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Class Action Status Granted to Municipality Against Online Travel Companies For Uncollected Tax
A federal judge in Texas granted class certification to the city of San Antonio in its lawsuit against Online Travel Companies (“OTCs”) such as Orbitz, Travelocity and Hotels.com.
San Antonio and some 175 other municipalities in Texas allege that OTCs have failed to pay “hotel occupancy taxes” owed to the municipalities. The amount owed has not been disclosed; however there is no statute of limitation barring claims for failure to pay hotel taxes, which means the OTCs may be on the hook from their first failure to pay the hotel taxes to the present.
The OTCs contract with hotels for a certain number of rooms at a designated price and then sell the rooms at a higher price to online consumers. The OTCs remit taxes based on the rate they pay the hotels. The municipalities claim that the OTCs should remit the full amount of tax based on the rate that the consumers pay to the OTCs. The OTCs argue that the difference in price that the consumers pay is a “service facilitation fee” and therefore not subject to the hotel occupancy tax. The OTCs further argue that since they are not the owners or operators of the hotels, they are not subject to ordinances, some of which were written before Internet commerce, that target owners and/or operators.
For additional information, visit:
http://www.bnasoftware.com/knowledgecenter/dtr/article.aspx?id=1148
http://www.chron.com/disp/story.mpl/metropolitan/5808961.html