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1 Joseph Henchman, Taxation of Online Travel Services: Lawsuits Generally Not Succeeding in Effort to Expand Hotel Taxes 1 (2012)

handle is hein.taxfoundation/srbjixz0001 and id is 1 raw text is: May 2012., No. 198 A number of lawsuits have been filed recently by cities and counties claiming that online travel companies (OTCs, such as Expedia, Hotels.com, Orbitz, Priceline, and Travelocity) are in violation of their hotel occupancy tax ordinances. 1 The suits claim that hotel occupancy tax should be paid on the amount of hotel reservation transactions that accrues to the OTC, described variously as a facilitation fee, service fee, commission, markup, or difference between the retail and wholesale rates. Altogether, some 70 lawsuits have been filed in 25 states and the District of Columbia. Put another way, the question is whether hotel occupancy taxes should be calculated based either (1) on the amount the hotel receives, or (2) on the amount the consumer pays. In the former case, hotel tax is imposed only on the hotel's charge for the accommoda- tion. In the latter case, any money spent in procuring accommodations is conceivably sub- ject to hotel tax, even if the money is spent on other services such as an online travel service, travel agent, personal assistant, or conference booking coordinator. In all but three states, ser- vices are generally exempt from sales taxation.2 City litigation efforts have also raised other serious questions by attempting to judicially enforce new interpretations of hotel occupancy tax statutes rather than pursuing legislative amendments, acting outside of established administrative procedures, and engaging in questionable oversight due to the hiring of private contingency-fee lawyers to pursue these lawsuits. In many cases, contingency lawyers 1 OTCs are sometimes referred to as third-party intermediaries (TPIs), accommodations intermediaries, travel intermediaries, or travel booking facilitators. 2 States that impose sales tax on services generally are Hawaii, New Mexico, and South Dakota.

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