The Wyoming Department of Revenue (DOR) has issued updated guidance on the taxability of lodging services and online travel companies (OTCs). The DOR is providing updated guidance to provide clarity in light of the state’s marketplace nexus legislation, which was enacted in 2019. Per the guidance, the DOR considers OTCs to be marketplace facilitators and hotels to be marketplace sellers. As marketplace facilitators, the OTCs are responsible for collecting and remitting sales, use and lodging taxes. In the absence of an OTC (i.e. the hotel room is booked directly with the hotel, not through an OTC), the hotel is responsible for collecting and remitting the applicable taxes.
The DOR provides guidance on when variations of a “merchant model” are used. This is when the hotel may set aside rooms to offer via an OTC. The basic scenario involves the OTC collecting all of the customer’s payment for the lodging service, including any applicable taxes. At a later time, the OTC then sends the funds back to the hotel minus a commission (sometimes referred to as a “service fee”, “facilitation fee”, or “markup”). In this case, when a lodging service is reserved entirely through an OTC, the OTC is responsible for collecting and remitting any applicable taxes to the DOR. The funds sent back to the hotel are considered subsequent to the taxing event.
The DOR also provides guidance on cases where some of the cost of the lodging service is paid to the OTC while another portion of the cost is paid to the hotel. Examples can include booking an additional night through the hotel, requesting a rollaway bed, purchasing an item from the front desk, etc. In these cases, the party responsible for reporting the sale and any applicable taxes is the party who accepts the payment. The OTC should collect taxes associated with the goods and services related to the online transaction. The additional taxable fees charged by the hotel should be directly collected by the hotel itself
If the OTC simply reserves a hotel room for the guest but the hotel takes payment and pays the OTC a commission at a later time, the sale does not meet the statutory marketplace facilitator guidelines. In this case, the hotel is responsible to report the total cost of the room and any applicable taxes. The commission paid to the OTC is not taxable to the OTC because the total cost of the lodging service was taxed by the physical hotel and is subsequent to the lodging service.
For short-term rentals of personal residences and vacation homes booked through OTCs, the OTC is still operating under the marketplace facilitator statute and is responsible for collecting and remitting any applicable taxes for these lodging services. In instances where an individual provides lodging services to transient guests outside of well-known OTC platforms, the DOR encourages the individual to contact the DOR for further guidance. The guidance states that “Providing lodging services to transient guests without a licensed OTC or marketplace facilitator will prompt licensing requirements with our office.”
The guidance states that following the 2014 Wyoming Supreme Court decision in Travelocity.com LP v. Wyoming Department of Revenue, it was common for the OTC to remit the tax on their markup while the physical hotel remitted the tax on the cost of the hotel room. While the customer paid the entire lodging cost to the OTC, tax was being reported by two vendors (the OTC and the hotel) for the same transaction. This updated guidance aligns Wyoming with its marketplace facilitator statute and eases the burden of verifying that all collected tax is reported correctly by shifting all of the tax reporting responsibility to one party.
The hotel should not report any OTC sales made on its behalf to the DOR. Once the lodging transaction occurs on an OTC marketplace, the hotel is no longer the vendor responsible for reporting these sales (as long as the hotel is not actually buying the room first). The DOR recognizes the hotel receives income from these transactions, but they are subsequent to the taxing event per language in the state’s marketplace facilitator statutes. Note that while this bulletin was issued on October 1, 2022, it states that it is effective January 1, 2023. (Lodging Services and Marketplace Facilitators, Wyoming Department of Revenue, Issued October 1, 2022, Effective January 1, 2023)