Tax Write-Offs for Travel Agents: A Comprehensive Guide to Maximize Profits and Minimize Tax Liability

Are you a travel agent looking to maximize your profits and minimize your tax liability? Understanding tax write-offs is crucial for your financial success. In this comprehensive guide, we will highlight the importance of knowing these deductions and provide information on deductible expenses such as transportation costs, accommodations, meals, and business-related expenses. We will also explain how you can claim deductions for professional development courses, marketing expenses, and office supplies. By maintaining accurate records and consulting with a tax professional, you can ensure compliance with tax laws and regulations while taking advantage of all the tax benefits available to you.

1. Transportation Costs: Deducting Your Travel Expenses

As a travel agent, you are likely to incur various transportation costs while conducting business. These expenses can be tax deductible, helping you reduce your taxable income. Here are some examples of transportation costs that you can deduct:

If you travel by air to attend industry conferences, meet clients, or visit destinations for research purposes, you can deduct the cost of your airfare. Keep in mind that the purpose of your trip must be primarily for business, and personal expenses should not be included.

Deducting Airfare

B. Car Rental and Mileage

If you rent a car for business purposes, the rental fees can be deducted. Additionally, if you use your personal vehicle for business travel, you can either deduct the actual expenses (such as gas, maintenance, and insurance) or use the standard mileage rate set by the IRS. Be sure to keep detailed records of your mileage and business-related trips.

Deducting Car Rental and Mileage

C. Local Transportation

When you are at your travel destination, you may need to use local transportation for business-related activities. Whether it’s taking a taxi, using rideshare services, or using public transportation, these costs can be deductible as long as they are directly related to your business.

Deducting Local Transportation

2. Accommodations: Claiming Your Stay Expenses

As a travel agent, you may need to stay in various accommodations while on business trips. The good news is that you can deduct the expenses associated with these stays. Here are some deductible accommodation expenses:

A. Hotels and Lodging

If you stay in hotels or other lodging establishments while on business trips, you can deduct the cost of your accommodations. Keep in mind that only the expenses directly related to your business activities are deductible.

Deducting Hotels and Lodging

B. Rental Properties

If you rent a property for business purposes, such as conducting meetings or hosting events, you can deduct the rental expenses. However, if you also use the property for personal reasons, you can only deduct the portion of the expenses that is directly related to your business.

Deducting Rental Properties

3. Meals: Savoring Your Deductions

As a travel agent, you may frequently dine out while on business trips or entertain clients at restaurants. Fortunately, you can deduct a portion of your meal expenses. Here’s how:

A. Business Meals

When you have business-related meals, whether it’s with clients, suppliers, or colleagues, you can deduct 50% of the cost of those meals. It’s important to keep accurate records of the date, amount, and purpose of the meal, as well as the individuals involved.

Deducting Business Meals

B. Travel Meals

If you are traveling away from your tax home for business purposes and need to eat while on the road, you can deduct 50% of your meal expenses. This includes meals at restaurants or even food purchased at convenience stores. Again, maintaining proper documentation is crucial.

Deducting Travel Meals

4. Business-Related Expenses: Deducting Your Professional Costs

As a travel agent, you incur various business-related expenses that are necessary for the operation of your business. These expenses are generally deductible. Here are some examples:

A. Professional Development Courses

To stay up-to-date with industry trends and enhance your skills as a travel agent, you may attend professional development courses, workshops, or conferences. The costs associated with these educational activities, such as registration fees, travel expenses, and accommodation, can be deducted.

Deducting Marketing Expenses

B. Marketing Expenses

Marketing is essential for attracting clients and growing your travel agency. You can deduct expenses related to advertising, website development, social media marketing, and promotional materials. This includes costs for creating brochures, business cards, and online advertisements.

Deducting Office Supplies and Equipment

C. Office Supplies and Equipment

Running a travel agency requires various office supplies and equipment. The costs of items such as computers, printers, stationery, and software can be deducted. Additionally, expenses for office rent or utilities may also be deductible if you have a separate office space.

5. Documentation: The Key to Successful Deductions

When it comes to tax write-offs, documentation is crucial. To ensure that your deductions are valid and supported by proper records, consider the following:

A. Keep Receipts

Keep all receipts related to your business expenses, including transportation, accommodations, meals, and business-related expenses. These receipts serve as evidence of your expenditures and are necessary to support your deductions in case of an audit.

B. Maintain a Travel Log

To claim deductions for mileage or car rental expenses, maintain a detailed travel log. This log should include the date, purpose, starting location, destination, and number of miles traveled. A well-maintained travel log provides evidence of your business-related trips.

C. Organize Your Records

Keep all your business-related records organized and easily accessible. This includes receipts, invoices, bank statements, credit card statements, and any other documents that support your deductions. Proper organization will save you time and effort when it’s time to file your taxes.

6. Consulting with a Tax Professional: Ensuring Compliance and Maximizing Deductions

While understanding tax write-offs is important, the complexity of tax laws and regulations can be overwhelming. Consulting with a tax professional who specializes in working with travel agents can help ensure that you are in compliance and taking full advantage of all available deductions.

A tax professional will have the expertise to guide you through the process, answer your questions, and help you optimize your tax strategy. They can also provide valuable advice on structuring your business to maximize deductions and minimize tax liability.

1. Can I deduct my travel expenses if I am self-employed as a travel agent?

Yes, as a self-employed travel agent, you can deduct eligible travel expenses related to your business. This includes transportation costs, accommodations, meals, and other business-related expenses.

2. How should I keep track of my business-related mileage as a travel agent?

To keep track of your business-related mileage, maintain a detailed travel log that includes the date, purpose, starting location, destination, and number of miles traveled. This log will serve as evidence of your business-related trips.

3. Can I deduct the cost of attending industry conferences and workshops as a travel agent?

Yes, you can deduct the cost of attending industry conferences, workshops, and other professional development courses as a travel agent. This includes registration fees, travel expenses, and accommodations.

4. Are there any limitations on deducting meal expenses as a travel agent?

When it comes to deducting meal expenses, there is a 50% limitation. You can deduct 50% of your business-related meal expenses, whether they are business meals or meals while traveling away from your tax home.

5. Why is it important to consult with a tax professional as a travel agent?

Consulting with a tax professional who specializes in working with travel agents is important to ensure compliance with tax laws and regulations. They can help you maximize your deductions, provide valuable advice on tax strategies, and save you time and effort when it’s time to file your taxes.

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Understanding tax obligations for online travel agencies

Gail Cole

If you’re old enough to have secured lodging without the help of the internet, you understand how online travel agencies have revolutionized the hospitality industry. Online travel agencies give consumers greater choice and more control over bookings, and they help businesses connect with customers to fill vacancies. But for the online travel agencies themselves, this service comes at a cost: a virtual world of tax obligations. 

This post will answer the following five questions to help you navigate tax compliance for online travel agency transactions:

What is an online travel agency? And what isn’t?

How do online marketplace facilitator laws affect online travel agencies, who’s responsible for collecting sales tax for online travel agency transactions, how does tax work for online travel agencies and marketplaces like airbnb, priceline, and vrbo, what are the tax compliance challenges for online travel agencies.

An online travel agency (OTA) is a web-based marketplace where consumers can research and book a variety of travel services, including, but not limited to, lodging. An online travel agency is not a metasite or similar platform that merely advertises for businesses without engaging directly or indirectly in transmitting communications and payments. Rather, an online travel agency provides a platform that allows multiple businesses to distribute accommodations and facilitate bookings.

Airbnb and Vrbo are also marketplaces but aren’t technically online travel agencies because they don’t provide the breadth of services offered by travel agencies online: cruises, flights, motor vehicles, etc. Nevertheless, we’re including them in this article because our focus is online lodging intermediaries and the tax challenges they face.

The relationship between an online travel agency and merchant can work in a couple of different ways: The online travel agency can be the merchant, or the hotel (or other lodging provider) can be the merchant. If the OTA is the merchant, consumers pay when they book; the rate type in this scenario is known as the prepay rate or merchant hotel rate. If the hotel is the merchant, consumers pay when they check in and the rate is known as the post-pay rate, agency rate, or hotel-collect rate. 

Identifying the merchant of record is a key factor because it determines who’s liable for what taxes. 

It’s also critical to determine whether an online travel agency or lodging platform is a "marketplace" for tax purposes. If you're classified as a marketplace facilitator, you may be subject to marketplace facilitator laws and so may need to pay tax on the net rate as well as on your markup (or margin). If you're not classified as a marketplace, for tax purposes, you may only need to pay taxes on your markup.

Lodging intermediaries are constantly evolving in response to changing consumer demand:  Couchsurfing is a place to find “friends you haven’t met yet” who’ll let you crash at their place;  Hipcamp is an online marketplace for “tent camping, RV parks, cabins, glamping, and more;” and the list goes on and on. “

As the industry grows and evolves,” notes a 2022 State Tax Research Institute report, “ the tax issues become more prevalent. ” 

Some marketplace facilitator laws apply to certain online travel agencies or other lodging intermediaries. Some don’t. To understand why, it’s helpful to know the marketplace facilitator law origin story.

Marketplace facilitator laws were created to close a loophole. When states first required Amazon to collect and remit sales tax, Amazon dutifully did so. (Eventually.) But at first the online mega marketplace didn’t collect and remit sales tax on behalf of its third-party sellers, and it argued that it didn’t have to. It wasn’t the merchant in third-party transactions , it reasoned; it was merely the facilitator. 

Amazon had a point, frustrating though that was for states. So, states developed marketplace facilitator laws that make online platforms the merchant for all transactions made through the platform. As the deemed seller the marketplace is responsible for collecting and remitting sales tax for third-party transactions as well as direct sales.

Because the initial focus of most marketplace facilitator laws was Amazon and similar marketplaces hawking things, most state marketplace facilitator laws didn’t reference online travel agencies. Gradually, that’s changing. 

Marketplace facilitator laws in some states now specify “marketplace” includes a lodging marketplace or online travel agency, and the lodging marketplace or online travel agency is responsible for collecting and remitting sales and/or lodging taxes on behalf of the lodging providers using the platform.

As of October 1, 2022, for example, Virginia requires online travel agencies to collect and remit applicable state and local taxes on room charges and fees. In other words, the online travel agencies generally must withhold tax on the net as well as their margin. 

Conversely, marketplace facilitator laws in some states specify that online accommodations or lodging platforms are not marketplace facilitators and therefore aren’t liable for collecting and remitting taxes on the net amount. That’s the case in Washington state . However, online travel agencies are usually still liable for tax on their markup. 

Regrettably, marketplace facilitator laws in some states don’t say one way or another. And sometimes tax requirements differ under different circumstances. 

In Michigan , for example, an online travel agency generally isn’t required to collect and remit applicable accommodations taxes on the net rate so long as the accommodations provider itself is registered for Michigan sales tax. If the accommodations provider is not registered for sales and use tax in Michigan, as some short-term rental hosts are not, the online travel agency that facilitates the sale generally is required to collect and remit the tax due on the net rate. At a minimum, the OTA would generally need to pay the tax on their markup. 

