Marketplace Facilitator Laws and OTAs: What Travel Businesses should know in 2025

Introduction

In today’s fast-moving travel and hospitality industry, where bookings are made in seconds across global platforms, staying compliant with tax rules is no longer optional. It’s fundamental to business survival and growth.

As we enter 2025, Marketplace Facilitator (MPF) laws have become central to U.S. sales tax compliance, especially for Online Travel Agencies (OTAs) and the businesses that rely on them. Emerging from the 2018 Supreme Court decision in South Dakota v. Wayfair, these laws have transformed how digital platforms manage tax collection and remittance, shifting responsibility from individual sellers to the marketplaces themselves.

For travel businesses, including hotels, tour operators, activity providers, and independent agents, this means navigating a complex patchwork of state-by-state rules that directly affect profitability. OTAs such as Booking.com, Expedia, and Airbnb now dominate the market, facilitating billions of dollars in bookings each year. But with scale comes accountability.

By 2025, almost every U.S. state with a sales tax has implemented marketplace facilitator legislation, and many have expanded their scope to include lodging and travel services explicitly.

This matters because the travel sector is rebounding strongly after the pandemic, with U.S. travel spending projected to reach $1.2 trillion in 2025, driven by experiential tourism and digital bookings. Non-compliance, however, can result in audits, penalties of up to 25% on unpaid taxes, and reputational harm.

For small operators, the questions are especially challenging: Should taxes be remitted on gross bookings or on commissions? Are OTAs handling local lodging taxes—or are you still liable?

This comprehensive guide from Antravia explains how these laws work, how they intersect with OTAs, what’s changed in 2025, and how travel businesses can stay compliant. Whether you’re a boutique hotelier listing on Airbnb or a travel advisor working with Expedia, this knowledge is essential.

At Antravia, we’ve helped hundreds of travel entrepreneurs streamline their tax operations, thus saving thousands in unnecessary liabilities. Let’s explore how.

Understanding Marketplace Facilitator Laws

Marketplace facilitator laws represent a major shift in sales tax administration, designed to close the estimated $8–13 billion “tax gap” from remote sellers each year.

Under these laws, digital platforms that connect buyers and sellers are deemed “facilitators” responsible for collecting, reporting, and remitting sales taxes on the transactions they enable. This reverses the traditional model: instead of each seller registering in multiple states and handling their own tax calculations, the platform now carries that burden.

For example, a traveler in New York books a ski lodge in Colorado through an OTA. The OTA must determine whether the transaction is taxable (short-term lodging usually is), apply the correct rate (Colorado’s 4.81% state rate plus local additions), and remit the tax to the state. The lodge owner is generally relieved of that responsibility, reducing administrative work but introducing reliance on the OTA’s accuracy.

Key elements of MPF laws include:

• Definition of a Facilitator: Any entity providing a platform for third-party sales, processing payments, or setting prices. In travel, this includes OTAs and peer-to-peer platforms like Vrbo.

• Nexus Triggers: Economic nexus—usually $100,000 in sales or 200 transactions into a state—creates the obligation. Physical presence still counts, but post-Wayfair, most cases involve remote sales.

• Scope of Taxable Transactions: Traditionally tangible goods, but now increasingly covering services such as lodging, tours, and digital products. Some states exclude pure travel agency services.

• Seller Relief: Facilitators collect and remit for the full sale, but sellers must still report direct sales. Penalties apply for both if compliance fails.

By 2025, 45 states plus D.C. and Puerto Rico enforce MPF laws, with Alaska relying on local jurisdictions. The structure brings relative uniformity, but nuances remain, especially around how “gross” versus “net” room rates are taxed. In California, OTAs must collect on the full rate, not just their commission, prompting ongoing disputes.

Travel businesses benefit from fewer direct filings but face risk if OTAs under-collect. A 2024 audit wave found tax discrepancies in 30% of OTA remittances to hotels. Understanding these laws is more than compliance, it’s risk management, protecting both margins and cash flow in an environment where combined sales tax rates now average 7.5% nationally.

The Evolution of MPF Laws and 2025 Updates

From their inception, MPF laws have evolved to keep pace with digital commerce, and 2025 marks a new phase focused on enforcement and expansion.

