Just a New York minute!

New York City Vacation Packages (NYCVP) assures travel agents that they can book New York City packages for their clients without concern for the new Hotel Room Occupancy Tax for Room Remarketers law that went into effect on September 1.

“Our company is in compliance with regulations issued by the City regarding the application of the tax to room remarketers,” says Joel Cohen, NYCVP’s Vice President. “Our pricing includes all taxes on all features of the products we sell and we intend to remit the tax to the City as required by the law.

“Our recommendation to travel agents is stated on our website nyctrip.com: ‘…travel agents who book fully commissionable vacation packages through NYCVP should not be affected by the tax with respect to those packages so long as travel agents charge clients the NYCVP-quoted price for all FIT (non-group) bookings and do not add a service fee to the booking,’ Cohen explained. “For almost all of the FIT bookings that we handle, the travel agent does not have to do anything further regarding the tax, does not have to register with the City, does not have to remit any additional tax, and can simply collect his/her commission in full compliance.”

Although NYCVP disagrees strongly with the City’s new legislation, the company will comply with the law and has received their Certificate of Registration.  NYCVP, as a member of the ASTA TOP program and NTA, is joining both those organizations in urging the City to reconsider the tax as damaging to potential tourism business.

“Regardless of our position on the legislation and its very confusing procedures,” Cohen continued, “we feel it’s important for travel agents to understand that they do not need to register and do not need to remit tax to New York City if they purchase an FIT vacation package through NYCVP. We have included taxes on the entire retail cost of the hotel room so agents and customers are protected.”

New York City Vacation Packages is the largest independent tour company in the US selling New York City exclusively. The company can be contacted by phone at 877 NYC-TRiP or on the web at nyctrip.com.

While we agree in principle with ASTA’s position on the newly-implemented Hotel Room Occupancy Tax for Room Remarketers, we disagree with their interpretation of the law as it applies to travel retailers. In the ASTA Member Alert of September 3, 2009 they state

Under the new tax computation procedures, whenever a travel retailer purchases New York City vacation packages from other travel sellers and then sells the packages to their own clients without knowing the cost of the hotel component of the package, it must use the following method of collecting and remitting taxes - “a 15-percent markup on 70 percent of the average retail rate of a similar room … to compute additional rent.” 

That statement is correct in certain circumstances, but is misleading to travel agents who might book their New York City vacation packages with reputable tour companies who have registered with the City and who have already made proper arrangements to pay the additional markup tax. New York City Vacation Packages (NYCVP), an ASTA TOP member, is one such company who has already included the markup tax in the price quoted to the travel agent, and who will remit the tax to the City as specified in the City’s Statement of Audit Procedures.

Travel agents who book their clients’ vacation with NYCVP do not need to be concerned about the new tax law, so long as they charge clients the NYCVP-quoted commissionable price for all FIT (non-group) bookings and do not add a service fee to the booking. We further agree with ASTA's position that the interpretation of the tax is vague, confusing and generally unacceptable, but we are concerned that ASTA's interpretation will lead to even more confusion on the part of travel agents. We request that ASTA clarify the Alert so that travel agents can properly service their New York City-bound clients.

UPDATE 9/4/09 2pm: ASTA has informed us that they are changing the wording on their Alert based upon our recommendation. Thank you ASTA.

In June, 2008, when New York City was celebrating another record year for tourism into the City, Mayor Michael Bloomberg was quoted in the New York Sun, "We don’t want to have more taxes that would hurt the economic well-being of this city. For example, a tax on tourists is a terrible idea. We desperately need tourists from around the world. … Killing the golden goose is not a smart thing to do."

In the summer of 2009, when New York City tourism was declining for the first time in many years, the Mayor and city council made not one, but two announcements that directly conflicted with the Mayor’s “Killing the golden goose” statement. They asked, and were granted, permission from the State of New York to increase the sales tax one-half percent, effective August 1. Then they amended the City’s Hotel Occupancy Tax to require travel resellers to remit tax directly to the City on their markup, service fees and booking fees.

The upshot of these actions is pretty easy to determine: increased hotel cost paid by consumers, either upfront or at checkout.

The secondary effect, yet undetermined, is how travel agency commissions will be treated. If agency commissions are taxed too, as some believe they will be given the vague wording in the law’s recent amendment, then travel agents will be disinclined to sell New York City as a destination. Given that the City is the top selling destination in the US, and travel agents account for a significant portion of sales, the result could be catastrophic.

Paul Ruden, senior vice president for legal and industry affairs for the American Society of Travel Agents (ASTA) was quoted in the July 27 issue of Travel Weekly:

     "If we’re talking about a travel agent who earns a commission on a hotel room and [the commission is] going to get taxed on occupancy, [then] the same commission is being taxed two times, as income and as a hotel occupancy." He added that the same was true for any service fees or mark-ups agents apply to a New York hotel booking to generate income.

     "Our view of the occupancy tax ordinances is that they’re written in a way that captures things that were not intended," Ruden said. They are written, he added, by "people who don’t know about the industry who just want more money."

        And where would the “more money” come from? Obviously the consumer.

      Joel Cohen, Vice President for nyctrip.com, a tour company promoting tourism to the City, does not agree with the logic behind the City’s recent announcements. “Demand is down, so New York City decides, basically, to raise the price for tourists. Is that really wise? It’s Economics 1-0-uh oh. Then to compound the issue the City wants to make it more complicated and more expensive for a tour company, an online travel agency, or indeed anyone selling New York, to generate tourist business.

     “What happens when demand for New York City falls even more? Will the City continue to ask for increased contributions from travelers?” Cohen continued. “The long-range impact of their recent actions could mean a significant loss of travel-selling partners who have contributed greatly to the past success of the destination.”

      Instead, Cohen suggests, the City should invest more in encouraging tourists to take advantage of the benefits the City offers. “There are travel partners, like nyctrip.com, throughout the US who, with a little bit of help from the City, could provide a huge return. But instead of supporting their promotional partners with marketing dollars, they tax them.”

      Business travelers, too, are concerned. In a letter to Mayor Bloomberg the Business Travel Coalition stated in part, “The legal obligations, accounting complexities and audit and compliance requirements alone are overwhelming to contemplate. Add higher taxes to that and you have a recipe for economic disaster for NYC as a business travel and meetings destination. Organizations worldwide will drive business to other cities because of this new tax. NYC hotels will lose existing business during an unparalleled downturn in business travel demand; the city will lose jobs and revenues."

      With the amended law scheduled to go into effect on September 1, it is unknown how hotel resellers will react. As of August 1, the City’s finance department has yet to determine the regulations and procedures necessary to assure compliance.