In Kansas, marketplace facilitators must collect and remit tax on third-party lodging (on the net rate), but not the net rate for hotel accommodations. Again, such marketplace facilitators are typically liable for the tax on their markup.

It depends on the taxing jurisdiction, the law, and the tax itself as well as who is the merchant of record and whether a markup is added. 

Whenever multiple parties are involved in the sale or rental of accommodations, it can be difficult to determine which party is responsible for collecting and remitting the applicable taxes. “The online travel company or short-term rental marketplace is probably responsible for some of the taxes due,” explains Oliver Hoare, General Manager of Lodging and Beverage Alcohol at Avalara, “it just depends on how much. The margin only? Or the margin and the net?” 

The lack of clarity can lead to the undercollection or overcollection of tax.  

Marketplace facilitator laws may help, as noted above, but laws and tax obligations vary from state to state. Indiana requires online travel agencies and other marketplace facilitators to collect and remit sales tax and applicable county innkeeper’s tax on behalf of sellers (on the net and the margin). But in Washington, a business providing online travel agency services for short-term lodging is not a marketplace facilitator and therefore generally isn’t required to collect and remit lodging taxes on the net — only on the margin.

Marketplace facilitator laws aside, the most critical factor for tax liability purposes is identifying the merchant of record and whether they add a markup. “This is a vital point,” explains Hoare. 

Who’s the merchant of record? What’s the markup got to do with it?

The merchant of record is the entity responsible for processing payments and collecting, remitting, or paying some or all of the taxes due on a transaction. Depending on the nature of the agreement, this description could refer to the online travel agency, a third-party supplier, or the lodging provider itself.

For example, an OTA could pay a wholesale rate for supply obtained from WebBeds (or a similar wholesaler) and then add a markup to the final consumer price. In this case, the online travel agency is the merchant of record. At a minimum, it would have to collect and remit tax on the markup, as no one else knows how much the markup is. If the online travel agency is classified as a marketplace facilitator for tax purposes and processes payments on behalf of the lodging provider, it would also be responsible for withholding and remitting the tax due on the net rate.

(Some lodging providers want the online travel agency to process payments; others prefer customers to pay at check-in.)

In short, an online travel company considered a marketplace for tax purposes would likely be responsible for taxes on both the net rate (or wholesale rate) and its markup. If there’s no markup and the platform doesn’t process payments or meet the definition of a marketplace, it may not be liable for any transaction tax at all.

So, you see, it depends.

How do local occupancy taxes complicate compliance?

There’s another complicating factor, as well. Even if an online travel agency is responsible for some taxes, it may not be responsible for collecting and remitting all the taxes due on the accommodations they facilitate. 

Some states require online travel agencies to collect and remit state-level taxes on accommodations as well as any local taxes administered by the state taxing authority. However, online lodging marketplaces often aren’t required to collect and remit the local lodging taxes administered by city and/or county tax officials. In such situations, the lodging provider, host, or property manager is liable for the tax.

According to a 2022 survey by the National League of Cities, 82% of cities surveyed require short-term rental hosts to remit taxes directly to the city . Only 5% of the survey respondents require the online platform to collect and remit local taxes on behalf of the hosts. 

As explained above, some states require online travel agencies and marketplaces like Airbnb, Expedia, and Vrbo to collect and remit at least a portion of the tax due (e.g., state-administered taxes), provided they meet the definition of a marketplace facilitator. Other states don’t — though OTAs and marketplaces are generally liable for any tax owed on their markup.

To simplify tax compliance for lodging providers that use the platform, a short-term rental marketplace not required to collect may agree to voluntarily collect certain lodging taxes for hosts through a voluntary collection agreement (VCA). 

For example, a short-term rental marketplace like Airbnb or Vrbo may agree to voluntarily collect and remit applicable state taxes but not applicable county or city taxes. Or the marketplace may agree to collect state and county taxes but not city taxes. It depends on the marketplace and the agreement made.

Short-term rental marketplaces usually let hosts know they collect a portion of the tax due on their behalf and that the hosts could have additional tax obligations. However, they ordinarily don’t specify what those tax obligations are (e.g., city tax or county tax or both), and it would be unwise for them to do so. After all, they’re not tax advisors.

So, what do they say?

Airbnb calculates, collects, and remits taxes in areas where it has “made agreements with governments or is required by law to collect and remit local taxes on behalf of hosts.” But it doesn’t necessarily collect all taxes and so cautions, “As a host, depending on your location, you may be required to collect local tax … from your guests .”

Vrbo collects and remits lodging tax on behalf of hosts where required and notifies hosts when it starts to collect and remit lodging tax in their area. “ Property owners and managers are responsible for understanding and complying with the laws and regulations applicable to their property listing,” Vrbo reminds. “You’re also responsible for collecting and remitting lodging taxes when we’re not liable to do so.”     

Unfortunately, hosts that don’t read the fine print may think they’re off the hook for all taxes. 

To summarize, an online travel agency or short-term rental marketplace may be required to collect some or all lodging taxes in one jurisdiction but have no obligation to collect and remit taxes in another jurisdiction. It may opt to collect some occupancy taxes voluntarily, or not. If it does collect some taxes for hotels or hosts, voluntarily or because it must, it may not collect all applicable taxes. 

Tax tends to be a true pain point for online travel agencies and short-term rental marketplaces, which typically have a large footprint. As they facilitate bookings for hotels or hosts across the country, continent, or whole wide world, they must navigate a world of tax requirements.

In the United States alone, there are thousands of locally administered accommodations taxes . According to the State Tax Research Institute, “state and local accommodations taxes exhibit even greater diversity.” 

States typically take one of five different approaches to taxing accommodations , ranging from a single statewide rate (with no additional local taxes) to three separate taxes: state sales tax, state accommodations tax, and local accommodations tax.  

Given that, tax pain points for online travel agencies include:

Finding all relevant tax information (it’s often harder than it should be)

Registering for all required taxes with all required entities

Interacting with each individual locality 

Navigating a lack of uniformity among locally administered taxes within one state

Correctly sourcing the transaction to ensure the proper taxes are applied at the proper rates (and ensuring transactions that should be exempt are exempt)

Correctly identifying when tax applies to fees 

Filing a massive number of local returns and remitting local taxes (on top of filing state returns and remitting state-administered taxes) 

Dealing with compliance and enforcement

“Basically, you have to pay the right people in the right way at the right cadence in the right format,” says Hoare. Fortunately, you can automate the calculation, collection, and remittance of hospitality-related taxes .

The risks of noncompliance are real. In 2015, the Hawaii Supreme Court ruled that nine online travel companies owed up to tens of millions of dollars in back taxes to the state for selling Hawaii hotel rooms over the internet. The same year, online travel agencies had to pay the District of Columbia more than $60 million in unpaid sales tax. The laws in both cases predated the existence of online travel agencies, but the courts determined they fit the definition of a vendor responsible for collecting and remitting the tax due.

State and local governments are gradually clarifying the tax requirements of online travel agencies, but they’re not necessarily making it easier for the online marketplaces to comply with them.  

Avalara can help solve the compliance challenges online travel agencies face .

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Tips For Independent Travel Agents On Tax Filing

T here are several tax filing considerations that you as an independent travel agency need to keep in mind. You are considered self-employed, which means you must handle your own taxes, which is one of the most crucial things to keep in mind since, in contrast to conventional workers, you are.

In order to maximize their tax savings and file their taxes, independent contractors like travel agents may run into problems. When selling hotel reservations, vacation packages, and other travel-related goods, many travel agents operate on a project-basis and make money. Because of the possibility of seasonal employment, revenue fluctuations may sometimes occur. The 1099 tax rate and form (and/or a  w2 template  if you find yourself working as an employee with any business), quarterly tax calculator, and self-employment tax calculator are thus essential tools that may assist you in making wise tax choices.

For independent travel agencies paying taxes, consider these suggestions:

1. Learn the tax regulations

In order to file taxes as an independent travel agency, you must first get familiar with the tax regulations that relate to your industry. Read the IRS publication on small enterprises and self-employed persons to learn how to record your income, deductions, and credits.

For independent travel brokers, it’s important to remember the following tax regulations:

-Unless you request an extension, you must submit your yearly tax return by April 15th and pay any taxes that are required.

– You are required to record all revenue you get from your travel agency, including 1099-style payments.

– Self-employment taxes, also known as Social Security and Medicare taxes, are due by self-employed people and now represent 15.3% of their net income. These taxes cover both the employer and employee components of Social Security and Medicare.

2. Recurring business costs should be monitored

Being a self-employed travel agent has several advantages, including the ability to deduct numerous company expenditures from taxable income, which may reduce your tax burden. You may write off certain costs, such as:

– Costs associated with running an office, such as rent, utilities, and supplies.

– Costs associated with traveling, such as lodging and rental vehicles.

– Marketing expenditures, including web hosting and advertising.

– The cost of your phone, camera, and computer equipment.

Maintaining precise records of all your company expenditures is crucial to ensure you don’t overlook any deductible costs. You may maintain a record of your expenditures in a spreadsheet or notepad, or you can use accounting software to manage your costs automatically.

3. Calculate the tax rate on your 1099 form

You get 1099 forms from your customers when you work as a self-employed travel agent, which implies that taxes are not deducted from your salary. Taxes on your income must be paid by you instead. Using a 1099 tax rate calculator is a fantastic idea to make sure you are allocating the right amount of money for taxes.

Based on your income and deductible costs, the calculator will help you establish your tax obligation. In order to assist you avoid underpayment penalties, it will also figure out the projected tax owed for each quarter.

4. Calculate the self-employment taxes

The self-employment taxes, which include Social Security and Medicare taxes, must be paid by self-employed people, as was previously noted. Use a self-employment tax calculator to get a rough idea of your taxes for being self-employed.

With the help of the tool, you can determine how much money you’ll need to put aside for self-employment taxes and an estimate of your tax liabilities depending on your net income. Remember that the self-employment tax rate is presently 15.3%, which includes 12.4% for Social Security and 2.9% for Medicare.

5. Maintain your tax payments on time each quarter

Quarterly anticipated tax payments are necessary if you anticipate owing more than $1,000 in taxes for the whole year. Penalties and interest fees may be assessed if these payments are not made.

Using a quarterly tax calculator to calculate your estimated tax bill for each quarter is crucial to ensuring that you pay your taxes on time and avoiding underpayment penalties. When the time comes to submit your taxes, this will help you prevent any surprises.

For independent travel brokers, handling taxes may be a huge hassle. But you can reduce the stress and increase your tax savings by being informed with tax laws, keeping track of your company spending, utilizing a 1099 tax rate calculator, calculating self-employment taxes, finding tax deductions and staying on top of quarterly tax payments. You can make sure you are remaining in compliance and choosing wisely when it comes to taxes for your travel company by heeding the advice in this guide.

The post Tips For Independent Travel Agents On Tax Filing appeared first on Mom and More .

