June 03--SALEM -- Booking an Oregon hotel could get more expensive under a bill that would expand the state's lodging tax to include charges from travel agencies, including online firms such as Expedia and Travelocity.

Supporters say the House Bill 2656 will close a loophole exploited by online retailers, but those retailers say the bill creates a new tax on travel agents -- a group that hasn't been subject to the tax in the past.

The disagreement lies in how the online travel brokers calculate the cost of the rooms they sell to travelers.

Local governments, which rely on the proceeds from the hotel taxes to promote tourism, say the tax already applies.

Portland and other cities have taken the online travel brokers to court in an effort to secure back taxes. Rep. John Davis, R-Wilsonville, said passing a statewide law clarifying that the tax applies to online brokers saves local governments from heading to the courthouse.

"This bill averts that necessity and gets to the original intent of the statute," Davis said.

Who would pay the increased tax bill is unclear.

There's a statewide 1 percent tax on all hotel room sales, and local governments can apply their own. Adding all the local taxes together, Portland hotel rooms are taxed at 11.5 percent.

If a traveler directly books a hotel room that costs $100, the customer pays $11.50 in tax. But when the traveler books the same room online through a travel broker, the math gets fuzzy.

Hotels sell rooms wholesale to brokers such as Orbitz and Hotels.com, who then offer the rooms online at or near the retail price. The broker typically pockets the difference, and the hotel sends a tax payment to government calculated on that lower wholesale price.

Add it all up, and the state figures that counties, cities and the state are losing $6.1 million every two years to this "loophole."

Under the new bill, online brokers would have to collect the tax and send the full bill back to the government. That would eat into the profit margin of the online travel brokers, who could in turn pass the increased costs onto consumers.

Robin Reck, communications director for Travel Tech, a professional association for online travel companies, said the added cost of booking online could impact Oregon's tourism industry.

"It will reduce the number of visitors to Oregon, diminishing tax revenue," Reck said. "It will cost jobs in the travel community -- notably among hotel employees, who are among the most economically vulnerable workers -- and will be disproportionately affected by the tax."

Adding to the muddle of interests, lawmakers adopted a bill amendment drafted by House Speaker Tina Kotek, D-Portland, dedicating $650,000 of an estimated $6.1 million in new revenue to promoting rural film production in Oregon.

"I think you could argue that the increased focus on economic development strengthens the bill," said Jared Mason-Gere, a spokesman for Kotek.

But the amendment, which was quickly unveiled and adopted last week, caused some consternation among Republicans on the House Revenue Committee, who didn't like the process.

The bill is scheduled for a vote Tuesday on the House floor. But with just a few weeks left in the legislative session, it could run out of time.

"Hopefully it'll be fixed on the Senate side," Davis said. "I think they'll lose some votes on the House side because of it."

--Christian Gaston

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