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Hotels.com LP, Expedia Inc., Hotwire Inc. and eight other online travel companies have been ordered to pay more than $55 million to settle a class action lawsuit accusing the companies of failing to collect and remit hotel occupancy taxes to Texas cities.
On April 4, U.S. District Judge Orlando Garcia ordered the companies to pay $55 million in back hotel occupancy taxes to 173 Texas cities. The cities argued they were owed the taxes based on the total retail amount charged to customers, not the discounted wholesale room rate customers pay hotels through the booking companies.
The court had determined earlier in 2011 that “extra person fees” and other mark-ups are taxable under local Texas city ordinances.
Judge Garcia sided with the cities and ordered the online travel companies to pay the back taxes, including interest and a penalty fees, and to immediately change their business practices to pay the proper tax amount required by local ordinances.
The companies argue that the ordinances at issue are outdated and were written before the Internet existed. They also said the judgment is inconsistent with state law and will raise travel costs in Texas, and that they plan to appeal the decision.
The attorney representing the city of San Antonio said he expects an aggressive fight with the booking companies in the appeals court, but that the cities will ultimately prevail.
“We’re going to stress the fact Texas law is clear the tax is owed on the price the customer pays for the room,” he said in a statement.
The case is City of San Antonio, Texas, et al. v. Hotels.com LP, et al., Case No. SA-06-CA-381-OG, U.S. District Court, Western District of Texas, San Antonio Division.
UPDATE: Expedia, Hotwire and other online hotel defendants are denied a retrial in the class action lawsuit settlement.
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2 thoughts onJudge Orders $55M Settlement in Hotels.com Occupancy Tax Class Action
Because what they are saying is the customer starts out paying for the room at a discount price but then “extra person fee” is added and then maybe some other fee is added and the city is saying they want taxes for the whole amount the customer paid, not just the room price.
hope the city loses. why should they get money based on the full amount as to what was actually paid