There are several tax filing considerations that you as an independent travel agency need to keep in mind. You are considered self-employed, which means you must handle your own taxes, which is one of the most crucial things to keep in mind since, in contrast to conventional workers, you are. In order to maximize their […]

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Tax Deductions for Travel Agents

By Mike Broemmel, J.D.

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  • Deduction Categories for a Sole Proprietor

Tax Deductions for Travel Agents

Travel agents enjoy not only more common tax deductions enjoyed by most other business owners, but there are some that specifically benefit individuals in the travel industry. In preparing your annual income tax return, it is crucial that you are up to speed on all of the expenditures that you legally can write off--and be forewarned about potential deduction-related problem areas.

A significant benefit of being a travel agent rests in the reality that you can deduct travel as a business expense. You can deduct most aspects of your travel--transportation, lodging, car rental and even the costs associated with visiting attractions. The primary purpose of the trip must be related to your profession as a travel agent. However, that includes research and investigation of destinations that your current or future clients might desire to access.

Client Discounts

Some travel agents offer discounts of different types to their preferred clients. Many times these discounts are underwritten by hotels, airlines and other providers. In some cases, travel agents directly offer such incentives. The costs associated with client discounts borne by a travel agent is deductible at tax time.

Group Trips

Any costs incurred by a travel agent for leading group trips (that are not reimbursed) generally are deductible. As with other business related travel this includes transportation, lodging and costs related to attractions accessed while traveling.

Office Expenses

Travel agents are entitled to deduct more common business expenses as well. This includes office expenses, including supplies, equipment and services (telephone and Internet, for example).

Advertising

Advertising is an important part of maintaining a growing client base in the travel industry. Advertising expenses are tax deductions available to travel agents.

Some travel agents host events throughout the year to promote their services to a broader audience. Additionally, some travel agents hold functions for their current clients as well. In either cases, the costs associated with these types of events are tax deductible.

Conventions and Conferences

Conventions and conferences frequently are held in the travel industry. A travel agent is permitted to deduct the costs of traveling to and attending these industry-related functions.

Rent or Mortgage

A travel agent is permitted to fully deduct the costs associated with the rent or mortgage of an office. If a travel agent works from home, she can deduct a percentage of the rent or mortgage attributed to the specific area of the residence dedicated exclusively to a home office.

  • "422 Tax Deductions for Businesses and Self Employed Individuals"; Bernard Kamoroff; 2009
  • "Deduct It!: Lower Your Small Business Taxes"; Stephen Fishman; 2009
  • "Tax Deductions for Professionals"; Stephen Fishman; 2010
  • Internal Revenue Service: Business Expenses

Mike Broemmel began writing in 1982. He is an author/lecturer with two novels on the market internationally, "The Shadow Cast" and "The Miller Moth." Broemmel served on the staff of the White House Office of Media Relations. He holds a Bachelor of Arts in journalism and political science from Benedictine College and a Juris Doctorate from Washburn University. He also attended Brunel University, London.

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13 Tax Tips for Travel Agents

13 Tax Tips for Travel Agents

Photo: Shutterstock.com

New tax laws that took effect on Jan. 1 will affect travel agencies and other small businesses. But for 2017, not much has changed when it comes to maximizing your deductions and minimizing your tax liabilities. Here are some tips to help you get it all together before the taxman comes calling.

1. Forget the entertainment deduction for 2017. Kiss that box at Yankee Stadium goodbye, unless you really are a diehard fan. The new tax bill, which took effect on Jan. 1, 2017, did away with the “E” in T&E, disallowing any deduction for entertaining potential customers. You can still write off expenses incurred in business travel, including 50 percent of meals you eat on the road – but not for tickets to events and shows.   2. Be aware of the small-business deduction for 2018. Many small businesses qualify for a new 20 percent standard deduction that also went into effect on Jan. 1. If you earn $20,000 selling travel part-time out of your home, for example, you can automatically deduct 20 percent, or $4,000, from the earned income on which you pay taxes. Some income limitations do apply, though.   3. Maximize your deductions for the year. If you have not made a deposit to your IRA, for example, do it before Apr. 17 so you can take the deduction. If you are aged 59.5 or more, you can take the money right back out and still claim the deduction.

4. File early. Of course, your books are all up to date, your business expenses are entered in a spreadsheet, and you have all the receipts to back them up in a file. Figure out your taxes now, either online or by visiting your accountant, so you know whether you owe or are getting a refund. If it’s the former, you can wait until the last minute to file with the IRS; if it’s the latter, put it in the mail immediately and get your check. (Filing early also helps protect you from fraud – see #6 below.)

5. Mind the deadlines. There are two extra days to file 2017 taxes. Forms and payments are due on Apr. 17, 2018, as are contributions for 2017 in an IRA.

6. Safeguard your data. This is prime time for scammers, who love to access the Social Security numbers of unsuspecting folks and beat you to the punch by filing for your refund. Always use a secure server when filing taxes or sending information to an accountant. And make sure your accountant is equally careful about backing up and storing your forms.

7. When the phone rings, it’s not the IRS calling. If you receive a call that purports to be from the IRS, just ignore it. The IRS only contacts taxpayers through the address on their tax forms.

8. If you work from home, consider taking the home-office deduction. The simplified home-office deduction lets those who work at home write off their home office with little fuss. Where in the past you had to do some math and store receipts to back up your claim, and claiming a home-office deduction was a red flag for the IRS, now you can just claim a flat $5 per square foot used in your office, up to a maximum of $1,500. A home office must be used exclusively for work — so no, you cannot have a gym or a guest bedroom set up in there.

9. Deduct your car. If you use your car for business you can deduct it as an expense, and choose the higher of the standard or the actual expenses. For the first, multiply the total miles driven for business by the standard mileage rate of 53.5 cents per mile plus 14 cents per mile for any miles you have driven doing charitable work. Or if you have kept a careful record, you can deduct your actual costs for gas, repair, etc., based on the percentage of the time you drove the car for work.

10. Don’t forget to deduct health insurance premiums. One of the most frequent errors of small-business owners is not deducting their health insurance premiums. You may also be able to deduct commercial vehicle insurance and life insurance premiums. Ask your accountant or look carefully at the IRS website.

11. Understand the difference between equipment and supplies. Equipment (also called capital expenditures) typically includes things that do not need to be replenished every year, such as office furniture and computers. You can write off the cost of new equipment (up to $1 million) in one year, or depreciate it over time. Supplies purchased throughout the year, such as pens, paper, and ink, are written off in the year they are purchased.

12. Make sure you understand the difference between an independent contractor and an employee. Be sure to have all independent contractors who work with you complete a W9 form and send them a 1099 tax form immediately, if you have not yet done so. Refer to the SBA website to learn more).

13. Know when to call for help. Do you understand that if you have a large income besides your freelance, odds are you do not have to pay quarterly taxes? Have you considered deferring income or accelerating deductions to cut your tax bill? Do you understand how pension planning can lower your taxes? If not, do some research, take a course or call an accountant. Thanks to Adele Valenzuela, of AVM DeMars CPAs, LLP, in Williston Park, New York, for contributing her time and insights to help with this article.

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Are travel services taxable?

By Robert Dumas on Thu, Jun 16, 2022 @ 02:17 PM

Topics: sales tax compliance taxability economic nexus

Summer vacation season is here – and it’s yet another area where sales tax shows up.

The sales tax associated with s ervices is a different sales tax animal as compared to tangible personal property. T he taxing of certain travel-related services, such as lodging, can be taxable in some states. The likes of Expedia and Orbitz have a long history of battling various states in the courts even as localities start making deals with new players in hospitality.

Here’s a brief overview of travel tax.

The debate goes way back

A decade ago the Tax Foundation was addressing how local officials in 25 states and the District of Columbia sought to reinterpret hotel occupancy tax ordinances to apply to amounts paid by consumers to online travel booking services (OTCs), “with limited success.”

At that time, OTCs had won cases in 18 states, the companies’ booking of hotels and other travel details often putting them outside what the Foundation called “the proper scope of hotel occupancy taxes.” The taxation question was further tipped in OTCs’ favor by relatively few states levying sales tax on services (which now may be steadily changing).

Nevertheless, the Foundation concluded in its 2012 article, “local governments should not expect easy revenue from pursuing such claims.”

Three years later, a District of Columbia Court of Appeals ruled that OTCs Expedia, Priceline, and Orbitz had to pay the District more than $60 million in unpaid sales tax dating back to 1998. The court upheld a previous ruling that the online travel agencies were “vendors” subject to sales tax on the retail rates they charged consumers, including the online travel agencies’ service fees, and not just for the sales tax on the net rate that they collected from consumers and handed over to hotels.

Working with jurisdictions

Not all jurisdictions were as lucky as D.C. Shortly after that decision, courts blocked states’ moves to require OTCs to collect tax, notably lodging taxes in California .

More recently, tax jurisdictions big and small seem to have become aware of the money they’re missing, especially when it came to accommodations. To cite Expedia as one example, some 16 states require the OTC to collect some kind of sales tax.

Three years ago it was determined that booking agents (including OTCs) were required to collect Pennsylvania 6% state and local hotel occupancy taxes on the full retail rate charged for a hotel room. The applicable taxes must be charged on accommodation fees and any other amount charged by the booking agent , not the hotel.

Yet just recently the Louisiana Court of Appeals determined that OTCs do not owe local sales tax on the fees they charge to their customers but the hotels in question do.

Traveling overseas? And as nexus and sales tax requirements loom in the U.K., British opponents proclaim that taxing online sales of OTCs will produce nothing short of a “significant impact” on travel businesses.

Some in the travel industry find it easier to just work with the tax man. Back in the U.S., Airbnb – often touted as a leader among online travel services working proactively with tax jurisdictions – spells out occupancy and other taxes by state on its site.

(A host of federal taxes, incidentally, are usually baked right into the cost of an airline or other travel ticket).

In short, in this always-changing field, don’t be surprised to encounter sales tax in many spots during your vacation travels. Seems you can’t leave home without it.

TaxConnex can help your business stay on top of your taxability and ensure you are maintaining compliance in the states where you have an obligation.  Get in touch  to learn how we can help you!

Robert Dumas

Written by Robert Dumas

Accountant, consultant and entrepreneur, Robert Dumas began his public accounting career on the tax staff at Arthur Young & Co., followed by a brief stint at Grant Thornton. In 1998, Robert founded Tax Partners, which became the largest sales tax compliance service bureau in the country, and later sold it to Thomson Corporation. Robert founded TaxConnex in 2006 on the principle that the sales tax industry needed more than automation to truly help clients, thus building within TaxConnex a proprietary platform and network of sales tax experts to truly take sales tax off client’s plates.

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Service tax has been imposed on travel agent’s services rendered by any travel agent by the Finance Act, 2004 with effect from 10th September, 2004. The gross amount charged to or total consideration received from any person in relation to services connected to booking of passage for travel is chargeable to service tax, i.e. services provided by travel agent to any customer. However, services related to air travel agents and rail travel agents are not covered in this category.

Meaning of Travel Agent

Section 65(115a) defines ‘travel agent’ as under —

“travel agent means any person engaged in providing any service connected with booking of passage for travel, but does not include air travel agent and rail travel agent”.