After Wayfair, states moved quickly to claim taxing rights over remote sellers, and by 2020 nearly all had enacted some form of marketplace law. Early adopters such as Pennsylvania set the precedent, though inconsistencies soon emerged around service-based industries.

By 2023, all sales-tax states had implemented MPF regimes, and 2024–2025 brought refinements: lower thresholds in tourism-heavy states, inclusion of local occupancy taxes, and use of AI audit tools to detect non-compliance.

Key 2025 developments include:

• Lodging-Specific Expansions: Indiana and Missouri now include “lodging marketplaces,” requiring OTAs to remit transient occupancy taxes alongside sales tax—covering roughly 70% of U.S. hotel bookings.

• Threshold Adjustments: States such as Wyoming and Mississippi revised exemptions for low-volume sellers, easing burdens on small B&Bs but tightening rules for larger resorts.

• Digital and Service Inclusion: States like Kentucky expanded taxation to digital services, including virtual tours and online experiences.

• Federal Oversight: The IRS’s 2025 update to Form 1099-K lowered reporting thresholds to $600, prompting new withholding and data-sharing obligations for platforms.

These changes reflect both fiscal necessity and fairness. States collected $500 billion in sales taxes in 2024, up 8% year-over-year. For businesses, proactive monitoring is essential, so automated tax software can flag updates and prevent the $2,000 average fine per violation.

OTAs as Marketplace Facilitators

OTAs are central to MPF law enforcement. They now process more than 60% of U.S. leisure travel bookings, representing $200 billion in gross merchandise value in 2025. Yet their hybrid role, as both intermediary and reseller, complicates taxation: are they selling the product or merely facilitating it?

Under MPF laws, most OTAs qualify as facilitators if they:

• List third-party inventory, such as hotels or vacation rentals

• Handle customer payments or set final prices

• Deliver taxable items, including lodging and tours

State treatment differs. Florida and Missouri exclude “pure” travel agencies, but Indiana’s 2024 update explicitly brings OTAs within scope.

Case Study: Expedia Settlement (2024) – Expedia agreed to pay $6.5 million to California for under-remitting hotel taxes between 2011 and 2023, reflecting the state’s position that OTAs must collect on the full room rate. In contrast, Virginia taxes only commissions, providing a 15% cost advantage to operators there.

OTAs now face several challenges:

• Jurisdictional Complexity: With over 10,000 local rates, location errors are common audit triggers.

• Seller Agreements: Poorly defined tax clauses caused 40% of OTA contract disputes in 2024.

• Technology Risks: AI-based upselling and dynamic pricing may create new taxable events, already under scrutiny in states like Texas.

For hotels and operators working with OTAs, transparency is essential. Request quarterly remittance reports and confirm data through state tax portals. Even direct booking software can meet MPF definitions if it processes guest payments, a common pitfall for small agencies.

Implications for Travel Businesses: Risks and Opportunities

Travel businesses sit at the intersection of marketplace laws and platform operations, bearing both risk and opportunity.

According to a 2024 Ryan study, OTAs remit roughly 80% of taxes accurately, leaving hotels to address the remainder.

Key implications include:

• Revenue Leakage: Missed or misapplied local taxes can reduce margins by up to 10% in high-rate states like New York (8.875%).

• Audit Exposure: “Non-collecting sellers” remain audit targets even when facilitators remit. One Colorado lodge audited in 2024 owed $50,000 in overlooked direct bookings.

• Cash Flow Timing: Remittance schedules can disrupt liquidity—especially when quarterly payments coincide with low-season revenues.

At the same time, opportunities exist:

• Simplified Compliance: Major OTAs now offer tax dashboards for seller verification.

• Competitive Transparency: Accurate taxation supports clearer pricing, which A/B testing shows can increase conversion by 15%.

• Operational Balance: Combining direct and OTA channels with proper reconciliation tools, like those developed by Antravia, helps stabilise cash flow.

Tour operators face growing exposure as activity-based services become taxable in more states. Agents seeking exemption must register as resellers and maintain valid resale certificates.

The rise of medical tourism, projected to reach $25 billion in 2025, adds a new layer of tax complexity for OTAs facilitating wellness or procedure-related travel. Those who adapt early will gain regulatory confidence and consumer trust.

