Update on Online Travel Company Tax Fight
A number of developments have occurred in the battle between online travel companies (OTCs) and state and local taxing authorities over liability for sales and accommodation taxes since our prior post from back in February.
As we reported previously, the results of litigation present a mixed bag. On March 4th, a Maryland District Court judge denied the OTCs’ motion to dismiss in a matter involving the hotel occupancy tax ordinance of Baltimore County, Maryland which was amended in 2003 as the ordinance was found to cover the OTCs. This matter is still pending trial. Washington, DC filed suit against the OTCs on March 22nd seeking to recoup sales taxes that the city believes are owed from the sale of rooms located there. An Oklahoma District Court ruled in favor of the OTCs on March 11th when it found that the applicable tax statute did not cover the internet-based services of the OTCs. On March 16th, a California Superior Court judge held that the City of Santa Monica's transient occupancy tax ordinance was not applicable to OTCs given the language in the ordinance, and therefore the OTCs were not liable for the $3.5 million in back taxes and penalties assessed by the city. Finally, on March 24th, an Alabama Circuit Court granted the OTCs motion for summary judgment finding that the OTCs are not engaged in the business of renting rooms or lodgings or furnish accommodations to transients and are therefore not subject to payment of lodgings tax.
In a surprising move given the current condition of Florida’s economy, two bills (SB 376 and HB 493) currently under consideration by the Florida Legislature would specifically limit the amount subject to Florida’s transient occupancy taxes to the "wholesale amount" paid by the OTCs to the hotels for the rooms that they resell and not subject the entire amount received by the OTCs from the end consumers for the rooms to these taxes.
Thank you to Beatrice Larkin for her assistance with this posting.