The above definition is a specific and exclusive definition of travel agency according to which –

(a) travel agent may be any person (i.e. individual, firm, company, commercial concern, etc.)

(b) he must be engaged in providing a service.

(c) the said service must be any service connected with booking of passage for travel.

(d) booking of passage for travel can be by any mode of transport except air and railways.

(e) travel agent does not include —

(i) air travel agent

(ii) rail travel agent

Booking of passage for travel would include ticketing or arranging or organizing the travel passage.

Taxable Service

Section 65(105)(zzx) defines ‘taxable service’ as under —

“any service provided or to be provided to any person, by a travel agent, in relation to booking of passage for travel”.

The services rendered by travel agents/agency shall be taxable to service tax when provided to a customer and when the services so provided relate to booking of passage for travel. The booking should be for passage leading to undertake a journey by travelling.

Taxable services should satisfy the following conditions —

(a) services should be provided to a customer, (upto 15-5-2008) and to any person (w.e.f. 16-5-2008).

(b) services should be provided by any person who is a travel agent.

(c) Services should be in relation to booking of passage by air.

(d) Service does not include services rendered by rail travel agents/air travel agents.

Business auxiliary services are different from travel agent services which is a distinct taxable service under section 65 (105) (zzx) of the Finance Act, 1994.   Travel agent means any person engaged in providing any service connected with booking of passage for travel, but does not include air travel agent and rail travel agent. Taxable service means any service provided or to be provided to any person, by a travel agent, in relation to booking of passage for travel.  On the other hand, business auxiliary services [ section 65 (12) ] covers marketing, sales promotion and other services including services rendered by commission agents. In the instant case, querist is not a commission agent but a travel agent and as such, he shall be liable to Service Tax under travel agency services.

Replacement of ‘customer’ with ‘any person’

Finance Act, 2008 has substituted the words ‘any person’ for the word ‘customer’ w.e.f. 16.5.2008 as the service tax is levied on service and status of recipient of taxable services should not determine the tax treatment of a given service.

In Sharma Transports v. CC, CE & ST (Appeals), 2009 -TMI - 34216 - CESTAT, BANGALORE, it was held that assessee’s selling of passenger tickets as an agent and receiving commission is covered as travel agent’s service and not as business auxiliary service.

Travel agents providing services of booking of passage by road, boats, steamer, fiery, sea cruise etc. shall be covered for service tax. Agents booking conducted tours will also be covered.

Departmental Clarification

CBEC has clarified as follows vide Circular No. 80/10/2004-ST dated 17-9-2004:

Extension of service tax on air travel agents and rail travel agents to other travel agents

“At present, service tax is leviable on air travel agents and rail travel agents. Travel agents of other modes of transport (road, water) are not covered under service tax. The scope of service tax has been extended to include all travel agents. The taxable service is the service provided by travel agent in relation to the booking of passage for travel by modes other than air and road.”

Value of Taxable Service

W.e.f. 1.3.2008, taxable service provided by a person located outside India, in relation to booking of an accommodation in a hotel located in India for a customer located outside India has been exempted from levy of service tax vide Notification No. 14/2008-ST dated 1.3.2008. However, if a travel agent is in India, it will attract service tax. Even when service receiver is in India, service tax would be payable.

Specific Exemption

Taxable services provided outside India for booking hotel accommodation in India for a customer located outside India is exempt from service tax vide Notification No. 14/2008-ST dated 1-3-2008.

Person Liable

Every travel agent providing taxable services to any person shall be liable to pay service tax and shall be treated as an assessee for service tax purposes.

By: Dr. Sanjiv Agarwal - November 25, 2011

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IRS Tax Tip 2022-104, July 11, 2022

Business travel can be costly. Hotel bills, airfare or train tickets, cab fare, public transportation – it can all add up fast. The good news is business travelers may be able to off-set some of those costs by claiming business travel deductions when they file their taxes.

Here are some details about these valuable deductions that all business travelers should know.

Business travel deductions are available when employees must travel away from their tax home or main place of work for business reasons. The travel period must be substantially longer than an ordinary day's work and a need for sleep or rest to meet the demands the work while away.

Travel expenses must be ordinary and necessary. They can't be lavish, extravagant or for personal purposes.

Employers can deduct travel expenses paid or incurred during a temporary work assignment if the assignment length does not exceed one year.

Travel expenses for conventions are deductible if attendance benefits the business and there are special rules for conventions held outside North America .

Deductible travel expenses while away from home include the costs of:

  • Travel by airplane, train, bus or car between your home and your business destination.
  • Fares for taxis or other types of transportation between an airport or train station to a hotel, from a hotel to a work location.
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  • Other similar ordinary and necessary expenses related to the business travel.

Self-employed or farmers with travel deductions

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  • Farmers can use  Schedule F (Form 1040), Profit or Loss From Farming .

Travel deductions for the National Guard or military reserves

National Guard or military reserve servicemembers can claim a deduction for unreimbursed travel expenses paid during the performance of their duty .

Recordkeeping

Well-organized records make it easier to prepare a tax return. Keep records, such as receipts, canceled checks, and other documents that support a deduction.

More information:

  • Publication 463, Travel, Gift, and Car Expenses
  • IRS updates per diem guidance for business travelers and their employers

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Tax Masala

service tax on tour operator and air travel agent

  • service tax
  • CA Tarannum Khatri
  • June 9, 2015 March 31, 2016

Service tax on tour operator and service tax on travel agent both are covered under different rules. In this article, we will understand these rules. The article is also helpful for common man to understand service tax on travelling expenses and tour packages.You can understand following points in this article:

service tax on tour operator and air travel agent

  • Definition of tour operator, tour, tour vehicle etc.
  • DIfference between tour operator and travel agent.
  • service tax on tour operator service.
  • Abatement and rate of service tax for tour operator service.
  • Service tax on air travel agent and travel agent.
  • Composition scheme for air travel agent.
  • Place of provision of service with regards to touring business.

Service tax on tour operator: definition under service tax:

Definition of tour operator:.

Tour Operator means

any person, Firm or Company engaged in the business of  Planning,Scheduling, organizing or arranging tours like arrangements of accommodation, sight-seeing or other similar services by any mode of transport
 Any Public sector doing tour business
 Any person, Firm or Company engaged in the business of tour in a tourist vehicle covered by a permit granted under the Motor Vehicles Act 1988 (59 of 1988).

Definition of tour:

As per service tax section 65 ( 76) of finance act, 1994 ,

Tour means a journey from one place to another irrespective of the distance between such places.

Definition of taxable service:

As per section 65 ( 105)(n) of finance act, 1994,

taxable services means Any service provided or To be provided to any person, by a tour operator in relation to a tour.

Difference between tour operator and travel agent:

It is required to understand difference between tour operator and travel agent. Because there are different rules which determine rate of service tax and taxability.

The word planning, scheduling, organising, arranging are important. Tour operator plans and arrange the tour but travel agent only books the tickets and gets commision or brokerage on selling those tickets.

Both the services are taxable but the rules are different.

Service tax on tour operator service:

Tour operator service is taxable service. The basic rate of service tax on tour operator service is 14% (budget 2015 amended) but tour operator can avail abatement and charge and pay service tax on part of the value.

Value of taxable service for tour operator:

To determine service tax liability, we are required to find taxable value of services first. The value of taxable service  for tour operator is gross amount charged by him from customer in relation to tour and includes accommodation charges, food and any related facilities provided by him with regards to tour package.

service tax rate on tour operator :

*Applicable From 1/4/16- budget 2016 amendments.

  • Cenvat credit for inputs, capital goods and input services has not been taken under the provision of cenvat credit rules, 2004. The bill issued should indicate that the charges are for accommodation cost and service charges. The abatement is not available when the bill only indicates the service charges for accommodation booking and does not include cost of accommodation.
  • Cenvat credit for inputs, capital goods and input services has not been taken under the provision of cenvat credit rules, 2004. The bill issued should indicate that it is inclusive of charges for the tour.
  • Cenvat credit for inputs, capital goods and input services has not been taken under the provision of cenvat credit rules, 2004. The bill issued should indicate that it is inclusive of all the charges for the tour.

If he is not availing abatement, he is required to charge service tax at 14% on package and he can avail cenvat credit for input services like service tax paid on air ticket, travel charges, hotel services etc.

 Service tax on air travel agent:

Air travel agent’s service is taxable service. He is required to charge service tax on bill and deposit it to government department.

Taxable value of services for air travel agent:

Taxable value of services for air travel agent is amount charged in bill excluding air fare but including commission received by air travel agent in relation to the booking.Read this link clarifying air fare should not be included while calculating service tax. Link    ( as per CBEC Circular No. 80/10/2004 ST dt. 17.09.2004 ) . However, you need to charge 14% on commission earned. It is not for composition scheme. If you are using composition scheme, the rate is 1.4% on total bill including air ticket.This taxable value will be helpful to determine small service provider exemption. You can get more details about small service provider exemption from this link.

Onus of proof for turnover:

Please maintain the following details:

  • Bill charged to customer.
  • Return filed with air travel company for transactions.
  • Other details received from air travel company.

Rate of service tax for air travel agent:

Air travel agent is required to charge and pay 14% service tax on taxable turnover.( mentioned in point above). However he can opt for composite scheme and pay service tax on full bill at the rate prescribed by composition scheme.

Composition scheme rate for air travel agent as per budget 2015 changes:

Budget 2015 has increased service tax rate of composition scheme for air travel agent. Please remember that the changes will be effective from 1st June, 2015.

Domestic booking : 0.70% of basic fare ( earlier 0.6%)

International booking: 1.2% of basic fare ( earlier 1.2%)

Basic fair means part of the air fare on which commission is normally paid by airlines to air travel agent.

Service tax on other travel agent:

Travelling service is taxable. There are specific rules for air travel agent but not for other travel agent. Generally there are principal company and agency in travelling business.Taxable turnover for travel agent should be commission he receives from principal agency on booking tickets. Statements from principal indicating agency commssion should be preserved for proof of turnover and to determine taxability of services.

Place of provision of service rules in tour operator and travels business:

Place of provision of service for passenger transport is the place where the passenger embarks on the conveyance for continuous journey.

Continuous journey means when

  • Single ticket has been issued for entire journey OR
  •  more than one ticket or invoice has been issued for the journey, by one service provider, or by an agent on behalf of more than one service providers, at the same time, and there is no scheduled stopover in the journey.

Stopover means

“Stopover” means a place where a passenger can disembark either to transfer to another conveyance or break his journey for a certain period in order to resume it at a later point of time. All stopovers do not cause a break in continuous journey. Only such stopovers will be relevant for which one or more separate tickets are issued. Thus a travel on Delhi-London-New York-London-Delhi on a single ticket with a halt at London on either side, or even both, will be covered by the definition of continuous journey. However if a separate ticket is issued, say New York-Boston-New York, the same will be outside the scope of a continuous journey.

Please go through place of provision of service rules mentioned in notification no. 21/2012.