Navigating State-by-State Variations

State enforcement remains uneven. Below is a snapshot of major travel markets:

In California, businesses exceeding $500,000 in annual sales must comply with marketplace facilitator rules, and OTAs are required to collect tax on the full room rate, not just commissions. The state is known for heavy enforcement and has been particularly active in auditing travel intermediaries.

In Florida, the threshold is $100,000, and while “pure” travel agencies are excluded, most platforms that handle lodging or bundled services fall within scope. Hotels and operators must also account for local tourist development taxes, typically around 6%, in addition to the state sales tax.

New York applies marketplace obligations once sales exceed $500,000 and 100 transactions within the state. The focus is squarely on lodging, with combined state and local tax rates reaching 14.75% in Manhattan. OTAs and hotels face rigorous scrutiny here, particularly for unreported occupancy taxes.

In Texas, there is no minimum threshold, meaning facilitators of any size are captured under the law. The state also taxes a wide range of tour and activity services and has been increasing enforcement through data-sharing programs with booking platforms.

Colorado maintains a $100,000 threshold, including both sales and use tax reporting for travel services. With its strong tourism sector, the state has tightened oversight of remote sellers and lodging marketplaces to ensure consistency in local remittances.

Recent changes in Wyoming and North Carolina have slightly eased reporting requirements for smaller operators while intensifying audit focus on OTAs and high-volume sellers. Across all states, accurate rate tracking and automated nexus monitoring remain essential to avoid exposure.

Best Practices for Compliance in 2025

• Audit Partnerships: Review OTA contracts annually and clarify tax responsibilities.

• Tech Integration: Implement MPF-ready software for real-time rate and jurisdiction checks.

• Training and Documentation: Educate staff and maintain valid resale certificates.

• Professional Support: Engage advisors such as Antravia for targeted audits and planning.

• Continuous Monitoring: Subscribe to state tax bulletins and allocate 1–2% of revenue toward compliance costs.

Following these steps can reduce tax administration costs by up to 40%, according to industry benchmarks.

How Antravia can Help

At Antravia Advisory, we specialise in travel tax and compliance for global businesses. Our 2025 services include MPF readiness audits, OTA reconciliation, and state-by-state tax planning, and built specifically for agents, operators, and hospitality groups.

Save time, protect your margins, and gain confidence in your compliance position. Contact us at info@antravia.com for a consultation.

Conclusion

The 2025 marketplace facilitator environment demands flexibility and attention to detail from every travel business. Treat OTAs as compliance partners, not as auditors, and transform tax accuracy into a strategic advantage.

With Antravia by your side, you can navigate the complexities of MPF laws confidently, ready for your next booking, wherever it comes from.

Navigating State-by-State Variations

As of November 2025, all forty-five states that levy a general sales tax, together with the District of Columbia, have implemented Marketplace Facilitator (MPF) laws. These regulations require digital platforms — including online travel agencies (OTAs) — to collect, report, and remit applicable sales and use taxes on transactions that exceed each state’s economic nexus threshold.

Alaska has no statewide sales tax but operates through the Alaska Remote Seller Sales Tax Commission (ARSSTC), under which municipalities may adopt local codes containing MPF provisions, particularly for short-term lodging. New Hampshire likewise lacks a general sales tax but applies a Meals and Rooms (Rentals) Tax, which since 2021 has required facilitators to collect and remit on behalf of property owners.

Although the Streamlined Sales Tax Agreement promotes some consistency, significant differences remain. States vary in their nexus thresholds (typically $100,000 in annual in-state sales), the taxable scope of travel-related services such as lodging and tours, and the specific compliance duties imposed on OTAs. Thresholds are measured on a rolling twelve-month basis and apply to gross receipts, including those processed through marketplace platforms. Once a business exceeds the threshold, registration and collection obligations generally begin within 30 to 60 days, depending on the jurisdiction.

For travel and hospitality operators, the primary exposure lies in lodging taxation. Most states treat short-term accommodations of thirty days or less as taxable, and OTAs are typically required to remit tax on the total booking amount rather than on commissions. In addition, local occupancy, tourism, or transient lodging taxes may apply at the municipal or county level, adding a further layer of compliance.

The following state-by-state overview summarises the key elements most relevant to travel operators. All information reflects official guidance from state revenue departments as of 2025. Because several states update regulations mid-year, businesses should always confirm details directly with the relevant authorities.

