TALLAHASSEE -- A lawyer for 17 Florida counties told an appeals court Tuesday that a trial judge erred by ruling that online travel companies can be charged tourist development taxes only on the wholesale price they pay for hotel rooms rather than the higher rate they charge consumers.
Millions of dollars are at stake in the case being considered by three judges of the 1st District Court of Appeal, but any ruling they make is likely to be appealed to the Florida Supreme Court by the losing side.
Roberto "Bobby" Martinez, a former U.S. attorney from Coral Gables, argued the online companies are engaged in a "sham or scheme" to keep those millions.
"They're essentially gaming the system to cheat the municipalities and counties," Martinez said.
Darrell Hieber, a Los Angeles lawyer who has represented online companies in similar cases across the nation, told the panel the markup is a fee for his clients' services rather than rent on which taxes are due.
Florida's law is unclear on the issue, Hieber argued. Several bills that would have settled the matter in favor of either the online companies or local governments have been introduced in the Legislature over the years. None of those measures has passed.
"What that leaves at best is ambiguity, and when there's ambiguity that means the tax
payer wins," Hieber said.
The counties are appealing a decision last year by Tallahassee-based Circuit Judge James Shelfer, who sided with the online companies.
Martinez argued that Shelfer erred in finding the law ambiguous and issuing a summary judgment rather than allowing the case to go to trial.
He said state law requires that the local option taxes of 1 percent or 2 percent be collected on the "full consideration" of short-term rentals -- those less than six months.
Hieber contended his clients shouldn't be taxed because they don't own the rooms so they can't rent them. He compared the online companies' function to someone being paid $100 by his brother to get the brother an $80 hotel room and keeping the remaining $20 for his trouble.
"He's not doing that for the hotel," Hieber said. "He's doing it for his brother, and it's not taxable to the hotel."
Martinez, though, argued that the tax is due from the customers rather than the businesses renting the rooms and tourists using their services pay the online travel companies -- not the hotels.
"Everywhere except in this courtroom and in the courtroom of Judge Shelfer and in other courtrooms, they rent a room," Martinez said of the online companies. "If the public knew that you could not rent a room by calling Expedia, Orbitz, Travelocity and Priceline, they'd be out of business."
Those and several other online companies are participating in the case. The counties involved are Leon, Flagler, Lee, Manatee, Pinellas, Polk, Alachua, Nassau, Okaloosa, Seminole, Wakulla, St. Johns, Escambia, Charlotte, Walton, Hillsborough and Pasco.
Some travel companies in 2010 agreed to pay $6.5 million to 32 Florida counties to settle a federal class-action lawsuit.
Orange County in 2011 approved a separate confidential settlement with Expedia.