Important clarification by service tax department about pop for travelling business:

“ According to Rule 11 of Place of Provision of Services Rules, 2012, the place of provision of a passenger transportation service is the place where the passenger embarks on the conveyance for a continuous journey. Therefore, if place of embarkation of passenger is located within the taxable territory, service tax is leviable on the gross amount payable for such continuous journey, irrespective of where the ticket is booked and where fees/charges are collected. If the place of embarkation of a passenger on a continuous journey falls outside the taxable territory, service tax is not leviable, irrespective of where the tickets are booked and where fees/charges are collected. However, only such charge will be determined under Rule 11 of POP as are directly related to the continuous journey. The POP of other charges will be judged on their own merits.”

In addition to above rules, when service provider and service receiver both are in taxable territory, the place of provision of service would be location of service receiver, no matter where service is provided or consumed.

There is an additional exemption for air transportation of passengers, embarking from, or terminating in an airport located in the state of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland,Sikkim, or Tripura or at Bagdogra located in West Bengal. The rule will be worked as per example given above.

Reverse charge mechanism:

There is no reverse charge mechanism applicable for tour operator service or travel agent. So do not worry about it as service receiver.

Intermediary service in travelling business:

Many times, travel agents are not operating tours but work as commission agent. In this case, the service is not tour operator but intermediary service.

As per service tax education guide issued by government on june 20, 2012,

Point no.5.9.6 (Page 67),

service provided by following persons will qualify as intermediary service:

  • Travel agent ( any mode of travel)
  • Tour operator
  • commission agent
  • Recovery agent

Intermediary service provider should have documentary evidence about acting on behalf of main service provider.

and he is not required to sell package to other party adding profit but same price as principal tour operator has for the tour.

He can charge service tax at 14% on commission earned by him ( as percentage determined) on sell of tours packages.

I have tried to cover main points about service tax on tour operator and travel industry. If you have any question regarding it, please ask in comments. Don’t forget to share this post on social media to inspire me to write more.

37 thoughts on “ service tax on tour operator and air travel agent ”

Air Travel business and booking air tickets by using portals of IATA registered agent like Ezeego, Makemy Trip etc. For providing this service they are getting commission from them. further our client is getting the business done through their sub agent also and in turn, they are passing the commission earned, to them. On verification of the records we observed that IATA registered agents are making the payments of commission to our client after deducting the Service Tax (12.36%) from the amount ( as if it is under RCM). Similarly our client is also deducting the service tax from the commission while making the payment to sub agent. To our understanding this is not covered under RCM and this service is taxable as intermediary service as defined under clause(f) of Rule 2. we were told by our client that the big agency houses like Riya Travels, Akbar travels, TSI Yatra etc they all are following this practice. My queries are followings : 1. Whether this process is legally correct ? 2. Is this service under RCM 3. When on Commission part Service tax was already deducted by IATA whether i also required to deposit service tax on commission earned by our client. I shall be pleased to have your valued guidance in the matter

As per my view,

The service as commission agent is not under RCM and the process is totally wrong.

Once the service tax is already deducted by service receiver, no need to deposit it same to government because it is double taxation.

( Still clarify the classification of service which service receiver is using.)

Hello I am Pratik Shah practicing CA in surat, I have gone through whole article is it is very good. I have some query realted to this service Query No.1 In composition scheme for air travel agent what will be the basic fare, like we have to include all the taxes which are charged by the airlines? or else just a basic fare? Query No.2 Suppose one assesses can opt for composition scheme as a air travel agent can also pay service tax at 14% as a tour operator service? Please reply me for the above queries.

AS per my understanding, it will be basic fare excluding other taxes.Let me know if you have different view or any resources you find in this point. Once the service provider opt for composition scheme, he is not required to pay service tax again at 14% on service value because he is already paying under composition scheme.

Related to Query No 2. Composition scheme is only for air travel agent So the assessee who is giving two services like first is air travel agent service and second is tour operator services So if he pay service tax under composition scheme on air travel agent service So on tour operator service on which rate service tax has to been charged ? Like normal tax rate of 14% or service tax rate under composition scheme ? And Assessee is already opted for composition scheme under air travel agent service

Thanking You

CA Pratik Shah

You can avail abatement for tour operator service as per nature of tour.

Read my post https://taxmasala.in/service-tax-rate-chart-for-fy-2015-16/

Thank You Madam

I’m a travel agent and I sell tour packages B2B for Europe to other travel agency. We pay service tax 3.5%. The other travel agent pays again service tax, 3.5%. Is that correct ? I think double taxation on same package is not correct. We might have the wrong information. How to avoid this ? 7% on the entire package it’s a huge amount working with very low margins.

If you are not tour operator but providing intermediary service ( if you are working for principal travel agent and he pays commission to you on sale of package) .

You need to charge 14% to commission earned and not 3.5% on entire tour.

Otherwise Rate 3.5% ( with abatement ) is correct for tour operator service or you can pay 14% ( without abatement) on entire package by availing cenvat credit.

In case of the ‘actual’ payment of ST, you have mentioned that service tax shall be payable on the commission charged on the invoice for air ticket booking raised upon the end customer. What about the additonal commission given by the airline to the agent on the same booking. will that have no service tax implications?

It is also taxable.

We are travel agent from udaipur, just want to know for example we purchased tour package for my principle agent of 1000 rs and paid a service tax of 3.09% 309 , now we sold this package on 1100 + 3.09% service tax , so should i need to pay a difference of 309 and 339 , so its 30 rs only , m i correct

No, you need to pay Rs. 339 to government. and not difference. You cannot avail cenvat credit while availing abatement.

Hi , I am a travel agent/ tour operator from pune and do only international hotel and flights booking

Have 3 queries as below

1. If I book a hotel for 1 lakh and charge only 2000 profit to match online rates then I have to pay 280 rupees service tax as charging 1.4% on gross amount I will earn only 600 rupees

2. On air tickets also same in ticket amounts of 50000 we hardly earn 200 to 300 rupees as again have to match online big agents rates so can I pay service tax of 14% on my profit as if I take 1.2% tax on base fare again we loose bookings

3. International railway bookings are exempted from service tax?

Best regards,

Yes, you can pay 14% on profit ( Commission earned). My view is based on this cbec circular no. 80/10/2004 dt 17/9/2004.Read f point in http://www.servicetax.gov.in/st-profiles/trvlagent-other.pdf

hi i am travel agent now firstly comes on air travel -As invoice received from supplier 50000rs and commission 500 tds 50 and i pay 50000rs now i sold it by adding markup 2000 to customer at 52000rs.

Q Now my question Is wheather my expemtion limit of rs1000000 is calculated on comission received by supplier or it is calculate on (markup+commission) or on what amount i will charge service tax and what percentage.? Waiting for reply

Best Regard Arpit

You have not cleared that you are solely booking tickets or not.

Assuming you are earning from booking tickets, taxable turnover will be Rs. 500 + Rs. 2000 = Rs. 2500.

Consider it while calculating small service provider exemption.

Service tax will be 14% on taxable turnover.

Thank u Mam, for your valueable response, I am dealing in air ticket and tour packages and charge service tax @3.50% on bill amount.(For eg 15000 air ticket and 50000 for tour package= 65000*3.50) Is this is correct or i will make seprate bill for both and if there is any solution for reducing service tax liability.

Thanks Arpit

Thank you so much …

For such a great knowledge sharing….

We are travel agent while sell domestic tickets we charge service tax on the bill but since we charge another Rs.200 on top of bill ,we are paying another 14 % on Rs.200 .. Is it correct

This is Jainam Shah. My client has opened up anew business of travel buses operating. He books tickets through agent. Agent in turn repays the fare collected after deducting service tax collected on fare and his commission. n then he asks my client to levy service tax on amount receivable from him.Is the method correct ? If not then please state the correct method.

We are Tour operator, Can we take CENVAT credit against service tax charged by supplier on Hotel Accommodation??

this is ajay i m a air travel agent .i recently started a my business of issuing tickets for international and domestic flights. i had a contract and issued all my tickets to a foreign company. i just want to know what is the rate of service tax and all the amount received is in foreign currency for this whether i required any approval from RBI or not . this is my request please provide me the procedure to handle this problem . thank you

We do outbound journey now and need a clarifications a) Indian and NRIs taking a tour package outside india without any services in India need to pay service tax which is presently after abatement is 3.625% ?

Madam, in your article, you had stated that reverse charge mechanism is not applicable to tour operators and travel agents. please state whether RCM is not applicable even if the air travel agent is a body corporate/business entiry (company) with a turnover of more than Rs.10 lakh in preceding year and availing services like legal, security, works contract, etc. Thanks.

Hi, I read all the above quires and very impressed with your responses. Hope you will throw some light on mine too, though it is a tricky question, I believe.

I am a tour operator doing bookings for flights, hotels, sightseeing, cruises for clients from India visiting international locations.

What I have been given to understand is that I have to levy service tax to my clients in either one of the ways below: 1. Show Flight, hotels and other services as intermediary services and charge service charge (my profit) and levy 14.5% service tax on this service charge. 2. Show the entire package as a single tour package and charge 3.63% Service Tax on gross invoice amount. Per my calculations, point 1 is more beneficial but here is my query:

Q1. Do I pay Service Tax OR Income Tax OR both on the commission earned (by the source, not client) for hotels, sightseeing and flight bookings? Q2. Can I raise 2 separate invoices to show the flight amount on one invoice with 1.4% service tax applicable on the base fare, and the tour package (Hotels, cruises, sightseeing etc) on a separate invoice with 3.63% service tax applicable on the gross amount? Q3. Can I raise 2 separate invoices to show the flight amount on one invoice with 1.4% service tax applicable on the base fare, and the rest of the bookings (Hotels, cruises, sightseeing etc) on a separate invoice with 14.5% service tax applicable only on the service charge(my profit)?

Looking forward for your advice for which option should be most beneficial and legal.

I plan to book a customized package through a tour operator. The tour cost is x. On that I am required to pay t ie 3.625% tax. The tour operator is charging me his fee on x+t while I have told him it is not legal to charge commission on tax portion of the package. Please clarify

We are a Tour Operator, Plans Tour from Hyd to China, provides accomidation, tickets booking, food etc. Whether the service is taxable or not, shall we go for 90% abadement and pay service tax on 10% value

One of my friend is doing tour and travel business, he is acting as sub agent for big travel houses like make my trip etc. These big travel houses give commission to my friend after deducting TDS and Service Tax (as said by them). My friend further raise the bill to the end consumer by charging Service tax on differential amount (margin he add) and deposit Service tax to the department. Whether this process is correct and whether the big travel houses who are deducting Service Tax from commission are following correct procedure.

we are tour operator and we want to know as we are paying service tax and also our suppliers,like transporters are billing us with service tax.Can be get CENVAT deduction/benefit on service tax?

so now will ola ober etc will also have 30 % taxable value ?

we have tour operator Indian passport holder booked only accommodation .food & conveyance & deposited amount in foreign currency account so advice for service tax applied or note

what’s the final rate of service tax after applying swachh bharat cess for air travel agent if the base rate of service tax is 0.7%.

i have booked a europe tour through thomascook india and have maid part payment in euros and part in indian currency. Please let me know if service tax is payable on the euro portion also.

