[Travelandtourism] Online agencies lose hotel tax case to Washington, D.C. another reason why not to use the OTA

[cheryl echevarria]

Seems like the last few day that the OTA - Online Travel Agencies, such as Travelocity and Expedia, and how they can charge so low for the hotels rates and other area of travel industry, they don't charge and pay certain taxes.
We the real travel professionals, have to charge our customers the real prices.
More and more people are staying away from the OTAs and now they have more reason to.
This article comes from Travel Weekly - The National Newspaper of the Travel Industry.
Online agencies lose hotel tax case to Washington, D.C.By Danny KingWashington, D.C., won a court ruling against online travel agencies (OTAs) over who’s responsible for millions of dollars in annual hotel taxes when rooms are booked through intermediaries. 

The decision marks what may be the highest-profile legal victory for municipalities in the five-plus years that municipalities and the OTAs have been fighting over the issue. 

Judge Craig Iscoe of the D.C. Superior Court wrote that the defendants are responsible for transient taxes on the gross amount collected for hotel rooms from customers, and not just on the net amount paid by OTAs to hotels. 

The defendants were Expedia Inc. (comprising the Expedia, Hotwire, Hotels.com and Travelscape brands), Priceline, Travelocity and Orbitz, The four companies collectively account for more than 90% of U.S. travel sold through OTAs. 

“Based on the structure of the statute and its clear purpose, the court finds that the [OTAs] are making a retail sale that is taxable under this statute, any party making a retail sale is considered a vendor for purposes of the statute, and the statute seeks to include the total cost of a transaction in calculating gross receipts,” Briscoe wrote. “Defendants, therefore, are providing a service which is taxable under the D.C. gross sales tax law.” 

Joe Rubin, president of Washington-based trade group the Interactive Travel Services Association, called the ruling “incorrect” and “an outlier,” adding that he expected OTAs to appeal the decision. Priceline declined to comment, directing questions to ITSA. Neither Expedia, Travelocity nor Orbitz immediately responded to requests for comment on Tuesday. 

“Most other courts have ruled in favor of the [OTAs],” said Rubin. “And every state legislature in the 2012 legislative session to consider amendments to expand the tax to travel intermediaries, including OTAs, has rejected them.” 

More than two dozen municipalities have taken on the OTAs in court because OTAs typically pay about 25% less per room than they charge the customer, leaving millions of dollars worth of occupancy taxes in dispute. 

Other municipalities that have taken on the OTAs in court and lost include Houston; Philadelphia; Anaheim, Calif. (home to Disneyland); and Branson, Mo. Notably, a 2010 ruling that awarded the city of San Diego $21.2 million was overturned last September. 

Out of the 29 cases where a municipality has taken the OTAs to court over alleged tax shortages, 22 were decided in favor of the OTAs, while another four involved rulings where the OTAs weren’t liable for back taxes, according to Rubin. 

The most notable exceptions to this trend, prior to the Washington case, involved San Antonio and Florida’s Orange County, which includes the city of Orlando and the Walt Disney World Resort. Orange County last year reached a settlement with Expedia in which Expedia paid the county an undisclosed amount to resolve a 2006 case. 

Meanwhile, in a July 2011 ruling involving San Antonio and 172 other Texas cities, including Dallas and Austin, the OTAs lost a $20.6 million decision. The presiding judge ruled that the OTAs were sometimes, in effect, charging consumers for the tax by imposing a surcharge that the OTAs kept. 

As for Washington, how much money the OTAs will have to pay is unclear. In Monday’s statement announcing the ruling, D.C. Attorney General Irvin Nathan noted that the decision wasn’t limited to the customary three-year statute of limitations on back taxes, and added that no total tax tab has been tallied. 

“The court’s ruling today is an important step in our efforts to ensure that the District receives the substantial sums it is owed by online companies selling hotel rooms in D.C.,” said Nathan. 


Cheryl Echevarria, PresidentNFB Travel and Tourism Division
Leading the Way in Independent Travel!
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Cheryl Echevarria, Ownerhttp://www.echevarriatravel.com631-456-5394reservations@echevarriatravel.comhttp://www.echevarriatravel.wordpress.com
2012 Norwegian Cruise Line University Advisory Board Member.
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