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Report: Government updates

The importance of educating legislators about the travel agency business hit home for Chris Seddelmeyer several years ago when Ohio proposed a tax on all service industry income. “Our margin is so narrow that being taxed on our earnings would have killed our business,” says the owner of Travel Concepts, Lima OH.

Seddelmeyer, who currently serves as co-chair of National ASTA’s Government & Political Affairs Committee and is the ASTA area director for the central region, testified before Ohio’s House Ways & Means committee and helped legislators understand the negative impacts the proposed tax would have. She says that having the agent’s voice heard played a huge part in defeating the measure. “It was eye-opening. That’s when I became passionate about ASTAPAC.”

It may seem intimidating to “lobby” legislators, but Eben Peck, ASTA’s senior vice president of government and industry affairs, is always available with expert guidance and Seddelmeyer has seen first-hand how important it is to form relationships with legislators. “A single travel agent meeting face-to-face with their legislator can make a huge difference. Suddenly he or she knows someone deeply impacted by what is
going on.”

The stakes are high in 2017. Fending off new state taxes on travel agent transactions and burdensome reporting responsibilities are among the key priorities for ASTA’s Government and Political Affairs Committee in 2017, reports Peck. Here are some pressing issues that should be on every agent’s radar:

Rationalizing disclosure responsibility

With the next round of FAA reauthorization deliberations set to kick off in early 2017, Jennifer Wilson-Buttigieg, co-president of Valerie Wilson Travel, Inc. and co-chair of National Government & Political Affairs Committee, is concerned about “the increasing and unrealistic list of potential notifications that front line travel advisors are required to notify travelers about — from insecticide spraying to seat assignments.”

She says the time is right for a unified digital platform or checklist that allows travelers to be informed and tick off their acceptance of disclosures, much like they do during the online check-in process.

Initial drafts of the 2016 FAA Reauthorization Bill included six proposed disclosures that agents would have been responsible for. ASTA successfully fought those, saving agents around $56 million per year in “talk time,” training and other costs, says Peck.

But the bill is up for renewal again in 2017. “We expect to revisit those fights to guard against new and unwarranted disclosures, while supporting initiatives to improve airline pricing transparency and competition.”

Dealing with new overtime rules

On December 1, 2016, new overtime rules from the Department of Labor (DOL) take effect. The salary

threshold for guaranteed time-and-a-half overtime pay will rise from $23,660 to $47,476. Since the average agency employee earns $37,730 and often must work irregular hours, this will affect much of the industry, and any agency with full-time employees making less than $47,476 needs to be prepared. In November, a federal court blocked implementation of the new rules, at least temporarily, so the final outcome is uncertain as of this writing.

ASTA.org offers resources to help member agencies understand and comply with the new rules. At the same time, ASTA is working to open an “escape hatch” — the Retail or    Service Establishment (RSE) exemption — that could help some agencies avoid the costs and complexities due to the new rules.

In 1970, DOL included travel agencies on a list of non-exempt industries that “lack a retail concept.” “We are calling this the ‘blacklist’ and our goal is to have travel agencies removed from it,” says Peck.

Defining independent contractors

About 20% of the travel agency workforce — an estimated 20,000 travel advisors — are independent contractors. However, it’s not always easy to determine whether a worker is an employee or an IC. There are multiple layers of rules agents need to worry about to stay out of trouble — the IRS test, the DOL test and, essentially, 50 different state tests.

Working with the Coalition to Promote Independent Entrepreneurship, ASTA will push for legislation in 2017 that would harmonize the DOL and IRS tests that determine who can be classified as an independent contractor, to provide a single set of clear guidelines, says Peck.

Streamlining travel insurance

When it comes to travel insurance, each state has its own set of regulations. ASTA has been working with the U.S. Travel Insurance Association on a state-by-state basis to permit travel agencies to offer travel insurance under the license of their travel insurance provider. This saves money and mitigates the risk of violating state insurance regulations.

To date, 43 states, plus the District of Columbia, have adopted the new travel insurance standard, for an estimated annual agency savings of more than $9.3 million. This year, ASTA hopes to put the national standard in place in the seven remaining U.S. states.

Fending off new state taxes

States are always looking for new sources of revenue and proposals can entail new taxe schemes that would negatively impact travel agencies. For example, Illinois is currently considering levying a 5% tax on services, including travel sales.

Remaining vigilant and pro-actively educating legislators about the impact of these taxes has fended off several potentially damaging initiatives. Peck cites two examples in 2016 where ASTA fought and won. In Pennsylvania, preventing the passage of a sales tax expansion bill saved agencies over $17 million per year in new taxes; and in Washington State, ASTA worked with members to defeat a proposal to increase the tax rate on commission income, saving Washington agencies $14.3 million over two years.

“I guarantee we are going to have multiple state-level tax fights in 2017, since this is a budgeting year in many states. Our members should be on the lookout and we’ll provide them with the tools to fight back,” says Peck.

The contributions of individual agents are essential to ASTA’s advocacy, says Zane Kerby, ASTA president & CEO. He cited ASTA’s third annual Legislative Day, where ASTA members came from all over the country “to make our case to Members of Congress and their staffs.”

Attending members are briefed and prepared to be “citizen lobbyists” in the morning and spend the afternoon attending arranged meetings with their Congressional representatives and/or their staffers.

Seddelmeyer had three meetings at last year’s Legislative Day. “It was inspiring to see that they really care about what we tell them. Eben and his team can state our case, but when an individual has made the effort to come to Washington and take time away from their business, that is very impactful,” she says.

“The results this year were immediate and tangible: the final FAA bill passed in July with none of the six new consumer disclosures originally proposed, and more than half the U.S. Senate now supports the Freedom to Travel to Cuba Act,” says Kerby. “When we work together as an industry and as an association, we can do great things.”

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