Hi Tarannum,

We are a ‘tour operator’ working with tourists/ students from Germany to India. Our travel packages are education based and involve domestic flight/ train booking, homestay booking, taxis and cost of local guides. Most of our homestays are owned and run by local NGOs or individual families. I want to know that what taxes will be applicable on us as a company when we receive payment in Euros. We are a pvt. ltd. setup.

As per your service category – tour operator, Service tax rate will be 15% without abatement and 4.5% with abatement. I request you to read full article for further understanding of service tax on tour operator service. Also consider small service provider exemption. Read related article here. https://taxmasala.in/small-service-provider-exemption/

Thanks, Tarannum

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Published: February 13, 2024   |   Last Updated: February 20, 2024

An introduction to tax forms for gig economy workers, listen/watch on youtube.

NTA Blog: logo

The gig economy has transformed the contours of the modern workforce, bringing forth a unique combination of flexibility, autonomy, and diversified income streams. Whether you’re driving for a ride-sharing platform, developing eye-catching graphics as a freelance designer, or mastering home repairs as a handyman, you’re participating in an ever-evolving, vibrant economy. But with the freedom of gig work comes an often overlooked aspect: understanding and managing your tax obligations. In this blog, I’ll cover some of the essential tax issues and IRS forms with which every gig worker should be familiar.

As a participant in the gig economy, you’re an independent contractor in the eyes of the IRS. Essentially, you’re a solo entrepreneur, which ushers in a unique set of tax rules and obligations . Central to these obligations is the Form 1099 series (Form 1099-NEC, Form 1099-K, Form 1099-MISC). We’ll look at each of these to get a better understanding of your gig worker responsibilities, but the key is that you must report your income to the IRS and to state and local tax agencies. As a gig economy worker, you should be familiar with what constitutes “income” and what you need to include on your annual tax return regardless of whether you receive one of the forms.

Income is the starting point for determining taxes due. In general, income is all the money and other things of value that you receive, but the technical definition is broad. For practical purposes, income can include payments you receive from wages and employee benefits , self-employment or side jobs (freelance or independent contractor work), goods or services you sell online, renting personal property, partnerships or other business entities, investments, or other benefits paid to you. Income isn’t just money – it can also be the value of goods or services you receive. (Think of a bartering transaction where someone pays you in an exchange by giving you an item or providing valuable work for you.) You can even have income for tax purposes for payments made to someone else on your behalf. Income is generally taxable when the payment is available to you, even if you don’t immediately take possession of it; for example, you usually can’t delay income simply by waiting to pick up a check or deposit it into your account.

When you perform gig work, you should carefully store and organize your receipts and other records of your costs . Tax law allows you to deduct certain business expenses, which can reduce the amount of tax you will ultimately need to pay on your income. While tax law requires third parties in certain situations to report payments to taxpayers, such as through the Form 1099 series, those forms generally only show your income, not your expenses. It’s your responsibility to keep track of your deductible costs so that you can correctly calculate the tax you owe. Even if you don’t receive a form reporting income paid to you during the tax year, you should report the income on your tax return.

Form 1099-NEC

Form 1099-NEC, Nonemployee Compensation , is a tax document you may receive from clients who have paid you $600 or more during the tax year. Unlike traditional employees who receive Form W-2, Wage and Tax Statement , you’ll receive a Form 1099-NEC as a gig economy worker. The form provides the IRS information on the income you received as an independent contractor. If you also paid another independent contractor $600 or more during the year, you are required to file Form 1099-NEC with the IRS and provide a copy to the independent contractor no later than January 31. This is much earlier than the normal April 15 deadline for an individual income tax return so you should start working on submitting any Forms 1099-NEC as soon as the new calendar year begins.

Form 1099-K

Businesses that received more than $20,000 and had more than 200 transactions during the year should be familiar with Form 1099-K, Payment Card and Third-Party Network Transaction . However, in 2021, Congress passed legislation that dropped the reporting threshold down significantly for gig economy workers who receive money through payment cards or third-party network transactions. As enacted, the legislation requires the platform, known as a third-party settlement organization (TPSO), to send a Form 1099-K if the total amount of such payments exceeds $600 for the sale of goods or services, regardless of the total transaction count in a calendar year. TPSOs could include auction sites; car sharing or ride-hailing platforms; craft or maker marketplaces; crowdfunding platforms; freelance marketplaces; online marketplaces (sale or resale of clothing, furniture, and other items); peer-to-peer payment platforms or digital wallets; real estate marketplaces; or ticket exchange or resale sites.

The IRS delayed the implementation of the $600 threshold to tax year (TY) 2024. For returns for calendar year 2023, there is no change. The $20,000 and 200 transaction thresholds still apply. But in a phased approach, the IRS plans to introduce an interim threshold of $5,000 for TY 2024. For TY 2025, the IRS expects to fully implement the $600 threshold. Remember that you’re responsible for reporting all your income no matter the threshold amount required for issuance of the form. So even if you don’t receive a Form 1099-K or if the thresholds change, you should keep diligent records and report all of your income to the IRS.

Form 1099-MISC

While Form 1099-NEC reports nonemployee compensation, Form 1099-MISC, Miscellaneous Income , captures income that doesn’t fit in neat categories. For gig workers, this includes rent from real estate, royalties, or other types of income.

Form 1099-MISC usually isn’t the standard form for most gig workers, but those who diversify their income streams may encounter it. As always, you should carefully track these types of income and expenses regardless of whether you receive a Form 1099 reporting the income. And as with Form 1099-NEC, if you must send a Form 1099-MISC for payments you made to someone else, you must send the form to both the IRS and the payee by January 31.

Self-Managed Tax Withholding

Your gig income is also subject to self-employment tax, which includes Social Security and Medicare taxes. While traditional Form W-2 employees have these taxes automatically withheld from their paychecks, in the gig economy, the onus of tax withholding falls squarely on your shoulders. Think of yourself as both the employee and the employer . For instance, after wrapping up a rewarding project, your earnings tempt you to indulge in a shopping spree. But, as an independent contractor, you may need to resist this urge and set aside a portion of your earnings for income and self-employment taxes.

Most gig economy workers cannot wait until tax filing season to think about how much tax they owe because the IRS requires most to make quarterly estimated tax payments . Note that these “quarterly” due dates are not evenly spread throughout the year : for TY 2024, the four due dates are April 15 (except taxpayers living in Maine and Massachusetts have until April 17), June 17, September 16, and January 15, 2025. If you also work another job as an employee, one option to satisfy your estimated tax obligation is by asking your employer to withhold additional tax from your paycheck. To do this, file a new Form W-4 with your employer and enter the additional amount you want your employer to withhold. The IRS Tax Withholding Estimator tool can help you determine how much you would need to add to your withholding. Alternatively, you can make estimated payments yourself through your IRS online account  or by using one of the other payment methods listed on IRS.gov/payments .

Estimated Tax Penalties

If you are required to make quarterly estimated tax payments but don’t, you could find yourself unexpectedly subject to costly additional penalties. The IRS bases these penalties on either paying too little in estimated tax or not paying each installment on time. Thus, you can’t necessarily escape penalties for a missed installment simply by paying more in a later installment. Try to spread your payments out evenly over the course of the year. The IRS provides a worksheet in Form 1040-ES, Estimated Tax , to help you determine how much estimated tax you owe.

Name, Image, and Likeness

In recent years, there’s been a groundbreaking change in the world of college sports introducing a new dimension to the gig economy: the monetization of an athlete’s name, image, and likeness (NIL) . This offers student-athletes opportunities to profit from their personal brand, opening doors to endorsements, sponsorships, and other income-generating opportunities. But just like any other income stream in the gig economy, these opportunities also come with new tax obligations.

NIL income is taxable. Therefore, like any other gig worker, athletes must keep meticulous records of earnings and associated expenses. It might not feel like it, but an athlete earning NIL income is now self-employed, just like a food delivery driver or online freelance graphic artist. Read my past blog on the tax implications of NIL earnings .

Other Essential IRS Forms and Publications for Gig Economy Workers

The sea of taxation is teeming with countless forms and publications that can leave even the most financially savvy individuals scratching their heads. As a gig worker, a few key documents can help you:

  • Form 1040-ES, Estimated Tax for Individuals : This form helps you calculate and distribute your estimated tax payments quarterly , effectively spreading out your tax liabilities throughout the year.
  • Schedule C, Profit or Loss From Business (Form 1040 or 1040-SR): This form is your platform to report gig income or loss and claim business expenses . Appropriately managing these business expenses can reduce your taxable income and decrease your overall tax liability.
  • Schedule SE, Self-Employment Tax (Form 1040 or 1040-SR): This form helps you compute self-employment tax , a unique component of gig worker taxation with which you might not be familiar.
  • Publication 505, Tax Withholding and Estimated Tax : This publication contains the rules, calculation methods, and information on penalties for underpayment of estimated taxes.

Of course, there are many other forms, publications, regulations, and statutes that might be applicable to your federal tax situation. This blog post is merely a broad introduction. For more information, visit the IRS’s guide to managing taxes for your gig work and guide to business expense resources . The gig economy can sometimes seem like a puzzle, but with a thorough understanding of the forms and rules relevant to your gig work and a disciplined approach to tracking your income and expenses, you can confidently piece together your tax responsibilities.

Read more about Form 1099-K: If You Resold the Hottest Ticket of Summer 2023, You Likely Didn’t Receive a Form 1099-K – But This Won’t Last Forever & Always

Read the past NTA Blogs

The views expressed in this blog are solely those of the National Taxpayer Advocate. The National Taxpayer Advocate presents an independent taxpayer perspective that does not necessarily reflect the position of the IRS, the Treasury Department, or the Office of Management and Budget.

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Read the most updated information on Form 1099-K

If you resold the hottest ticket of summer 2023, you likely didn’t receive a f....

Service Tax Applicability on Tour Operators

  • | Service Tax - Articles
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  • 08 Dec 2013
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SERVICE TAX APPLICABILITY ON TOUR OPERATORS

To understand the concept of Tour Operator first of all we have to clear that there is major difference between tour operator and Travel Agent Service. Tour Operator is wide term than Travel Agent.

Difference between Tour Operator Service and Travel Agent Service can be understand easily by following Table

After understanding the difference in our mind following question take place

  • What Is “Taxable Service”?
  • What is the Definition of “Tour”?
  • Who Is “Tour Operator”?
  • What Service Tax Applicability on Tour Operator i.e (what should be Rate of Service Tax and how to charge Etc)?
  • Is There any exemption for service provided by  Tour Operator ?

As Per Section 65 (105) (n) of Finance Act, 1994 as amended “Taxable Service” means

1. Any service provided or

2. To be provided to any person, by a tour operator in relation to a tour.

As Per Section 65(113) of Finance Act, 1994 as amended “Tour” means

  • A journey from one place to another irrespective of the distance between such places.