Penalties for non-compliance — including under-collection or under-remittance by facilitators — can be substantial, commonly ranging from 5% to 25% of the tax due, plus interest. Some states also impose audit assessments or the suspension of registration privileges for repeated violations. For multi-state operators, regular reconciliation and professional oversight are strongly recommended to maintain compliance and protect margins.

• Alabama: Economic nexus at $250,000 in sales. Lodging and tours via facilitators are taxable; OTAs collect on full bookings. Reference: Alabama Department of Revenue - Marketplace Facilitators.

• Arizona: $100,000 in sales. Transient lodging and vacation rentals included; OTAs remit transaction privilege tax (TPT) on gross receipts. Reference: Arizona Department of Revenue - Marketplace Facilitators.

• Arkansas: $100,000 in sales or 200 transactions. Hotel bookings and tours covered; OTAs collect gross receipts tax on facilitated lodging. Reference: Arkansas Department of Finance and Administration - Marketplace Facilitator.

• California: $500,000 in sales. Short-term rentals and travel packages taxable; facilitators must collect and remit state sales/use tax on applicable transactions, with local hotel occupancy taxes often requiring remittance on the full room charge depending on jurisdiction. Reference: California Department of Tax and Fee Administration - Marketplace Facilitators.

• Colorado: $100,000 in sales. Lodging and recreational services included; OTAs collect state sales/use tax, county lodging tax, and local marketing district taxes on the entire amount charged for rooms. Reference: Colorado Department of Revenue - Rooms & Accommodations.

• Connecticut: $100,000 in sales and 200 transactions. Hotel occupancy and tour fees covered; platforms remit sales tax on facilitated room rentals. Reference: Connecticut Department of Revenue Services - Marketplace Facilitators.

• Delaware: No general sales tax; gross receipts tax applies without MPF equivalent for travel at the state level. Local hotel taxes handled separately. Reference: Delaware Division of Revenue - Gross Receipts Tax.

• District of Columbia: $100,000 in sales or 200 transactions. Short-term lodging included; OTAs collect sales tax on full transaction value. Reference: Office of Tax and Revenue - Marketplace Facilitator.

• Florida: $100,000 in sales. Lodging marketplaces included (pure travel agencies may be exempt); OTAs remit on rentals, with separate tourist development taxes. Reference: Florida Department of Revenue - Marketplace Providers.

• Georgia: $100,000 in sales or 200 transactions. Accommodations and tours covered; platforms collect on gross sales for lodging. Reference: Georgia Department of Revenue - Marketplace Facilitators.

• Hawaii: $100,000 in sales or 200 transactions (General Excise Tax). Transient accommodations tax included; OTAs remit on hotel bookings. Reference: Hawaii Department of Taxation - Marketplace Facilitators.

• Idaho: $100,000 in sales. Lodging services covered; facilitators collect sales tax on rentals. Reference: Idaho State Tax Commission - Marketplace Facilitators.

• Illinois: $100,000 in sales or 200 transactions. Hotel occupancy included; OTAs remit on facilitated sales. Reference: Illinois Department of Revenue - Marketplace Facilitators.

• Indiana: $100,000 in sales or 200 transactions. Lodging marketplaces explicitly included; OTAs collect on gross for short-term rentals. Reference: Indiana Department of Revenue - Marketplace Facilitator.

• Iowa: $100,000 in sales or 200 transactions. Lodging and events covered; platforms remit sales tax on bookings. Reference: Iowa Department of Revenue - Marketplace Facilitators.

• Kansas: $100,000 in sales. Transient guest tax included; OTAs collect on hotel sales. Reference: Kansas Department of Revenue - Marketplace Facilitator.

• Kentucky: $100,000 in sales or 200 transactions. Lodging and digital services (e.g., e-tickets) covered; OTAs remit on gross for travel. Reference: Kentucky Department of Revenue - Marketplace Facilitators.

• Louisiana: $100,000 in sales or 200 transactions. Hotel occupancy tax included; platforms collect state sales tax on rentals. Reference: Louisiana Department of Revenue - Marketplace Facilitators.

• Maine: $100,000 in sales. Lodging services covered; OTAs remit on facilitated sales. Reference: Maine Revenue Services - Marketplace Facilitators.

