Multi-State Tax Law Blog
Many states, including my home state of Florida, have been unbundling the online travel company mess from a tax perspective over the last few years. Like many state and local tax issues, states have been all over the map when it comes to the taxation of new technology-type transactions. In the online travel industry, companies like Orbitz, Expedia, and Hotels.com (“OTCs”) purchase rooms at a low rate and facilitate a deal with customers to rent them from the hotel. Like many businesses tend to do, the online travel company turns a profit in this transaction. The problem that has arisen is whether the state and its counties should collect tax on the price charged from the hotel to the OTC or the higher price charged from the OTC to the customer.
One of the few states that seem to have a final determination is Georgia. Georgia is one of the few states that had the issue go up the judicial ladder to its Supreme Court. Ultimately in City of Atlanta v. Hotels.com, 710 SE 2d 766 (Ga 2011), the court ruled in favor of the city and determined that the bed tax applied to the higher amount. As an aside, many states have ruled exactly the opposite and it is worth pointing out that the counties, not the states, have been the aggressors in these cases.
After remaining dormant for a few years, the Georgia Supreme Court ruled that the case was still not closed. Apparently, in the opinion, the Georgia Supreme Court ruled in a footnote that the trial court did not rule on the city’s conversion claim, so it could not rule on the claim on appeal. The case went back to the trial level court on this issue, and the city amended its complaint to add other counts against the OTCs.
The OTCs decided to attempt to force the trial court to close the case (legally known as a writ of mandamus), and the court refused. The OTCs appealed this decision, and, on review, the Supreme Court again ruled for the city and held that the trial court did not have to close the case until all the claims were decided.
It will be interesting to see whether the parties can reach some type of an agreement following the latest ruling. Perhaps the OTCs have some reason to keep the litigation going as long as possible? Maybe the OTCs have some liability for periods after the court decision, and keeping the case open will cause periods to drop off under the applicable statute of limitations? Your guess is as good as mine, but the legal chess match going on is extremely fascinating.
About the author: Mr. Donnini is a multi-state sales and use tax attorney and an associate in the law firm Moffa, Gainor, & Sutton, PA , based in Fort Lauderdale, Florida. Mr. Donnini’s primary practice is multi-state sales and use tax as well as state corporate income tax controversy. Mr. Donnini also practices in the areas of federal tax controversy, federal estate planning, Florida probate, and all other state taxes including communication service tax, cigarette & tobacco tax, motor fuel tax, and Native American taxation. Mr. Donnini is currently pursuing his LL.M. in Taxation at NYU. If you have any questions please do not hesitate to contact him via email JerryDonnini@Floridasalestax.com or phone at 954-642-9390. Please also visit his blog , Facebook, and Twitter.