As Per Section 65(115) of Finance Act, 1994 as amended “Tour Operator” Means

i.  “Tour Operator” means any person, Firm or Company engaged in the business of

  • Scheduling,
  • organizing or arranging tours like arrangements of accommodation, sight-seeing or other similar services by any mode of transport

ii.   Any Public sector undertaking operating tours.

iii.   Any person, Firm or Company engaged in the business of tour in a tourist vehicle covered by a permit granted under the Motor Vehicles Act 1988 (59 of 1988).

Service Tax Applicability On Tour Operator

General Exemption for All Service Provider as well as Tour Operator.

  • Service Provided to United Nation
  • Service Provided to International Organization e.g.( World Health Organization , IMF International Labour Organization) etc.
  • Service Provided to Officers of any foreign diplomatic mission in India or their family members for official or personal use are exempt.
  • Service Provided Outside of India .
  • Service Provided to Special Economic Zone i.e (Special Economic zone  ( SEZ ) is a geographical region that is designed to export goods and provide employment)
  • Exemption for Small scale service Provider whose value of service does not exceed Rs 10 lakh .(But this exemption is available only if value Of Taxable service in the preceding year does not exceed Rs 10 Lakh that means for exemption of service tax we have to check preceding year value of service  provided).
  • Service Provided Free Of Cost .

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23 Comments

I have enquired multiple tour operators amount for 6pax for 5Night and 6 Days from Gauwahati, kaziranga(1N), shillong,(2N), Gauwahati(2N) and fly Three tour operation given quote approximatley 14200 per pax from 16april 2017 to 21 april 2017. One operator added extra cost 0f 9% Govt Tax, Second operator added extra cost of 3.5 GovtService Tax. Third one has put no extra cost. What is actual method to pay Govt TAx. It is GST. What type invoice /bill I should demand as customer.

hi, I am a travel agent and tour reseller.My supplier is charging service tax 4.35% from me . i am selling package to client with my mark up profit. so do i need to pay service tax again, whats the procedure.pls advice with example.

hi, please somebody give me the details of % of tax to be aid in local travels firm if income is exceeded by10lks/annually

hi, please tell me services tax rate on educational trip organized by school via tour operators .

kindly tell me . . . services tax exemption on that services.

Sir if service provided to a foreigner from hotels/home stays/restaurants in India and the income is received in foreign currency, and the service is received in India whether service tax is applicable. Please clarify with relevant service tax rules and provisions

hi, Presently I am paying 14% (flat) against tour operation service tax after abatement value. 60% abatement is applicable in our case. I am paying 14% of 40% value as service tax for tour operation or 5.6% of total amount. Eg. Total invoice value is Rs. 100000/- for that I am paying service tax of 100000 less 60% abatement =40000 * 14% = 5600/- or 5.6% of 100000 = 5600/- This is the current situation . From 15th November onward 14.5% of after abatement value or 5.628 % of total value is it correct?

similarly ticket booking i am paying 1.4% (flat) of total invoice value. It will changed from 15th November is 1.407 is it correct?

Please clarify my doubts.

Regards/Gopi

i am a travel agent please advice service tax calculation

we are charge to customer ticket price 5000 commition 400 bank charges 25

we are pay ticket ptice 5000 bank charges 10+st

please advice urgent basis

I Would like to know the calculation about Travel Agent Service Tax.

Please help me out.

Regards, Sanjay Deb 9706155637

My client providing transport service to one Pvt Ltd company on a contract basis and this company taking service from my client and provide to other company in this case my client charge service tax

What would be senario if suppose xyz agent is selling hotel to another agent ABC, then ABC to customer. So in this case first service tax will be charged by xyz and then by Abc. However as per act if tour operator claiming abatement then he is not eligible to take credit on input service tax paid by him. As we see practically there has been cascading effect on tax. So please guide me on these issue with relevant act and judgements.

What Should be Service tax implications if

1-I am booking room in my hotel on behalf of tour operator

1-I am booking room in my hotel on behalf of tour operator 2-I am booking room on behalf of foreign tour operator or non resident tour operator.

I have started tour and travel business and taken service tax registration voluntarily i haven’t cross turnover off rupess 9lakh . shall i stiil need to collect and pay service tax ? second issue- rate of service tax and any credit if available in respect of service tax already paid at the time of purchase of ticket from agency.

Kindly advice to what are the applicable taxes for tour operator / package tour handler. Am I suppose to pay tax while booking the hotels / package @ (TDS + S.TAX+ Education Cess+ Others) and charge it again to my customer?

For e.g Purchase ABC Hotel:

Hotel Booking 10,000 Car Rental Service 2,000 TDS as applicable (10%) 1,200 Service Tax ???? Edu Cess ????

Total Purchase Amount 13,200 ++++

Sale of Package to XYZ individual: Hotel Booking 10,000 Car Rental Service 2,000 Commission 1,000 TDS as applicable (10%) 1,300 Service Tax ???? Edu Cess ????

Total Sale Amount 14,300 ++++

I am a tour operator and in a way resale the services to my clients (as per above example, purchased from ABC and sold at % commission to XYZ). Will the same % of taxes be applicable to my company as well as they are applicable to ABC in this case.

Appreciate your detailed response for my better understanding. Thanks in advance.

Best Regards,

Jayesh Jeshrani

The tour operator can follow commission basis method instead of claiming abatement scheme?

Dear Ma’am,

Can we avail cenvat credit on the service tax paid to a tour agent.. Service tax charged @3.09%…

Hello Sonu, Thanks for the blog. I had couple of questions:

Does this blog still hold good, in terms of any new rules or regulations?

Service tax should be paid if the aggregate of taxable service is more than 10lakhs in previous year or aggregate of value of tours sold is more than 10lakhs?

If the customer pays in a different currency to a bank account abroad what are the implications?

I agree with Mr. Manoj, as the section 65 has become inoperative from 1 July 2012; and the said meanings as has been derived by you may be obtained vide Para 2 of the Notification No.26/2012-ST dated 20 June 2012.

I humbly request to take note of such facts, as such articles may mislead to novices.

With due respect, I would like to bring to the notice that after the negative list concept, section 65 has become inoperative w.e.f. 01-07-12 vide Notification No. 20/2012 dated 05-06-2012.

Dear Pranav There is no concept of no profit no loss basis service in Finance Act,1994. Any provider of taxable service whose ‘aggregate value of taxable service in a financial year exceeds nine lakh rupees need to get registered himself with Central Excise board and he is has to pay service tax if preceding year value of service provided exceed Rs 10 Lakh .

Does an unregistered body / association of person who arranges tours like trekking etc on no profit no loss basis is required to pay ST?

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What you need to know for the 2024 tax-filing season

February 14, 2024

Ottawa, Ontario

Canada Revenue Agency

Millions of Canadians file an income tax and benefit return every year. For the 2023 tax-filing season , Canadians filed more than 32 million tax returns, and more than 92% of them were filed electronically. There were also more than 18 million refunds processed, and Canadians who had a tax refund received an average of $2,262!

To simplify your tax-filing experience, we've compiled what you need to know for this tax-filing season. This includes what’s new on the income tax and benefit return and with the Canada Revenue Agency's (CRA) services. We hope this information helps you file your tax return, so you can receive the benefit and credit payments you may be entitled to.

Important dates

  • February 19, 2024 – This is the first day you can start filing your 2023 tax return online . If you file on paper , you should receive your income tax package in the mail by this date.
  • April 30, 2024 – This is the deadline for most Canadians to file a tax return. By filing your tax return on time, you’ll avoid delays to any refund, benefit, or credit payments you may be entitled to. If you owe money to the CRA, this is also the payment deadline. You’ll avoid late-filing penalties and interest by filing and paying on time. 
  • June 15, 2024 – If you or your spouse or common-law partner are self-employed, this is the deadline to file your tax returns. As this date falls on a Saturday, your return will be considered filed on time if the CRA receives it or it is postmarked on or before June 17, 2024 . If you owe money to the CRA, you'll still need to pay by April 30, 2024 , to avoid interest.

What’s new with our services

Digital Disability Tax Credit (DTC) application form – The CRA has made it faster and easier than ever for persons with disabilities and their medical practitioners to complete the DTC application form, by introducing a new fully digital application process. Applicants can now complete Part A of the application form online in My Account or by phone. This means that they no longer need to print and complete the form by hand, and take it to their medical practitioner. To further simplify the process, the applicant’s portion of the form will be prepopulated with information already on file at the CRA. Once completed, the applicant will receive a reference number to give to their medical practitioner who will use it to complete Part B of the form.

Changes to the T1 notice of assessment – The CRA has made changes to the T1 notice of assessment and notice of reassessment to provide more complete information that is easier to understand. The CRA recently released an updated version of the Registered Retirement Savings Plan (RRSP) table. Due to changes in the production of the cheque notice, if you are expecting a refund and you are not signed up for direct deposit, you will receive a paper T1 notice of assessment and cheque separately . Sign up for direct deposit to avoid waiting for a cheque in the mail.

What’s new on the income tax and benefit return

Income tax package is thinner than usual – Starting in 2024, the CRA will no longer print line-by-line instructions in the paper package. The CRA made this change after hearing feedback from individuals who file on paper. The majority of these individuals confirmed that they rarely use the line-by-line instructions when filing. Instead, they indicated that they rely on information from prior year returns and the “What’s New” section of the income tax package. By making this change, the CRA will reduce each paper package by approximately 30 pages, or about 20%. This also supports the CRA’s commitment to sustainable development and the government's efforts to go green.

Advanced Canada workers benefit – Advanced payments of the Canada workers benefit are now issued automatically under the new Advanced Canada workers benefit to those who received the benefit in the previous tax year. As a result, Form RC201, Canada Workers Benefit Advance Payment Application, was discontinued last year.

Deduction for tools (tradespersons and apprentice mechanics) – Starting in 2023, the maximum employment deduction for tradespersons’ eligible tools has increased from $500 to $1,000. As a result, the threshold for expenses eligible for the apprentice mechanics tools deduction has also changed.

Federal, provincial, and territorial COVID-19 benefit repayments – Federal, provincial, and territorial COVID-19 benefit repayments made in 2023, can be claimed as a deduction on line 23200 of your 2023 return.

First Home Saving Account (FHSA) – The FHSA is a new registered plan to help qualified individuals to save to buy or build a qualifying home. Starting April 1, 2023 , contributions to an FHSA are generally deductible and qualifying withdrawals made from an FHSA to buy or build a qualifying home are tax-free. Notices of assessment will also include a table similar to the RRSP table for the FHSA balances where applicable.

Multigenerational home renovation tax credit (MHRTC) – The MHRTC is a new refundable tax credit that allows an eligible individual to claim certain renovation costs to create a secondary unit within an eligible dwelling so that a qualifying individual (a senior or an adult who is eligible for the disability tax credit) can reside with their qualifying relation. If eligible, you can claim up to $50,000 in qualifying expenditures for each qualifying renovation completed, up to a maximum credit of $7,500 for each claim you are eligible to make.

Home office expenses for employees – The temporary flat rate method used to claim a deduction for home office expenses does not apply to 2023. Therefore, eligible employees looking to claim a deduction for home office expenses for 2023 will be required to use the detailed method and get a completed Form T2200, Declaration of Conditions of Employment , signed by their employer.

