remit directly to the hotel the taxes they collect on the discounted room rental (as they do now) plus the sales and occupancy taxes on their "facilitation fee." Upon receipt of those taxes, each individual hotel property will be responsible for: 1) remitting the state sales tax to the North Carolina Department of Revenue, and 2) remitting the occupancy tax to the local government.

This new law is effective on January 1, 2011, and applies to all hotel rooms rented by OTCs after that date. Please note that your hotels will not be held liable for any tax owed by an OTC that is not paid to you for remittance to the state and the local government. Likewise, the OTCs will not be liable for any tax sent to your hotels but not remitted by you to the state or local governments on their behalf. 

North Carolina is the first state to pass this new tax category that applies to OTCs. Accordingly, AAHOA will continue to monitor the implementation of this new law and provide information about the remittance process as it becomes available.