More hotels may duck city taxes in LA thanks to an odd loophole, ‘now that people are aware it exists’ official warns.
A Los Angeles City Council committee recommended approval on Monday, January 30, of an ordinance that aims to close a loophole allowing hotels in Los Angeles to avoid paying their taxes.
Currently, hotels could bypass paying the city’s transient occupancy tax via a “secondary operator” that would collect the tax on the hotel’s behalf, but the city would have no method of collecting the tax if the secondary operator does not “have any assets and fails to collect the tax,” according to a September motion.
The city is projected to collect $263 million from transient occupancy taxes in the current fiscal year, according to the motion. “Our concern is that this will become a more prominent thing now that people are aware it exists,” Whitley said. “I don’t think it was on people’s radar. But it’s known, and it’s an ongoing concern.”
Whitley said he spoke to two local hotel associations, who relayed concerns that the proposed ordinance would not prevent hotels from entering into contracts with secondary operators for collections of other fees and taxes beyond the transit occupancy tax.
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