In the annals of e-commerce, the last few years may be seen as a regulatory tipping point. Four states passed laws that require Amazon to collect local taxes, eliminating a major advantage for the site’s retailers. Now Montana is leading a similar charge against Travelocity and its ilk, saying that the travel sites evade the “bed tax”—a charge tacked onto the cost of a hotel room. In Montana, for example, the bed tax is 8 percent of the room price. Local hotel owners pay it or pass on the cost to their customers. But the state says online retailers take their cut of each room transaction bed-tax-free. “It’s not a bad gig,” Montana Gov. Brian Schweitzer tells NEWSWEEK. But he’s out to make sure these “coyotes” do not get away with it for long.
Late last year, Schweitzer blasted the head of Travelocity’s parent company. Now the state is pursing a lawsuit against more than a dozen travel sites, citing failure to pay the bed tax. Dan Toporek, a spokesperson for Travelocity, the largest of the named sites, accused Schweitzer of trying to create a “new tax.” A leading trade group compared the logic to penalizing a wedding planner for helping a bride find a dress. But the idea has already spread: at least 40 similar lawsuits have been filed by local governments nationwide. It’s too early to tell which side will prevail in court. But in Montana, at least, the travel sites can’t rest easy.