Measure TC on the June 2nd ballot aims to require online travel companies to pay hotel taxes based on the markup price they charge customers, potentially generating $5 million annually for city services and leveling the playing field for local hotels. A related measure also proposes increasing the hotel room tax rate.
Los Angeles voters are poised to decide on a significant change to how hotel tax es are collected, potentially impacting both travelers and the city's budget.
Currently, a somewhat paradoxical situation exists where booking a hotel room through online travel agencies like Hotels.com or Trivago can result in a lower overall tax burden for the consumer compared to booking directly with the hotel. This is due to how the city’s transient occupancy tax, commonly known as the bed tax, is applied to these transactions.
The current system allows online travel companies to pay taxes based on the wholesale price they pay to the hotel – a discounted rate – rather than the retail price they charge to the customer. Measure TC, slated for a vote on the June 2nd ballot, aims to rectify this discrepancy.
If approved, it would mandate that these online intermediaries calculate and remit the city’s hotel tax based on the markup they add to the room rate, effectively taxing the full price paid by the consumer. This adjustment is being presented not as a new tax, but as a closing of a legal loophole that currently benefits online travel companies. The impetus behind Measure TC stems from a growing budget shortfall facing the city of Los Angeles.
City officials are actively seeking new revenue streams to fund essential services, including vital infrastructure improvements and maintenance of public spaces. Proponents of the measure, including City Councilmember Tim McOsker, argue that it will generate an estimated $5 million annually, earmarked for critical needs such as sidewalk and street repairs, park improvements, and other necessary city services. Beyond the financial benefits, supporters also emphasize the importance of creating a more equitable playing field for the local hotel industry.
Hotels argue they are at a competitive disadvantage because online travel companies, by paying a lower tax rate, can offer seemingly lower prices to consumers, even if the actual difference is absorbed through the tax structure. By leveling the tax burden, Measure TC aims to support the struggling hotel sector and ensure fair competition. The City Council unanimously approved placing Measure TC on the ballot, demonstrating broad support for the proposed change.
McOsker was specifically chosen to draft the official argument in favor of the measure, further highlighting the city’s commitment to its passage. Adding another layer to the discussion, a related measure also appears on the June 2nd ballot, proposing an increase in the hotel room tax rate itself. This measure seeks to raise the tax from the current 14% to 16% until the end of 2028, after which it would decrease to 15%.
Crucially, this proposed tax increase would also apply to online travel companies, ensuring that any increase in the tax rate is applied consistently across all booking channels. The absence of any formally registered opposition to Measure TC is noteworthy. The City Council file related to the measure lists no opponents, and no arguments against the measure were submitted to the city for inclusion on the ballot.
This lack of organized opposition suggests a general consensus that the current system is unfair and that Measure TC represents a reasonable solution. The core principle behind the measure, as articulated by McOsker, is to ensure that all parties – the online providers and the hotel occupants – collectively pay the full amount of tax equivalent to what a direct booking would incur.
This adjustment is intended to streamline the tax collection process, increase revenue for the city, and foster a more competitive environment for local hotels. The outcome of the vote will likely have a significant impact on the future of hotel taxation in Los Angeles and the financial health of the city
Los Angeles Hotel Tax Measure TC Online Travel Companies Hotels.Com Trivago City Budget Transient Occupancy Tax Bed Tax Tax Revenue
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