Residential Property Flipping Rule – Starting January 1, 2023 , any gain from the disposition of a housing unit (including a rental property) located in Canada, or a right to acquire a housing unit located in Canada, that you owned or held for less than 365 consecutive days before its disposition is deemed to be business income and not a capital gain, unless the property was already considered inventory of the taxpayer or the disposition occurred due to, or in anticipation of, certain life events.

Return of fuel charge proceeds to farmers tax credit – The Return of fuel charge proceeds to farmers tax credit is now available to self-employed farmers, or to individuals who are members of a partnership operating a farming business with one or more permanent establishments in Alberta, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Prince Edward Island, or Saskatchewan. 

Are you a podcast person?

You can check out our new podcast: Taxology . We simplify the world of taxes, since it can be confusing!

We’ll help you understand Canadian taxes, including how to prepare for tax season, explain different savings accounts to help kick-start your savings, and introduce you to the platform economy.

Learn more about the Canadian tax system

We have a free online learning tool to help you understand what taxes are, how to do them, and what’s in it for you. We want to empower people to do their own taxes and to make sure they know about the benefit and credit payments they could be eligible for. We have 5-minute lessons, fun quizzes, and quick videos on everything you need to know.

Take advantage of digital services and online filing

Registering for  My Account and having full access lets you manage your tax affairs online. This includes updating personal information, including your address, marital status, and phone number. You don't need to call the CRA to make these changes.

When it comes to filing your tax return,  online filing  is a great option. To file online, the CRA has a list of  NETFILE-certified tax software  products that are easy to use, fast, and secure, some of which are free!

When you have full access to My Account and file online with NETFILE-certified software, you’ll be able to use the following services:

  • Auto-fill my return which allows you to automatically fill in parts of your income tax and benefit return with information that the CRA has available at the time of the request. This service can retrieve information from the current year and seven years prior.
  • Express NOA which allows you to view your notice of assessment (NOA) in your certified tax software and in My Account, immediately after the CRA receives and processes your return.

If you combine online filing with direct deposit , you could get any refund you’re owed in as little as eight business days. Paper returns aren’t as fast, and it could take up to eight weeks to process them.

Available Services

There are services available that can provide you with support, and help you file your tax return and understand your tax obligations, including:

  • Community Volunteer Income Tax Program (CVITP) – If you have a modest income, a simple tax situation, and require assistance, a CVITP volunteer may be able to do your taxes for free. To find a clinic, please visit our  Free tax clinics  page. If you live in Quebec, please visit the  Income Tax Assistance – Volunteer Program  page for more information.
  • Liaison Officer Service – If you are self-employed or own a small business, you can learn more about your tax obligations by booking a meeting with a liaison officer . This service is free and 100% confidential.

Keeping your information safe and secure

There are ways to protect yourself from scams and fraud. One way is by knowing how the CRA might contact you. Take a moment to visit our  Scams and fraud  page, where you will find information to help you recognize the signs of a scam and learn about the ways the CRA may contact you, including by phone or mail.

More resources

  • Need help getting started? Go to  Get ready to do your taxes  for a list of what you need to know before you file your taxes.
  • The Taxes and benefits for Indigenous peoples page offers information about tax filing, as well as benefits and credits for Indigenous Peoples. Visit this webpage for helpful tips, resources and guides to help answer your questions about First Nations, Inuit and Métis taxes.
  • For answers to frequently asked questions about filing a tax return, go to  Questions and answers about filing your taxes .
  • Charlie the chatbot is also available on the CRA homepage and many of our other webpages on Canada.ca.

Media Relations Canada Revenue Agency 613-948-8366 [email protected]

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  6. TCS on Foreign Tours & Travel:- Income Tax Amendment

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COMMENTS

  1. 15 Tax Tips for Travel Agents

    Taxes, Vacation The thought of having to prepare and file your taxes for your independent travel agency may send you a panic. Just take a breath and calm down because we've got 15 tax tips for travel agents to make tax time less stressful. Before we dive into our helpful tax tips for travel agents, we need to stress something extremely important:

  2. Tax Tips for Agents

    For Incorporated Travel Agents and Sole-Proprietor Travel Agents A NEW 20% deduction on income from pass-through income entities (Schedule C, LLC, S-Corp, Partnership) for Qualified Businesses Income of $315,000 (married) or $157,500 (single). TAX SAVINGS TIP: CONSIDER INCORPORATING.

  3. Tax Write-Offs for Travel Agents: A Comprehensive Guide to Maximize

    1. Transportation Costs: Deducting Your Travel Expenses As a travel agent, you are likely to incur various transportation costs while conducting business. These expenses can be tax deductible, helping you reduce your taxable income. Here are some examples of transportation costs that you can deduct: A. Airfare

  4. Service tax

    " Air Travel Agent " means any person engaged in providing any service connected with the booking of passage for travel by air; [Section 65 (4) of Finance Act, 1994 as amended] (C) Rate of Tax & Accounting Code: ( Rate of tax is effective from 24.02.2009.) ( D ) Classification of Taxable Services:

  5. Tax Tips for Travel Agents

    The limits for 2019 are: 401 (k) base contribution: $19,000 (up from $18,500 last year) 401 (k) catch-up contribution (for taxpayers age 50 and older): additional $6,000 (unchanged) IRA base...

  6. Understanding tax obligations for online travel agencies

    An online travel agency (OTA) is a web-based marketplace where consumers can research and book a variety of travel services, including, but not limited to, lodging. An online travel agency is not a metasite or similar platform that merely advertises for businesses without engaging directly or indirectly in transmitting communications and payments.

  7. What Travel Advisors Should Know About 2021 Taxes

    You can claim your actual vehicle expenses (depreciation or lease payments, gas, and oil, tires, repairs, and insurance) based on the percentage usage or apply the standard mileage deduction rate...

  8. 10 Tax Tips for Travel Advisors for 2020

    9. Don't get mislabeled by the IRS. Be careful how you treat your business. There is a difference to the IRS between hobbyists and businesses. "You can't treat your travel agency like a ...

  9. Travel Agency Tax Deductions

    The Internal Revenue Service lets travel agents deduct general business expenses such as rent and office supplies. You are also entitled to deductions specific to the travel industry if you...

  10. Tips For Independent Travel Agents On Tax Filing

    -Unless you request an extension, you must submit your yearly tax return by April 15th and pay any taxes that are required. - You are required to record all revenue you get from your travel ...

  11. Tax Deductions for Travel Agents

    A travel agent is permitted to fully deduct the costs associated with the rent or mortgage of an office. If a travel agent works from home, she can deduct a percentage of the rent or mortgage attributed to the specific area of the residence dedicated exclusively to a home office. Travel agents enjoy not only more common tax deductions enjoyed ...

  12. Tax Tips 101

    Some agents purchase books to use as resources at home such as the Moffitt Guide and the Travel Agency Directory. Also, subscriptions to magazines are tax deductible. 5.

  13. 13 Tax Tips for Travel Agents

    2. Be aware of the small-business deduction for 2018. Many small businesses qualify for a new 20 percent standard deduction that also went into effect on Jan. 1. If you earn $20,000 selling travel ...

  14. Are Travel Related Services Taxable?

    The taxing of certain travel-related services, such as lodging, can be taxable in some states. The likes of Expedia and Orbitz have a long history of battling various states in the courts even as localities start making deals with new players in hospitality. Here's a brief overview of travel tax. The debate goes way back

  15. ASTA on the Issues: Travel Weekly

    Eben Peck is ASTA's vice president for government affairs. Contact him at [email protected]. As small businesses, travel agencies have to deal with a lot of different tax issues: federal and state ...

  16. Deducting travel expenses? Beware the IRS

    Under the IRS regulations, you have to "substantiate" your travel expenses. To do so, you must keep "adequate records" to determine: (1) the amount of the expense; (2) the time and place it was ...

  17. Service Tax on Travel Agent s Services

    Section 65 (105) (zzx) defines 'taxable service' as under — "any service provided or to be provided to any person, by a travel agent, in relation to booking of passage for travel".

  18. Travel resources

    Your agency's authorized travel management system will show the final price, excluding baggage fees. Commercial baggage fees can be found on the Airline information page. Domestic Domestic fares include all existing Federal, State, and local taxes, as well as airport maintenance fees and other administrative fees.

  19. Services Provided by Tour operators & Travel agents

    1. Domestic/ International Hotel Bookings 2. Air Ticket & Commission from Airlines Companies 3. Sale Tour Packages 4. Travel Related Services like Visa, Passport, etc. 5. Railway Reservations 6. Car Rental Services, Travel Insurance

  20. Here's what taxpayers need to know about business related travel

    Tax Tip 2022-104, July 11, 2022 — Business travel can be costly. Hotel bills, airfare or train tickets, cab fare, public transportation - it can all add up fast. The good news is business travelers may be able off-set some of those cost by claiming business travel deductions when they file their taxes.

  21. TOUR OPERATOR AND AIR TRAVEL AGENT :: SERVICE TAX

    The basic rate of service tax on tour operator service is 14% (budget 2015 amended) but tour operator can avail abatement and charge and pay service tax on part of the value. VALUE OF TAXABLE SERVICE FOR TOUR OPERATOR: To determine service tax liability, we are required to find taxable value of services first.

  22. service tax on tour operator and air travel agent

    Service tax on tour operator and service tax on travel agent both are covered under different rules. In this article, we will understand these rules. The article is also helpful for common man to understand service tax on travelling expenses and tour packages.You can understand following points in this article:

  23. Service tax on Travel Agent's (Other Than Air or Rail) Services

    (A) Date of Introduction: 10.09.2004 vide Finance ( No2 ), Act, 2004 (B) Definition and scope of service: "Travel agent" means any person engaged in providing any service connected with booking of passage for travel, but does not include air travel agent and rail travel agent. (Section 65(115a) of Finance Act, 1994 as amended) "Taxable Service" means any service provided or to be ...

  24. An Introduction to Tax Forms for Gig Economy Workers

    Form 1040-ES, Estimated Tax for Individuals: This form helps you calculate and distribute your estimated tax payments quarterly, effectively spreading out your tax liabilities throughout the year. Schedule C, Profit or Loss From Business (Form 1040 or 1040-SR): This form is your platform to report gig income or loss and claim business expenses .

  25. Service Tax Applicability on Tour Operators

    What Is "Taxable Service"? What is the Definition of "Tour"? Who Is "Tour Operator"? What Service Tax Applicability on Tour Operator i.e (what should be Rate of Service Tax and how to charge Etc)? Is There any exemption for service provided by Tour Operator ? As Per Section 65 (105) (n) of Finance Act, 1994as amended "Taxable Service" means 1.

  26. What you need to know for the 2024 tax-filing season

    Millions of Canadians file an income tax and benefit return every year. For the 2023 tax-filing season, Canadians filed more than 32 million tax returns, and more than 92% of them were filed electronically. There were also more than 18 million refunds processed, and Canadians who had a tax refund received an average of $2,262!