In specific regions of the United States and Canadian provinces, OTAs, for example, Booking.com and Expedia, withhold and pay taxes when the guest pays for their reservation through them. This applies when:

• The OTA charges the guest directly

• The system processes reservations using payments by the OTA

 

This reduces the amount you receive via virtual credit cards or wire transfers, leading to discrepancies in billing within Mews. If your property is in an affected state, to ensure correct tax reporting and smooth financial operations, you need to adjust how you handle these reservations in the Accounting configuration in Mews Operations.

 

 

In this article, you can find answers to the following frequently asked questions:

• Why do Booking.com and Expedia withhold taxes on reservations?
• Which properties are affected by these changes?
• What is split tax remittance, and how does it affect me?
• How does tax withholding impact the billing process in Mews?
• How can I adjust my accounting setup in Mews for these changes?
• What happens if I do not update my tax settings in Mews?
• Does the change affect existing reservations retrospectively?
• What happens if a reservation is modified in Mews?

 

Why do Booking.com and Expedia withhold taxes on reservations?

Booking.com and Expedia comply with tax regulations in specific US states. They calculate, withhold, and pay applicable taxes on reservations when they process the guest’s payment. This ensures compliance with local tax laws and reduces the administrative burden on properties.

 

Which properties are affected by these changes?

These changes apply to properties that:

• Use Payments by OTAs.

• Receive payouts via virtual credit cards and wire transfers

• Are located in specific US states where tax withholding is required.

 

Note: Properties in other states remain responsible for calculating, collecting, and remitting their own taxes.

 

What is split tax remittance, and how does it affect me?

In some US states, Booking.com and Expedia withhold and remit only part of the applicable taxes. On a single booking, multiple taxes can apply. Split tax remittance means that some taxes for the same reservation are the responsibility of the OTA, and others are your responsibility to remit. This means that Booking.com and Expedia only partially withhold and remit applicable taxes for the reservation. The OTA leaves some of these collected taxes on the virtual credit card for you to remit to your local authorities.

 

For example,

A three-night stay costs $300, OTA withholds:

• 3% State Sales and Use tax = $9

• 7% County Sales and Use tax = $21

• Total withheld by OTA: $30

OTA also collects 5% City Lodging tax ($15) and adds it to the virtual credit card for you to remit to your local authorities.

 

You can view who pays which tax in the OTA taxes tab in the Accounting configuration in Mews Operations.

 

How does tax withholding impact the billing process in Mews?

When the OTA withholds taxes, the amount received via virtual credit card or wire transfer is lower than the total bill amount in Mews. This can lead to:

• Bills appearing unbalanced in Mews.

• Failed charges when trying to collect the full amount.

• Additional manual adjustments needed to close bills correctly.

 

How can I adjust my accounting setup in Mews for these changes?

To ensure Mews correctly accounts for OTA tax withholdings, follow these steps:

1. In Mews Operations, go to the Accounting Configuration.

2. Select the OTA taxes tab.

3. Under Select taxes to be paid by OTAs:

Click to select the taxes that the OTA withholds and remits in your region using the dropdown menu.

 

To review tax summaries:

Check the Tax summary and Taxes paid by OTAs tables in bill previews.

 

To monitor reservations with withheld taxes:

Mews adds a system-generated note in the reservation details whenever the OTA withholds taxes.

 

This setup ensures accurate reporting and prevents discrepancies in billing.

 

What happens if I do not update my tax settings in Mews?

If you do not update your settings:

• The bill total in Mews remains higher than the amount received from the OTA.

• The bill stays open, causing delays in financial reporting.

• Staff must manually adjust reservations, increasing the risk of tax reporting errors.

• Revenue reporting may become inaccurate.

 

Updating the tax settings allows Mews to handle these changes automatically.

Note: The configuration outlined in this guide only applies to the direct Mews-built OTA direct integrations.

 

Does the change affect existing reservations retrospectively?

No, the existing reservation database in the PMS is not amended automatically. However, reservation modifications arriving via the OTAs does trigger the PMS to report withheld tax according to the new feature.

For new customers onboarding with Mews, importing all future reservations via the interface ensures the system reports with the new withheld tax breakdown. It is important to configure the OTA taxes feature in advance to ensure accurate reporting.

 

What happens if a reservation is modified in Mews?

If you modify a reservation in a way that recalculates the price, the system recalculates taxes based on the tax configuration in Mews Operations.

In these cases:

• The system does not apply OTA tax withholding

• The system recalculates all taxes

This creates discrepancies between the OTA payout and the bill in Mews.

Users should not modify OTA reservations in Mews Operations in ways that affect the price. You make these changes through the OTA.