A new proposed federal law may actually hurt local hotels. It seems that hotels are caught up in the middle of a dispute between the government and online travel agencies. The new proposed law, the Internet Travel Tax Fairness Act, is meant to solve tax issues for online travel agents such as Expedia. However, it now seems that it may do nothing more than harm hotels whether the act gets passed or not.

If the new law passes, hotels will find themselves taxed by local governments at a higher rate. This is, of course, not good for the hotels. However, if it fails, hotels may end up being blacklisted by online travel agencies resulting in fewer guests and lower revenue. Overall, this new proposed law could have just caused a lot of problems for hotels.

The proposed federal law is actually expected to address a dispute that was between the government and online travel agents over what the government claims are unpaid hotel taxes. So here is the issue at hand that started the proposed law in the first place. Online travel companies, such as Expedia, help hotels book rooms that otherwise would remain empty.

This is good because the company gets money for helping the hotel book the room. The hotel is happy, because it has less empty rooms, and the travelers are happy because they got a great deal. However, the problem seems to be coming in on what price travelers should be paying taxes on. Up until recently, taxes were only being paid on the reduce price, and not the full price. This led the government to believe that they are missing unpaid taxes.