LA Sues Travel Websites for Underpaying Hotel Taxes

Los Angeles leaders have accused Internet travel companies of costing the city millions of dollars a year by underpaying hotel taxes.


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Los Angeles claims that Priceline.com, Expedia and Orbitz, among others, are buying rooms in bulk from hotels at deep discounts, marking up prices for consumers and then paying taxes on the cheaper rate, the Orlando Sentinel reported. The Los Angeles city hotel tax rate is 14 percent, which is charged to consumers, but the Internet companies are pocketing the difference, the lawsuit says.

"The webites can't have it both ways," said Katie Buckland, a spokeswoman for City Attorney Rocky Delgadillo, according to the Associated Press. "They can't charge consumers taxes based on retail price but give back to the city only part of the money."

Following the lead of Orange County, Fla., the city filed a lawsuit last week in Los Angeles Superior Court, and wants payments going back to 1999.

The Internet companies have argued that they don't actually sell hotel rooms, they sell the service of helping consumers find cheaper rates. "We believe that the allegations in the [Los Angeles] complaint are entirely without merit and will vigorously defend against this lawsuit," said Andrea Riggs, spokeswoman for the parent company of Expedia and Hotels.com, InterActiveCorp.

Orange County, Fla. officials say that the Internet companies cost them $5.5 million in tourist-tax revenue last year. They also say that the sales tax lost could have been enough to renovate the Florida Citrus Bowl.

"I'm very reluctant to get into lawsuits of any kind,” said Orange County Comptroller Martha Haynie, “but the fact of the matter is sometimes that's what you have to do to force an issue."

You may view this press released issued last week from the Interactive Travel Services Association.

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