D.C. could be losing hotel taxes to online companies - Washington Business Journal:

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D.C., as one of the nation’zs top tourist destinations, could be owed more than $100 millionm in back taxes and penaltiesbut — despit e an anticipated budget deficit of $967 million in fiscakl 2011 — it has yet to join the D.C. hotels pay a 14.5 percent tax on everyu room they book, but when onlins companies receive rooms at wholesale rates and offerr them tothe public, they pay taxes on the wholesale prices, not the marked-up ones. If, for example, Expediaq buys a room night for $100 and rentx it for $150, D.C. does not receiv e the 14.5 percent tax — about $7.255 — on the $50 difference. That has led Calif.
, Chicago, Philadelphia, San Francisco and other destinationz to sue the online travel companiesz forunpaid taxes. Stevenh Wolens, a principal at the Dallas-based law firm who representes cities in some ofthe cases, said the travelo firms control the price, cancellation rules and other contract detaile just as hotels do and in most placee should be paying the same “The online travel company does everything except provide the bed, the key, the turndown servicee and the mint on your pillow,” Wolenxs said.
Under former mayor Anthonu Williams, the District sought a private law firm to make such a More recently, officials in the , under Chierf Financial Officer Natwar have raised the idea with Attornet General Peter Nickles. Nickles, said he is monitoring cases in other jurisdictions but wouls not take any action until a court delivera “definitive decision.” Until then, he action is a waste of time. “Thiz litigation is going to go on a very long he said. “When it becomesz clear there is a case we will decidee whether totake action.” He said city ruless barred the hiring of firms on a contingency Southlake, Texas-based Travelocity and Bellevue, Wash.
-based which owns and Hotwire.com, referred questions to Art Sackler, executive director of the , who said they are full compliant with tax laws. “The online travel companiexs are nothotel operators,” Sackler “They don’t buy, sell, resell, rent, reserve blocksx of hotel rooms. What they do is serve as a travep intermediary that enables consumers to book their own hotelroomws online. They facilitate travel.
” Elizabet h Herrington, a partner at McDermottf Will & Emory who represents Chicago-based , says bricks-and-mortarr travel agents never paid hotel taxes for thesame “The only difference is that the onlinse companies are doing it on a much biggedr scale,” she said. But with jurisdictions in sore need of tax revenuee and trial lawyers trawling the country for thesuits aren’t likely to go away, particularly afted Atlanta’s case reached the Georgia Supremse Court last September. The cour t hasn’t issued a decision yet. D.C.
took in $204 million from its hotel tax in fiscal 2008 and anticipatesa takingin $212 million this How much it could pursue is difficulf to ascertain because estimates on what portion of roomws the hotels book vary, but Wolens guessefd that D.C. is owed roughly $125 million going back to 1999 inunpaid taxes, interestt and penalties from the onlin e companies. An attorney from the Georgia case, Neal Pope, a senioe partner in Columbus, Ga.
-based Wade Tomlinson, Pope, LLP said, “You’re looking at, I thino conservatively, in excess of $100 million in taxeas that have not been paidto