Online agencies lose hotel tax case to Washington, D.C.

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  1. ACMM
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    Posted on: September 25, 2012
    Online agencies lose hotel tax case to Washington, D.C.

    By Danny King
    Washington, D.C., won a court ruling against online travel agencies (OTAs) over who’s responsible for millions of dollars in annual hotel taxes when rooms are booked through intermediaries.

    The decision marks what may be the highest-profile legal victory for municipalities in the five-plus years that municipalities and the OTAs have been fighting over the issue.

    Judge Craig Iscoe of the D.C. Superior Court wrote that the defendants are responsible for transient taxes on the gross amount collected for hotel rooms from customers, and not just on the net amount paid by OTAs to hotels.

    The defendants were Expedia Inc. (comprising the Expedia, Hotwire, and Travelscape brands), Priceline, Travelocity and Orbitz, The four companies collectively account for more than 90% of U.S. travel sold through OTAs.

    “Based on the structure of the statute and its clear purpose, the court finds that the [OTAs] are making a retail sale that is taxable under this statute, any party making a retail sale is considered a vendor for purposes of the statute, and the statute seeks to include the total cost of a transaction in calculating gross receipts,” Briscoe wrote. “Defendants, therefore, are providing a service which is taxable under the D.C. gross sales tax law.”

    Joe Rubin, president of Washington-based trade group the Interactive Travel Services Association, called the ruling “incorrect” and “an outlier,” adding that he expected OTAs to appeal the decision. Priceline declined to comment, directing questions to ITSA. Neither Expedia, Travelocity nor Orbitz immediately responded to requests for comment on Tuesday.

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