This is not a final judgment. The online travel agencies (OTAs) do not owe any municipality in Texas anything at this time. The judge told the parties that he would not render judgment prior to April 4. Given previous rulings in the state in our favor, we feel confident that the fifth circuit will reverse its decision as it is inconsistent with Texas law as defined by the Texas appellate courts.
ORIGINAL ITEM: Dallas and 172 other Texas cities could share a $55 million windfall from online travel bookers who failed to pay all of the hotel occupancy tax they owed, according to terms reached in a federal lawsuit.
A host of online booking companies, including giants Expedia, Travelocity and hotels.com, filed papers with a federal court in San Antonio Tuesday agreeing to the amount of back taxes, penalties and interest they owe under a judge’s order.
U.S. District Judge Orlando Garcia must still enter a final judgment in the case but will use the amounts filed Tuesday in crafting his ruling.
Dallas alone could stand to reap almost $10 million, the companies agreed.
But the fact that the cities and the companies have agreed how much is owed doesn’t mean the cities should look for a check in the mail.
Steve Wolens, who is representing cities in the class-action suit, said he fully expects the travel companies will appeal the judgment.
But for the first time since San Antonio led other cities in filing suit in 2006 – and won a critical jury verdict in 2009 – cities now have a clear idea of what they stand to gain if the case is upheld on appeal.
The unanimous verdict in 2009 was a key moment in cities’ fight against the online bookers because it determined that the companies “control” the hotel rooms they sell online.
The companies have insisted that the hotels they trade with actually control the rooms.
The companies purchase unsold inventory at wholesale, mark it up, and sell it online to travelers. (A spokeswoman for an online booking association says this is “absolutely not” the correct way to described the businesses. I am waiting for a clarification on that.)
As a result, the booking companies have paid taxes only on the wholesale cost they pay hotels for the rooms – not on the retail price they charge customers who stay in the room.
The jury determined, however, that the online companies actually control the rooms they sell, in much the same way the physical hotels control the rooms. As a result, they are responsible for paying cities the taxes on the retail sales price – the same way hotels do.
But even now, more than 2 1/2 years after the verdict, the online bookers have refused to pay taxes on the full retail rate.
Wolens said that is part of a long history the companies have in refusing to pay what they rightfully owe.
“Going back to 2002 there was an opinion from the Texas comptroller telling online travel companies they needed to remit the price based on the retail price the customer pays for the room,” Wolens said.
That opinion was ignored as were subsequent opinions from the state, he said.
A series of similar cases around the country have been met with mixed verdicts. Houston, for example, did not join other Texas cities in the class action suit and instead took its own case to state court.
It lost its fight in a summary judgment handed down in early 2010.
Jump to see what your city might stand to gain.
Online travel bookers could owe Dallas nearly $10 million in back taxes and … – Dallas Morning News (blog)