The Pocono Hotel Tax Loophole

SMITHFIELD TOWNSHIP, Pa. -- Pennsylvania is missing out on about $20 million a year in tax revenue because of online hotel sales.

The Pocono Mountains Visitors Bureau is working with lawmakers to change that.

The Shawnee Inn and Golf Resort is packed with vacationers. They should all be contributing the same amount in state taxes but they're not.

"The online travel companies are calculating the tax on the wholesale rate versus the retail rate," explained Chris Barrett of the Pocono Mountains Visitors Bureau.

Anyone who books a room directly through a Pennsylvania hotel pays a six percent room tax.

When someone books a room on a travel site like Expedia, the state gets less tax revenue because Pennsylvania's tax code allows online travel companies to pay lower sales tax than hotels do for booking rooms.

So, the guest pays the same price, but online bookers pay less in taxes and make more money.

Chris Barrett runs the Pocono Mountains Visitors Bureau. He explained that the hotel tax rules were written in the 1970s before the online digital age.

"It's not a new tax. It's really applying the tax law correctly."

It's important because the hotel tax revenue helps pay for promoting tourism.

"It's really important to get out and compete with those areas like the Catskills, and Hudson Valley, Hershey and all those other areas," said Rob Howell, Shawnee Inn manager.

Howell said it's always best for guests to book directly with a hotel because they have the most up-to-date property information, can offer the same rates, and the money stays in the community.

"It leads to the ability for us to buy from local people, the ability to just help the economy here."