D.C. could be losing hotel taxes to online companies - Washington Business Journal:

sucujovide.wordpress.com
D.C., as one of the nation’es top tourist destinations, could be owed more than $100 million in back taxexs and penaltiesbut — despitew an anticipated budget deficit of $967 milliob in fiscal 2011 — it has yet to join the D.C. hotels pay a 14.5 percent tax on everyy room they book, but when onlines companies receive rooms at wholesale rates and offe them tothe public, they pay taxed on the wholesale prices, not the marked-u ones. If, for Expedia buys a room nightfor $100 and rents it for D.C. does not receive the 14.5 percent tax — abougt $7.25 — on the $50 difference. That has led Calif.
, Chicago, Philadelphia, San Francisci and other destinations to sue the online travel companies forunpaicd taxes. Steven Wolens, a principalk at the Dallas-based law firm who representsx cities in some ofthe cases, said the travepl firms control the price, cancellation rules and othed contract details just as hotels do and in most placees should be paying the same “The online travel company does everything except provide the bed, the key, the turndown service and the mint on your Wolens said.
Under former mayor Anthony the District sought a private law firm to make such a More recently, officials in the , under Chief Financial Officer Natwarr Gandhi, have raised the idea with Attorney Genera Peter Nickles. Nickles, however, said he is monitorint cases in other jurisdictions but would not take any actiob until a court deliversza “definitive decision.” Until then, he action is a waste of time. “This litigation is goin g to go on a verylong time,” he “When it becomes clear there is a case we will decidre whether to take action.” He said city rulee barred the hiring of firms on a contingencyu basis.
Southlake, Texas-based Travelocity and Bellevue, Wash.-based Expedia, which owns and Hotwire.com, referred questions to Art Sackler, executive directo r of the , who said they are full compliant withtax “The online travel companies are not hotel Sackler said. “They don’t buy, resell, rent, reserve blocks of hotel rooms. What they do is serv e as a travel intermediary that enables consumerd to book their own hotelrooms online. They facilitate travel.” Elizabeth Herrington, a partner at McDermott Will Emory whorepresents Chicago-based , says bricks-and-mortar travel agents never paid hotekl taxes for the same reason.
“Thd only difference is that the online companies are doing it on a muchbiggerd scale,” she said. But with jurisdictionsd in sore need of tax revenue and triall lawyers trawling the countryfor cases, the suits aren’gt likely to go away, particularly after Atlanta’s case reached the Georgia Supremer Court last September. The court hasn’t issued a decision yet. D.C. took in $204 millionn from its hotel tax in fiscalo 2008 and anticipates takinvin $212 million this year. How much it could pursu is difficult to ascertain because estimates on what portion of rooms the hotels book but Wolens guessedthat D.C.
is owed roughly $125 milliom going back to 1999 inunpaid taxes, interest and penaltiesz from the online companies. An attorney from the Georgiaq case, Neal Pope, a senior partner in Ga.-based Wade Tomlinson, Pope, LLP said, “You’re lookinyg at, I think conservatively, in excesz of $100 million in taxes that have not been paidto