How Seller of Travel Laws Impact Service Fees
This is part 2 of a 2 part series!Did you catch wind of our first article on developing a service fee structure? If not, you can find it here.
Seller of Travel Laws and Service Fees: What to Know
There’s a ton to consider when creating a service fee structure for your agency. One of the things easy to overlook? Understanding how seller of travel laws will impact your service fee structure.
In our previous article, we chatted a bit on different kinds of service fees, discussed reasons why agents reported not charging fees, provided a few resources for processing service fees, and highlighted how three travel agents decided on their fee structure.
For this article, we’re going chat on the complexities of service fees when your agency is located in states with seller of travel laws—or selling to clients in states with seller of travel laws.
We know that there is nothing fun about seller of travel laws and making sure you're on the right side of the law. Absolutely nothing. That's why we decided to spice things up and create a free service fee agreement template that travel agents can customize and use with their clients! Special thanks to WhirlAway Travel’sCOO, Jamie Jones for sharing her own forms to help guide our template.
If that's not quite the resource you're looking for, we have a few others out and about on the site!
Service Fees for Hosted Agents in Seller of Travel States
We discuss seller of travel requirements, state by state, at length in this article. Here we’re going to dig into the intersections between seller of travel laws and service fees. But don’t take it from me about legalities. So I reached out to Mark Pestronk, a long-time travel lawyer and a real expert in the industry. He edits a column in Travel Weekly, that I highly recommend (and which you’ll find linked in many of our articles). If you’re looking for a travel lawyer, Mark is definitely on the shortlist of those who we’d recommend.
Below, Mark discusses the legalities of implementing a service fee structure for agents that operate their business in or sell to clients who reside states that have seller of travel requirements.
Since some readers that used a host agency expressed a belief they were unable to charge fees in seller of travel states, I asked Mark via about the legalities of hosted independent contractors charging service fees. Here’s what he had to say:
This issue is whether an IC, who otherwise qualifies for an exemption under a seller of travel law, will lose his or her exempt status merely by charging a fee to clients.
The answer depends on the state law of each of the five states that have seller of travel registration laws: California, Florida, Hawaii, Iowa, and Washington. Each state is different.
1. California: One of the seven requirements for exemption is that the IC, 'Does not receive any consideration for air or sea transportation or other travel services from the passenger.' So, this rules out charging a fee. However, if the fee is imposed by the host and merely collected by the IC on behalf of the registered host, I think that you could get around this requirement, even if the host later remitted the fee to the IC. The reason why this workaround might work is that funds collected by the registered seller are protected by a trust account or bond.
2. Florida: An exempt IC must 'not receive a fee, commission, or other valuable consideration directly from the purchaser for the sale of travel.' A prohibition on 'directly' receiving implies that the IC can collect the fee “indirectly,” in the manner set forth above.
3. Hawaii: The law applies only to “travel agencies.” It is not clear whether IC’s qualify as travel agencies, but regardless of whether they do, there is no prohibition on charging fees.
4. Iowa: Same as Hawaii.
5. Washington: An IC need not “be registered if: … all money received for travel services by the … independent contractor, or outside agent is collected in the name of the registered seller of travel and processed by the registered seller of travel as required under this chapter.”
So, an IC can collect fees 'in the name of' the registered host, have the host process them, and deposit them into the required trust account. As with California and Florida, I see no prohibition on having the host remit the fees to the IC after collection.
In a nutshell, I believe that an IC would be safe in collecting a fee charged by the host, as long as the funds were treated as required by the statute, even if the host later remitted the fees to the IC."
In Summary: Here's what Mark said above, but in layperson-speak:
1. CA, WA & FL: If you collect service fees you must a.) Collect them through whomever holds the seller of travel registration. For many agents, this may be their host agency, which means the service fees are subject to your commission split with the host—bummer) or b.) apply for your own seller of travel number, set up your own merchant account (Stripe, Square, PayPal, etc.) and run your fees through there. If you go this route, make sure you have your own Errors & Omissions insurance policy. Service fees run through your own merchant account will not be covered under a host agency's policy.
2. HI & IA: There are no explicit prohibitions against charging fees.
If a travel agent has their own Seller of Travel number—hosted or otherwise—there is no conflict with charging a service fee in any of the seller of travel states so long as the required processes are followed.
A Free Service Fee Template for Travel Agents
Okay, so we’ve chatted a bit on legal biz, and we’re going to keep the legal jargon going by providing a free Service Fee Agreement Template for travel agents to customize and use with their clients.
This template comes courtesy of Jamie Jones, COO of WhirlAway Travel, who shared her own personal service fee agreement to help HAR create a template. So when you see her next, buy her a drink!
Without further ado:
If that's not enough to scratch your itch, Mark Pestronk, who offers free sample disclaimers here. Want more? You can find other examples of disclaimers here and less legal-heavy travel agency forms here.
Our service fee template in particular ensures that clients understand your service fee structure and their obligation to pay it! Wondering what the service fee template looks like? Here's a peek:
Customizing the Service Fee Template to You Agency's Needs!
A few things: In order to use the template above, you'll need to start a Cognito Account. We use paid functions to create the form (a signature line and the ability to download the final pdf). The payment for this functioning (and other abilities) is $10/month for the Pro Plan. In the Pro Plan, you also have the ability to use Stripe as a payment option if you want to want to charge for service fees that way. If you want to use PayPal or Square, you'll need to upgrade to a higher plan.
If you don't have a Cognito account yet, here is a referral link that will give you a free month on their Pro Plan! Full disclosure, that is an affiliate link so if you end up purchasing a plan, HAR does earn some credits.
In addition to Cognito, DocuSign is another option:
- Cognito: $10/mo for Pro Plan (needed for electronic signature and for clients ability to download copy of form).
- DocuSign: Fees start at $10/mo, $25/mo if you want to send more than 5 documents for signature per month. (Jamie uses this form, and her templates look GREAT).
There's other resources too—but we're not familiar with them. Do you have any programs you'd recommend for online document signing? If so comment below! We love options here at HAR :)
Tutorial on Customizing Your Travel Agent Fee Template
We won't leave you hanging! Here's a tutorial you can check out for a few tips on how to customize your service fee template!
Here's my own little disclaimer: I hope it goes without saying that I'm not a lawyer by any stretch of the imagination. So take the service fee template with a grain of salt! It's not a bad idea to have a lawyer take a look at how you want your terms and conditions tailored to fit your agency needs exactly.