• Maryland: $100,000 in sales or 200 transactions. Short-term rentals included; platforms collect sales and use tax. Reference: Maryland Comptroller - Marketplace Facilitator.

• Massachusetts: $100,000 in sales. Room occupancy covered; OTAs remit on gross bookings. Reference: Massachusetts Department of Revenue - Marketplace Facilitators.

• Michigan: $100,000 in sales or 200 transactions. Lodging included; facilitators collect use tax on rentals. Reference: Michigan Department of Treasury - Marketplace Facilitators.

• Minnesota: $100,000 in sales or 200 transactions. Lodging and tours covered; OTAs remit on full amount. Reference: Minnesota Department of Revenue - Marketplace Providers.

• Mississippi: $100,000 in sales. Lodging included; platforms collect on rentals. Reference: Mississippi Department of Revenue - Marketplace Facilitator.

• Missouri: $100,000 in sales. Lodging marketplaces explicitly included; OTAs remit sales tax on gross. Reference: Missouri Department of Revenue - Marketplace Facilitators.

• Montana: No general sales tax; local lodging taxes apply with MPF-like rules in some jurisdictions. Reference: Montana Department of Revenue - Lodging Taxes.

• Nebraska: $100,000 in sales or 200 transactions. Lodging sales covered; facilitators collect on bookings. Reference: Nebraska Department of Revenue - Marketplace Facilitators.

• Nevada: $100,000 in sales (per locality). Transient lodging tax included; OTAs remit room taxes. Reference: Nevada Department of Taxation - Marketplace Facilitators.

• New Hampshire: No general sales tax; Meals and Rooms tax applies to lodging with MPF rules requiring platforms to collect since 2021. Reference: New Hampshire Department of Revenue Administration - Rental Platforms.

• New Jersey: $100,000 in sales or 200 transactions. Lodging sales tax covered; OTAs remit on facilitated transactions. Reference: New Jersey Division of Taxation - Marketplace Facilitators.

• New Mexico: $100,000 in sales. Gross receipts for lodging included; platforms collect on rentals. Reference: New Mexico Taxation and Revenue - Marketplace Facilitators.

• New York: $500,000 in sales and 100 transactions. Hotel occupancy strictly enforced (up to 14.75% in NYC); OTAs collect on full rate. Reference: New York State Department of Taxation and Finance - Marketplace Providers.

• North Carolina: $100,000 in sales (200-transaction prong removed in 2024). Lodging and tours covered; OTAs remit on gross sales. Reference: North Carolina Department of Revenue - Marketplace Facilitators.

• North Dakota: $100,000 in sales. Lodging sales tax included; facilitators collect on bookings. Reference: North Dakota Office of State Tax Commissioner - Marketplace Facilitators.

• Ohio: $100,000 in sales or 200 transactions. Commercial activity for lodging covered; OTAs remit on rentals. Reference: Ohio Department of Taxation - Marketplace Facilitators.

• Oklahoma: $100,000 in sales. Lodging tax included; platforms collect sales tax on gross. Reference: Oklahoma Tax Commission - Marketplace Facilitators.

• Oregon: No general sales tax; local lodging taxes handled separately without statewide MPF. Reference: Oregon Department of Revenue - Transient Lodging Tax.

• Pennsylvania: $100,000 in sales. Hotel occupancy covered; OTAs collect on facilitated sales. Reference: Pennsylvania Department of Revenue - Marketplace Facilitators.

• Puerto Rico: $100,000 in sales (IVU). Room taxes included; platforms remit on bookings. Reference: Puerto Rico Department of Hacienda - Marketplace Facilitators.

• Rhode Island: $100,000 in sales or 200 transactions. Lodging sales tax covered; OTAs remit on gross. Reference: Rhode Island Division of Taxation - Marketplace Facilitators.

• South Carolina: $100,000 in sales. Accommodations tax included; facilitators collect on rentals. Reference: South Carolina Department of Revenue - Marketplace Facilitators.

• South Dakota: $100,000 in sales or 200 transactions. Lodging services covered; OTAs remit sales tax. Reference: South Dakota Department of Revenue - Marketplace Facilitators.

• Tennessee: $100,000 in sales. Hotel/motel tax included; platforms collect on gross bookings. Reference: Tennessee Department of Revenue - Marketplace Facilitators.

