Montana, Florida and more than 60 local governments are suing online travel sites such as Travelocity, Priceline, Expedia and Orbitz for not paying the hotel taxes on the rooms they book.
Similar lawsuits are springing up from local governments all over the country — including in New York, Pennsylvania and New Jersey — saying these online travel companies should be paying taxes on the facilitator fees they receive when booking hotel rooms for their sites’ visitors.
Online travel sites such as Travelocity and Priceline work much like offline travel agents, booking hotels, airplane tickets, car rentals and vacation packages for customers, and then collecting a facilitator’s fee from the hotels, airlines and rental agencies.
The State of Montana in its lawsuit says it is cheated out of millions of dollars in state lodging taxes every year because people who book through online travel companies pay retail room rates but only pay taxes on wholesale rates. The online travel companies pocket the rest, the suit claims.
“There is very little factual or legal support for this,” said Andrew Weinstein, spokesman for the Interactive Travel Services Association, the industry group for companies such as Priceline. “The online travel industry isn’t hotel owners or operators.”
Connecticut — which has a 12 percent hotel tax and is considering an increase to 15 percent — hasn’t filed a lawsuit to date. The state Attorney General’s Office said any lawsuit would be initiative by the Department of Revenue Services.
Tom Costello is the CEO, Partner & Co-Founder of Groups International, a company that provides marketing, consultative services, and technology solutions to the group and leisure travel markets. Connect with him on Twitter, LinkedIn, and Facebook or contact him by email.