Web Travel Firms Sued Over Taxes

From Bloomberg News

Orbitz Inc., Expedia Inc. and a dozen other online travel companies were sued Thursday by San Diego’s city attorney, who accused them of failing to turn over $30 million in taxes they collected on hotel rooms they booked.

City Atty. Michael Aguirre said the companies failed to pay the city “transient occupancy” taxes of $6 million they charged their customers for each of the last five years.

“They’re charging the customer at the retail level and paying the city at wholesale level,” Aguirre said. “The tax is levied based on occupancy. The fact that it goes through the medium of the Internet doesn’t make any difference as to the appropriateness or scope of the tax.”


The suit, filed in Superior Court, resembles cases filed against the travel companies in at least eight cities, including Los Angeles and Philadelphia, said Art Sackler, executive director of the Interactive Travel Services Assn. Sackler’s travel industry trade group represents Orbitz, Expedia and other online companies identified in Aguirre’s lawsuit.

The suits “appear to be based on the same misconception,” Sackler said. Occupancy taxes are included in the hotel prices listed online, and are then passed on to the hotels, which are responsible for remitting the taxes to municipalities, he said.