• Texas: $500,000 in sales (economic nexus for remote sellers; marketplace sales count toward threshold). Lodging and tours covered; marketplace providers must collect and remit if engaged in business or exceeding threshold. Reference: Texas Comptroller - Remote Sellers and Marketplace FAQs.

• Utah: $100,000 in sales or 200 transactions. Transient room tax included; OTAs collect sales tax on rentals. Reference: Utah State Tax Commission - Marketplace Facilitators.

• Vermont: $100,000 in sales. Rooms and meals tax covered; facilitators remit on bookings. Reference: Vermont Department of Taxes - Marketplace Facilitators.

• Virginia: $100,000 in sales or 200 transactions. Accommodations intermediaries (OTAs) collect sales and lodging taxes on the total charge for the room, including intermediary fees. Reference: Virginia Department of Taxation - Retail Sales Tax on Accommodations.

• Washington: $100,000 in sales (B&O tax). Lodging services included; OTAs collect sales tax on gross. Reference: Washington Department of Revenue - Marketplace Facilitators.

• West Virginia: $100,000 in sales or 200 transactions. Consumer sales for lodging covered; platforms remit on rentals. Reference: West Virginia State Tax Department - Marketplace Facilitators.

• Wisconsin: $100,000 in sales. Lodging included; OTAs collect on facilitated transactions. Reference: Wisconsin Department of Revenue - Marketplace Facilitators.

• Wyoming: $100,000 in sales (200-transaction prong removed in 2024). Lodging sales tax covered; facilitators remit on gross. Reference: Wyoming Department of Revenue - Marketplace Facilitators.

For high-volume travel businesses, tools like nexus trackers from the Multistate Tax Commission can monitor changes. Always cross-reference with state-specific guidance to avoid exposure in tourism hotspots.

References

• Sales and use tax guidelines for e-commerce retailers - https://tax.thomsonreuters.com/en/insights/articles/sales-and-use-tax-guidelines-for-e-commerce-retailers

• Marketplace facilitators | Washington Department of Revenue - https://dor.wa.gov/taxes-rates/retail-sales-tax/marketplace-fairness-leveling-playing-field/marketplace-facilitators

• State-by-state guide to marketplace facilitator laws - Avalara - https://www.avalara.com/us/en/learn/guides/state-by-state-guide-to-marketplace-facilitator-laws.html

• City of San Diego: Letters About Potential TOT and TMD Assessments Arising from Expedia Transactions - https://aahoa.com/blog-details/city-of-san-diego-letters-about-potential-tot-and-tmd-assessments-arising-from-expedia-transactions

• § 58.1-3733. License tax on commission merchants - Virginia Law - https://law.lis.virginia.gov/vacode/title58.1/chapter37/section58.1-3733/

• Marketplace Facilitator Laws 101: State By State (2025) - Numeral - https://www.numeralhq.com/blog/marketplace-facilitator

• The Evolution of Marketplace Facilitator Legislation - CBIZ - https://www.cbiz.com/insights/article/the-evolution-of-marketplace-facilitator-legislation-navigating-the-new-terrain-of-e-commerce-taxation

• State-by-state guide to marketplace facilitator laws - Avalara - https://www.avalara.com/us/en/learn/guides/state-by-state-guide-to-marketplace-facilitator-laws.html

• State Tax Revenue Declines Again in Fiscal 2024 but Shows Signs of Stabilizing - https://www.pew.org/en/research-and-analysis/articles/2025/01/09/state-tax-revenue-declines-again-in-fiscal-2024-but-shows-signs-of-stabilizing

• U.S. Travel Forecast 2025: Modest Growth but Decline in International Visitors Threatens Economy and Jobs - https://www.ustravel.org/press/us-travel-forecast-2025-modest-growth-decline-international-visitors-threatens-economy-and

• [PDF] 17-494 South Dakota v. Wayfair, Inc. (06/21/2018) - Supreme Court - https://www.supremecourt.gov/opinions/17pdf/17-494_j4el.pdf

Disclaimer:
Content published by Antravia is provided for informational purposes only and reflects research, industry analysis, and our professional perspective. It does not constitute legal, tax, or accounting advice. Regulations vary by jurisdiction, and individual circumstances differ. Readers should seek advice from a qualified professional before making decisions that could affect their business.
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