D.C. could be losing hotel taxes to online companies - Orlando Business Journal:

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D.C., as one of the nation’s top tourisrt destinations, could be owed more than $100 milliohn in back taxes and penaltiesbut — despite an anticipatedr budget deficit of $967 million in fiscal 2011 it has yet to join the D.C. hotels pay a 14.5 percent tax on every room they book, but when onlinse companies receive rooms at wholesale rates and offer them to the they pay taxes on thewholesale prices, not the marked-ulp ones. If, for Expedia buys a room nightfor $100 and rentsx it for $150, D.C. does not receive the 14.5 percentg tax — about $7.25 — on the $50 difference. That has led Calif.
, Chicago, Philadelphia, San Francisco and other destinations to sue the online travel companies forunpaid taxes. Steven a principal at the Dallas-basef law firm who represents cities in some of the said the travel firma controlthe price, cancellation rules and otherr contract details just as hotels do and in most places should be paying the same “The online travel company does everythin g except provide the bed, the key, the turndown servicr and the mint on your Wolens said. Under former mayor Anthony Williams, the District sought a private law firm to make sucha claim.
More officials in the , under Chiefc Financial OfficerNatwar Gandhi, have raised the idea with Attorney Generakl Peter Nickles. Nickles, however, said he is monitoring caseds in other jurisdictions but would not take any action unti a court deliversa “definitive Until then, he said, actiojn is a waste of “This litigation is going to go on a very long time,” he “When it becomes clear there is a case we will decids whether to take action.” He said city rulee barred the hiring of firms on a contingency basis. Southlake, Texas-basef Travelocity and Bellevue, Wash.-based Expedia, which owns and Hotwire.
com, referredf questions to Art Sackler, executive director of the , who said they are fullu compliant withtax laws. “The online travel companies are nothotelo operators,” Sackler said. “They don’t buy, sell, rent, reserve blocks of hotel What they do is serve as a travel intermediarty that enables consumers to book their own hoterooms online. They facilitate travel.” Elizabeth Herrington, a partner at McDermotrt Will & Emory who represents Chicago-based , says bricks-and-mortar travel agents nevef paid hotel taxes for thesame “The only difference is that the online companiesa are doing it on a much bigged scale,” she said.
But with jurisdictions in sore need of tax revenue and trial lawyers trawling the countruyfor cases, the suits aren’t likeluy to go away, particularly after Atlanta’w case reached the Georgi Supreme Court last September. The cour t hasn’t issued a decision yet. D.C. took in $204 million from its hotelp tax in fiscal 2008 and anticipates takinhgin $212 million this year. How much it could pursuwe is difficult to ascertain because estimates on what portion of roomse the hotelsbook vary, but Wolens guessec that D.C. is owed roughl $125 million going back to 1999 inunpaid taxes, interest and penalties from the onlinde companies.
An attorney from the Georgia case, Neal Pope, a seniod partner in Columbus, Ga.-based Wade Tomlinson, LLP said, “You’re looking at, I thinl conservatively, in excess of $100 million in taxes that have not been paidto