The City of Houston and the Harris County-Houston Sports Authority are currently suing multiple travel websites such as Orbitz and Priceline over tax revenues it claims the sites owe it. Online travel sites pay wholesale prices to hotels for rooms and then customers book those rooms at a mark-up from that wholesale price. The sites pay taxes on the wholesale price, and keep whatever is made from the customer booking the room at the marked-up price.
Houston, along with cities and counties across the country that have also filed suits, is arguing that the sites are skirting Hotel Occupancy Tax laws and should be paying taxes on the amount that they make when the customer books the room.
"We estimate we, like many other localities, are losing millions of dollars," Frank Michel, Communications Director for the City of Houston, tells Hair Balls.
The sites, though, have already notched one victory. The Fourth Circuit Court of Appeals in Raleigh came down against Pitt County, N.C.
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Art Sackler, executive director of the Interactive Travel Services Association, to which most of these sites belong, says the court wrote that the sites "have no role in the day-to-day operation or management of the hotels," and "cannot be said to operate the hotels," and for these reasons were not subject to the Pitt County Occupancy Tax.
"The hotel rooms are neither bought nor resold by the [online travel companies]," Sackler said. "They are intermediaries which facilitate travel, and have no ownership, control or inventory responsibility for hotel rooms."
The City of Houston filed its suit in March 2007, and is currently in the discovery phase. Despite the Court's decision in Raleigh, Michel says the city is confident that state laws will support their case.
-- James Holmes