New Hampshire court sides with travel websites in tax case

The New Hampshire Supreme Court on Friday sided with online travel websites in a dispute over collection of the state’s rooms and meals tax.

The state sued Expedia, Priceline, Orbitz and Travelocity in 2013 in hopes of recovering hundreds of thousands of dollars it claims it is owed because it collects taxes only on the lower, wholesale rate the companies pay hotels instead of the higher, retail price they charge consumers. The state argued that is unfair to both consumers, who aren’t given a detailed breakdown on the “taxes and fees” they pay, and to local businesses that pay the tax on the full retail rate.

The 9 percent rooms and meals tax brings in more than $300 million per year, and the state would reap hundreds of thousands more if it had won its case. A superior court judge rejected the state’s argument, however, that the sites should be considered hotel “operators” subject to the tax. The state Supreme Court upheld that finding Friday, saying the companies neither manage nor control the hotels.

“Nor do they own, staff or maintain the hotels,” the court wrote. “They have no involvement in the day-to-day management or running of the hotels.”

The court also rejected the state’s argument that the websites met the definition of “operator” because they provide “hotel-related services” such as inspecting and rating properties, advertising and collecting payments. Justices pointed to another case in which a court reasoned that when a hotel contracts with a cleaning service that hires and pays workers, the cleaning service does not become an operator of the hotel.

According to the Travel Technology Association, which represents the online travel industry, courts in 23 states have found that online travel agencies do not operate hotels or resell hotel rooms as retailers, placing them outside the scope of occupancy taxes.

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