If a car dealer buys a new car and then sells it to you, taxes are based on the retail price that you paid for the car.
If a travel website buys a hotel room deal and then rents the room to you, taxes often are paid on the lower wholesale price -- the rate the website operator initially paid for the room.
It doesn't seem logical, and it doesn't seem fair.
That's the point suburbs like Arlington Heights, Des Plaines, Oak Brook Terrace, Warrenville and Willowbrook are making in joining a class-action suit aimed at taxing the rooms at the rate the consumer pays. Other towns are expected to join the suit.
Rosemont, home to dozens of hotels, won a similar case in 2011 when a federal judge ruled the village should collect its 7 percent hotel tax on the full amount paid by the consumer.
For one room, the difference in taxes might be a few bucks. But for a town with a lot of hotels, the difference could add up to big money. Arlington Heights, which has a 5 percent hotel tax, estimates taxing hotel rooms based on what consumers pay could add $60,000 to $120,000 a year to the city's coffers, Daily Herald staff writer Melissa Silverberg reported this week.
"It's a significant amount of money. The websites pay wholesale for rooms and then sell them at a retail rate, and we aren't getting money from the websites in hotel tax," Arlington Heights finance director Tom Kuehne said.
Would it cost you more? Maybe, if efforts like these spurred widespread change in how online sites price hotel stays. Travel websites wouldn't have to pass the extra expense on to consumers, but it's entirely possible they would.
And remember, this isn't a new tax. It's just that online businesses have found a way to avoid paying hotel taxes in full, while our local municipalities continue to bear the responsibility of extra police, fire protection and infrastructure that go along with having hotels in town.
And as towns get squeezed by rising pension and other obligations on top of cuts in federal and state funding, they increasingly -- and understandably -- need to pursue all the money that's due to them.
In many ways, the battle over hotel taxes mirrors the arguments over sales taxes on Internet transactions.
We support requiring online retailers to apply state sales taxes to purchases in the belief the health of our communities -- not only their finances, but the very existence of their bricks and mortar stores that need to be able to compete -- depends on fairly applying an existing tax no matter where the purchase occurs.
The retail and travel world has been changing for some time. No one needs to walk into a store or phone a hotel to make a purchase. But they're making a purchase, just the same.
It's time the methods of applying appropriate and existing taxes catch up to the 2013 reality.Copyright © 2014 Paddock Publications, Inc. All rights reserved.