District of Columbia: Online Travel Companies Owe Hotel Tax
- Sep 25, 2012 | Gail Cole
According to a recent ruling by the Superior Court of the District of Columbia, the District may collect sales tax on hotel rooms purchased through Online Travel Companies.
A September 24, 2012, news release from the District of Columbia Office of the Attorney General states that "the District won a summary judgment ruling that four major online travel companies are liable for unpaid hotel room taxes."
At issue is the difference between wholesale prices and retail prices. The District of Columbia alleges that certain Online Travel Companies have been selling hotel rooms at retail rates, but paying taxes to D.C. on wholesale rates.
D.C. Superior Court Judge Craig Iscoe ruled that the city "is entitled to receive hotel room taxes based on the online travel companies retail sale prices."
District Attorney General Irvin B. Nathan announced that the "Court's ruling…is an important step in our efforts to ensure that the District receives the substantial sums it is owed by online companies selling hotel rooms in D.C."
Ben Nuckols writes in the Huffington Post that "Joseph Rubin, president of the … trade group that represents the online companies, said he was confident the companies would win on appeal if they decided to do so." "The industry contends that the difference between the wholesale rate the companies pay and the rate charged to consumers is a service charge that should not be taxed."
As other portions of the case are not yet decided, the District may not yet start collecting taxes. However, Judge Iscoe found that the tax liability of online travel companies "is not limited by the three-year statute of limitations" that ordinarily applies.
Issues still to be decided include, but are not limited to:
- total amount of taxes owed
- whether or not Defendants are subject to negligence or fraud penalties
- liability of the parent corporations of Expedia and Orbitz
This issue is being addressed throughout the country. Read about Ohio and Online Travel Companies.
Read the full decision here.