According to an article released by The Desert Sun, several desert cities are preparing for a fight with online hotel booking agencies they believe have withheld at least hundreds of thousands of dollars in tourism-related taxes in recent years.
Coachella Valley cities count on the money, known as a transit occupancy tax, to help pay for city essentials like police and fire services.
“TOT and sales tax go into our general fund and that’s what keeps our city running,” said La Quinta Mayor Don Adolph, whose city, officials estimate, has lost between $300,000 and $400,000 in TOT revenue since 2001.
“To provide our citizens service, that’s what our taxes are there for — and if we’re not getting it, that’s not quite fair to the city or our residents.”
La Quinta and a couple of other desert cities have adopted ordinances and are even considering joining in on litigation against online hotel booking agencies — with the four major companies being Expedia.com, Orbtiz, Priceline and Travelocity.
The cities, as well as the League of California Cities, claim the online agencies are withholding TOT, a bed tax charged to hotel customers.
Dan Carrigg, legislative director for the state league, calls it a scheme in which online travel companies are able to purchase hotel rooms at a discounted rate, charge its online customers more for a hotel room but only pay TOT on the lower rate, pocketing the remaining tax dollars as profit.
That loss in revenue has amounted to about $20,000 in general fund revenue for Palm Desert this year alone “from TOT being siphoned off by online travel companies,” said Palm Desert City Manager Jim Wohlmuth.
Indian Wells city officials said they also believe they have lost about the same amount.
More than 400 California cities and 55 counties levy a local TOT, according to the League of California Cities.
And while some Coachella Valley city officials haven’t completed calculations, valleywide estimates may be at least $1 million in lost TOT this fiscal year.
“They’re trying to squeeze in more profit at the expense of the consumers,” Carrigg said of the online companies.