2025 tax preference review: Travel Agents and Tour Operators
25-10 final report | December 2025
Geoff Cunningham, research analyst
Pete van Moorsel, tax review coordinator; Eric Thomas, legislative auditor
Legislative Auditor's conclusion
Savings for large beneficiaries are increasing. The number of small beneficiaries and their savings are decreasing.
Key points
- Travel agents and tour operators receive one of two preferential business and occupation (B&O) tax rates based on their taxable earnings. Beneficiaries saved $5.8 million in fiscal year 2024.
- From fiscal year 2020 through 2024, savings for large beneficiaries increased 107%.
- The lower preferential rate, together with the Small Business Credit, reduced B&O tax for small beneficiaries by 90%.
- However, the number of small beneficiaries and their savings are decreasing.
Legislative Auditor’s recommendations
The Legislative Auditor makes three recommendations.
Recommendation #1
The Legislature should continue the 0.275% preferential tax rate for small beneficiaries.
- The preference is meeting the inferred objective of providing tax relief to travel agents and tour operators, particularly those with annual incomes of $250,000 or less.
- Still, the number of small beneficiaries is in decline.
Legislation required: No.
Fiscal impact: If the Legislature continues the preference, small beneficiaries will continue to save $2.1 million in the 2027-29 biennium.
Implementation date: Not applicable.
Commission recommendation: Endorse without comment (HTML)
Recommendation #2
The Legislature should add an objective and performance metrics for the 0.275% preferential tax rate for small beneficiaries.
Legislation required: Yes.
Fiscal impact: None.
Implementation date: At the discretion of the Legislature.
Commission recommendation: Endorse with comment (HTML)
Recommendation #3
The Legislature should review the 0.9% preferential tax rate for higher earners. If it continues the preference, it should add an objective and performance metrics.
Legislation required: Yes.
Fiscal impact: Depends on the Legislature's policy choice.
Implementation date: At the discretion of the Legislature.
Commission recommendation: Endorse without comment (HTML)
Video summary
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Travel Agents and Tour Operators (HTML)