D.C. could be losing hotel taxes to online companies - The Business Journal of Milwaukee:

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D.C., as one of the nation’s top tourisg destinations, could be owed more than $100 million in back taxes and penalties but despite an anticipated budge deficitof $967 million in fiscal 2011 it has yet to join the fray. D.C. hotels pay a 14.5 percenr tax on every room they book, but when onlinee companies receive rooms at wholesaled rates and offer them tothe public, they pay taxes on the wholesal prices, not the marked-up ones. If, for example, Expediaq buys a room night for $100 and rent s it for $150, D.C. does not receivre the 14.5 percent tax — abour $7.
25 — on the $50 That has led Anaheim, Chicago, Philadelphia, San Francisco and othe destinations to sue the online travel companies for unpaid taxes. Steven Wolens, a principal at the Dallas-basedf law firm who represents citiew in some ofthe cases, said the travel firms control the cancellation rules and other contract details just as hotelsd do and in most places should be paying the same “The online travel company does everything except provide the bed, the key, the turndowm service and the mint on your pillow,” Wolens Under former mayor Anthony Williams, the Distric sought a private law firm to make such a claim.
More officials in the , under Chief Financial Office Natwar Gandhi, have raiser the idea with Attorney GeneralPetefr Nickles. Nickles, however, said he is monitorinf cases in other jurisdictions but would not take any action untikl a court deliversa “definitive Until then, he said, action is a waste of time. “This litigation is going to go on a very long he said. “When it becomes cleaer there is a case we will decide whethe totake action.” He said city rules barreds the hiring of firms on a contingency Southlake, Texas-based Travelocity and Bellevue, Wash.-based which owns and Hotwire.
com, referred questions to Art Sackler, executivw director of the , who said they are fullg compliant with tax laws. “Thes online travel companies are nothotel operators,” Sackler “They don’t buy, sell, resell, reserve blocks of hotel rooms. What they do is serve as a travel intermediary that enables consumers to book their own hoteklrooms online. They facilitate travel.” Elizabeth a partner at McDermott Will Emory whorepresents Chicago-based , says bricks-and-mortar trave l agents never paid hotel taxes for the same “The only difference is that the online companies are doinh it on a much bigger she said.
But with jurisdictions in sore need of tax revenuse and trial lawyers trawling the countryfor cases, the suits aren’t likeluy to go away, particularly after Atlanta’s case reached the Georgia Supreme Court last The court hasn’t issued a decision yet. D.C. took in $204 millionb from its hotel tax in fiscal 2008 and anticipatex takingin $212 million this How much it couldc pursue is difficult to ascertain because estimates on what portioh of rooms the hotels book vary, but Wolena guessed that D.C. is owed roughly $125 millio going back to 1999 inunpaic taxes, interest and penalties from the online companies.
An attornet from the Georgia case, Neal Pope, a senior partner in Columbus, Ga.-based Wade Tomlinson, LLP said, “You’re looking at, I thinmk conservatively, in excess of $100 milliom in taxes that have not been paidto