hotel tax

Who Will Win the Merchant Hotel Room Occupancy Tax Battle?

by RobertKCole on March 19, 2010

Hundreds of local US tax authorities are attempting to apply room occupancy tax rates on the margin captured by online travel companies under merchant model hotel booking transactions. The question raging in courtrooms, executive suites and now, the halls of congress is “Who deserves the money?”

This week, the American Hotel & Lodging Association (AH&LA) held its annual Legislative Action Summit in Washington, DC. A significant portion of the agenda was dedicated to discussing the impact of hotel merchant occupancy taxes and expressing the industry’s views to US federal legislators. Over the past decade, this issue has spawned litigation, now numbering in the hundreds of cases, by cities and counties to recover alleged lost tax revenues from the online travel agencies.

The rhetoric recently escalated due to an open letter addressed to the US hotel industry requesting support of proposed legislation that would eliminate merchant hotel room occupancy tax assessments. The letter was drafted by a consortium of organizations representing online travel sellers including: the American Society of Travel Agents (ASTA), the Business Travel Coalition (BTC), the Hotel Electronic Distribution Network Association (HEDNA), the Interactive Travel Services Association (ITSA), and the U.S. Tour Operators Association (USTOA).

For those desiring more detail on the history, stakes and and ramifications of the potential outcomes, here is a comprehensive blog post on the topic: Bathing in the Hotel Merchant Tax Quagmire

Many challenges face the global travel industry. New business models, competitive marketing strategies, emerging mobile technologies, interactive customer engagement and the constant need to drive profitability create complexities that were never previously imagined by hotels, destinations, airlines or online travel companies.

Each week, RockCheetah and the Views from a Corner Suite blog will present a new poll to gauge the sentiment of the travel industry, and of course, allow respondents to comment on the issues at hand.

Tagged as: hotel, hotel tax, online travel companies, poll, travel

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Bathing in the Hotel Merchant Tax Quagmire

by RobertKCole on December 22, 2009

There is no economic recession when it comes to courts litigating hotel merchant tax cases between various local tax jurisdictions and the online travel agencies. With an estimated seventy cases at various stages of the process, legal teams representing both sides appear to have guaranteed job security into the foreseeable future.

Quicksand
Creative Commons License photo credit: publicenergy

As municipalities, courts, states, online travel agencies, hotels, lobbyists and lawyers on contingency continue battling, it seems the more they struggle, the deeper they sink

The fundamental issue is whether Online Travel Agencies (OTAs) should be held responsible for collecting hotel occupancy taxes on a) the retail price charged to consumers, or b) on the net wholesale rate paid to the hotel – the current practice. Simply put, the question for juries across the land is if the OTA’s should be paying room tax on markups that are embedded in the quoted room rate.

This topic has been simmering for years, initially with several cases dismissed by courts asking the tax authorities to exhaust administrative remedies. Earlier this year, a couple smaller jurisdictions won victories over the OTAs, but more recently, the tide has turned against the OTAs, with several high profile cases decided in favor of the local municipalities. It is very important to note that the vast majority of these verdicts are under appeal by the OTAs.

Instead of becoming more straightforward as the cases progressively create precedents, verdicts are creating more confusion. New jurisdictions are electing to litigate, while others are choosing to rewrite their tax codes. Smaller markets like Columbus, Georgia have been boycotted by OTAs following court victories, but the same has not held true in larger destinations like Anaheim. A Washington State consumer class action targeted Expedia, adding a new front for the OTAs to defend (Priceline is also currently named in two consumer class actions.) New York City decided to make package booking margins taxable as well. Despite all the activity, there has been no advancement in technical standards or operational process improvements that simplify the identification, recording or remittance of hotel merchant taxes. It seems all parties are in some form of denial regarding the long term impact of changes to the hotel tax environment. continue reading →

Tagged as: Expedia, hotel, hotel tax, online travel companies, Orbitz, Priceline, Travelocity

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Online Travel Companies in Hotel Tax Squeeze Play

by RobertKCole on June 2, 2009

A recent King County summary judgment against Expedia (NASDAQ:EXPE), reportedly the largest consumer class action suit in Washington State history, creates a new front in the growing litigation battles facing the Online Travel Companies (OTC’s).  Expedia competitors Priceline (NASDAQ:PCLN), Orbitz (NYSE:OWW), and privately held Sabre’s Travelocity potentially risk facing similar claims, although their exposure is somewhat limited relative to Expedia due to lower hotel sales volume and merchant model transaction ratios.

Online Travel Companies getting squeezed by cities and consumer class action suits
Creative Commons License photo credit: capsicina

Cities, and now consumers, look to squeeze Online Travel Companies for hotel merchant taxes

The King County judgment is significantly different from earlier claims targeting the Online Travel Companies.  High profile cases, such as the claim filed by the City of Anaheim, focused on the local taxing jurisdictions attempting to secure the hotel merchant tax differential from the OTC’s.  In the Washington State case however, the plaintiffs seek compensation to consumers for the hotel merchant tax differential.  The suit fundamentally alleges that the tax was collected on a retail basis from consumers, but remitted on a wholesale basis to the hotel (and then passed through to local jurisdictions.)  In short, the suit claims the tax amount paid by consumers was overstated by Expedia and the difference should be refunded.  Expedia is refuting these claims and appealing the ruling. continue reading →

Tagged as: Expedia, hotel, hotel tax, online travel companies, Orbitz, Priceline, Travelocity

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