Does Expedia Owe Millions of Additional Hotel Occupancy Taxes?
- Feb 10, 2015 | Gail Cole
Online travel companies (OTCs) such as Expedia have been long embroiled with states over taxes. The gist of the argument is as follows: Numerous state and local goverments say OTCs owe local occupancy taxes on the retail value of the rooms. OTCs say they owe the taxes only on the wholesale or discount price of the rooms they book. Per transaction, the difference between the two doesn’t amount to much; collectively, it amounts to hundreds of millions.
According to Expedia’s recently released annual report to the Securities and Exchange Commission for the fiscal year ending December 31, 2014, eighty-eight lawsuits have been “filed by cities, counties and states involving hotel occupancy taxes.” Twenty-three of those cases have been dismissed “based on a finding that we and the other defendants were not subject to the local hotel occupancy tax ordinance or that the local government lacked standing to pursue their claims.”
Expedia takes the stance that “the ordinances at issue do not apply to the services we provide, namely the facilitation of hotel reservations, and, therefore, that we do not owe the taxes that are claimed to be owed. We believe that the statutes and ordinances at issue generally impose occupancy and other taxes on entities that own, operate or control hotels (or similar businesses) or furnish or provide hotel rooms or similar accommodations.”
In New York, Oregon and Washington D.C., regulations have been amended “to clarify that travel websites owe taxes on retail room rates charged to customers” Other states, like Virginia, may follow suit. In the meantime, litigation continues. The Hawaii Supreme Court is expected to decide soon if the OTCs are liable for more than a decade of uncollected taxes. “Losing in Hawaii could leave the company, along with its subsidiaries, on the hook for as much as $626 million in taxes, penalties, and interest through 2015.” Losses in other state could bring that amount closer to $847 million (Bloomberg Business).
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photo credit: Four Points by Sheraton LAX airport: Hotel exterior via photopin (license)