Illinois ~ Sales and Use Tax: OTCs Not Liable for Chicago Hotel Accommodations Tax

CCH Tax Day Report

An Illinois appellate court held that online travel companies (OTCs) were not liable for Chicago’s hotel accommodations tax on the fees the OTCs charged customers who reserved hotel rooms with the OTCs because the fees were not rent. For the tax years at issue, a Chicago ordinance imposed a tax on the “gross rental or leasing charge ” made by every owner, manager, or operator of hotel accommodations. In general, rent is paid for the use of property. Thus, “gross rental or leasing charges” are sums paid by customers to use or occupy hotel rooms. The OTC charges included the amount of the rental rate paid by the OTCs to the hotels and an additional fee imposed by the OTCs. The additional fees were fees charged for facilitation and services, not for use of hotel rooms. The appellate court reversed the lower court’s summary judgment in favor of the city of Chicago and remanded the case instructing that summary judgment be found in favor of the OTCs. The Chicago ordinance has been amended since the tax years at issue.

Chicago v. Expedia, Inc., Appellate Court of Illinois, First District, No. 1-15-3402, April 26, 2017, ¶403-222



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