CHICAGO – The Illinois Hotel & Lodging Association (IHLA) today announced a legislative proposal that could raise much-needed revenue for the state by closing a loophole used by third-party booking websites that allows them to pay lower taxes when travelers book rooms online.
When hotels have a surplus room inventory, they sell rooms to third-party booking websites known as Online Travel Agencies (OTA) at a discounted rate. These third-party agencies then sell those surplus rooms to guests at a marked-up rate. However, the tax collected for that room is only on the original discounted rates, which can be significantly lower than the rates at which OTAs sell the room for.
This loophole allows tens of millions of potential hotel tax dollars to go unrealized by the state.
SB 3496/HB 5144, led by the IHLA and sponsored by Sen. Cristina Castro and Rep. Marcus Evans, will close this loophole, allowing the state to collect tens of millions of dollars in additional revenue.
Closing this loophole will not only level the playing field between hotels and third-party websites, but it would also increase Illinois’ competitiveness. In the aftermath of the COVID-19 pandemic, states across the country have doubled down on their efforts to increase travel and tourism to their states. By closing this loophole, Illinois can generate more revenue for tourism promotion, which will help attract more business to the state, further bolstering Illinois’ economy and tax revenue.
“Until we close this online travel agency loophole, the state will continue to lose tens of millions of dollars each year that could be used to fund important state programs,” said Michael Jacobson, President and CEO of the Illinois Hotel & Lodging Association. “That includes tourism promotion, which is more important than ever as we seek to return Illinois tourism to pre-pandemic levels to grow our state’s economy.”
About the Illinois Hotel & Lodging Association
The Illinois & Lodging Association (IHLA) serves as the essential resource and unified voice for advancing the lodging industry across Illinois. Consisting of more than 500 hotels and their employees throughout the state, IHLA advocates the industry’s position on political, legislative and regulatory issues that have the potential to impact the success of Illinois hotels. For more information, visit https://www.illinoishotels.org/