Why did the City revise the TOT return?

In September 2018, our office issued a letter to hotel and motel operators (“Operators”) regarding the California Supreme Court ruling which requires Operators to report and remit on the Rate Parity Amount. The Rate Parity Amount is the minimum rate that an OTC must charge to sell an Operator’s room, which is set pursuant to a Rate Parity Agreement (see below for definition). The return has been updated to assist both Operators and the City in identifying additional tax remitted on the Rate Parity Amount.

Who must use the new return?

All Operators must use the new return; however, the new mandatory field is only applicable to transactions involving rooms sold through an online travel company (OTC) pursuant to a Rate Parity Agreement, which is an agreement where the Operator sets the minimum amount that can be charged by the OTC for a room. If you do not have a Rate Parity Agreement with an OTC, enter zero in the field.

What is OTC?

OTC stands for online travel company. As set forth in the California Supreme Court ruling, an OTC is a company that publishes on its website comparative information about hotels and motels and allows consumers to book reservations with these hotels and motels. OTCs contract with hotels and motels to advertise and rent rooms to the general public. OTCs handle all financial transactions related to the hotel and motel reservations and become the merchant of record as listed on the customer’s credit card receipt, but OTCs do not themselves own, operate or manage hotels.

What is a Rate Parity Agreement?

A Rate Parity Agreement is an agreement where the Operator sets the minimum amount that can be charged by the OTC for the Operator’s room.

What should be entered in the new field “Additional OTC Rent”?

The new field must be used to report the difference between the Wholesale Room Rate and the Rate Parity Amount for transactions in the reporting period. The Rate Parity Amount is the minimum retail room rate that an OTC is required to charge for a room pursuant to a Rate Parity Agreement between an Operator and an OTC. Operators must continue to report Wholesale Room Rate revenue in the Taxable/Assessable Rent line of the return. If you do not have a Rate Parity Agreement with an OTC, enter zero.

What records will I need to maintain in the event of an audit?

Operators must continue to maintain records related to all transactions where TOT needs to be reported and remitted, including but not limited to summary records by month of transactions based on both Wholesale Room Rates and Rate Parity amounts, supporting documentation such as OTC invoices and/or monthly statements, guest folios, and contracts with OTCs. All records must be made available during an audit in accordance with the San Diego Municipal Code.

If I have questions, who should I contact?

For additional information please visit our website at www.sandiego.gov/treasurer/taxesfees/tot or contact us via email at sdtot@sandiego.gov or call 619-615-1530.