Academic journal article Journal of Accountancy

Online Travel Companies Not Liable for Occupancy Taxes

Academic journal article Journal of Accountancy

Online Travel Companies Not Liable for Occupancy Taxes

Article excerpt

The Sixth Circuit affirmed a district court's judgment in favor of defendant online travel companies (OTCs) for alleged violations of local tax laws. The district court had held that the OTCs were not liable for collecting occupancy taxes.

It is common practice for OTCs such as Priceline.com, Expedia, and Travelocity (which were among the lawsuit's defendants) to provide discounted hotel room rates to customers by contracting with hotels for rooms at "wholesale" rates and then booking rooms for customers on their websites at a marked-up "retail" rate that is above the wholesale rate but below the market rate. Most states allow cities and counties to assess an occupancy tax upon the persons reserving those hotel rooms. The hotel operator is required to collect and remit the tax. Eleven localities in Ohio (including cities, townships, and a county) sued the OTCs, arguing that the companies were required to remit a guest occupancy tax on the higher retail rate the companies charged customers. OTCs have traditionally remitted tax based on the contractual wholesale room rate that the hotels charged the companies. In essence, the point at issue was whether OTCs must collect and remit occupancy tax on their profit margin.

The district court held that the OTCs had no obligation to collect the guest taxes because they were not among the three types of entities designated by the localities' tax ordinances as responsible for doing so: operators (proprietors of the hotel, whether in the capacity of owner, lessee, licensee, or any other capacity, and managing agents of hotels); vendors (persons who own or operate a hotel and who furnish lodging); or hotels (establishments kept, used, maintained, advertised, or held out to the public to be a place where sleeping accommodations are offered to guests). …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.