Duval Suing Top Travel Web Sites; Jacksonville and Several Other Cities Say the Sites Pocket Hotel Tax Money

By Kormanik, Beth | The Florida Times Union, August 13, 2006 | Go to article overview

Duval Suing Top Travel Web Sites; Jacksonville and Several Other Cities Say the Sites Pocket Hotel Tax Money


Kormanik, Beth, The Florida Times Union


Byline: BETH KORMANIK

Jacksonville is suing several popular travel Web sites - including Hotwire, Orbitz and Travelocity - claiming the companies skimped on paying taxes for hotel rooms they sold.

Jacksonville joins more than a dozen cities nationwide that have sued online travel companies, alleging they are "unlawfully pocketing" money by paying taxes on hotel rooms they purchase at a discounted rate then selling them for a mark-up without paying additional taxes. The companies contend the markup reflects a service fee and they do not owe additional taxes.

The Jacksonville law firm of Brennan, Manna and Diamond filed the class-action suit on behalf of Duval County in Circuit Court and wants to represent all 39 Florida counties that collect tourist and convention development taxes. The firm took the case on a contingency basis, which means the city pays nothing up front but would hand over 30 percent of any money recovered from the defendants.

Duval County charges a 6 percent tax on hotel rooms and uses the money to promote tourism and to pay off debt for the Prime Osborn Convention Center and Alltel Stadium. Last year it collected about $15 million in room taxes.

Jacksonville lawyer Michael Freed said he did not have enough information to estimate how much money Duval County loses because of the discounting practice. Experts estimate other cities have had tax losses ranging from $2 million in Houston to $15 million in tourist mecca Orlando.

City Council President Michael Corrigan, chairman of the county's Tourist Development Council, said the lawsuit would end an unfair competitive advantage that Web sites have over other hotel room brokers.

"We feel they have a pretty good case," he said.

Not surprisingly, those in the industry disagree.

Art Sackler, executive director of the Interactive Travel Services Association, a trade group that represents travel Web sites, said city governments are suing instead of trying to resolve differences outside the courtroom. …

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