TALLAHASSEE -- Gov. Rick Scott and the Florida Cabinet said Thursday it may be time to update a 62-year-old tax rule to determine if it applies to online travel companies that currently do not pay taxes on the markup they charge customers for hotel rooms.
At the request of Attorney General Pam Bondi, the governor and Cabinet asked Department of Revenue Executive Director Lisa Vickers to come up with a schedule for getting public input on revising and clarifying the 1949 rule that spelled out how to tax hotel room transaction decades before the emergence of Internet sales. She will report back at their next meeting on Aug. 2.
Bondi, who was criticized last week by St. Petersburg Democratic Rep. Rick Kriseman for failing to prosecute the online travel companies that don’t pay state and local taxes, said that after several unsuccessful attempts by Florida lawmakers to clarify the law, the question should be addressed by the state’s tax collector.
At issue is whether online travel companies such as Expedia, Travelocity, and their partners, should impose a sales tax on a portion of their profits. The companies currently negotiate with hotel chains to sell their unbooked rooms, then re-sell them at a profit. They charge tax on the portion they pay the hotel but not on the markup they charge customers, keeping the difference as part of their profit.
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Cities and counties around the country have filed numerous lawsuits against the companies for failing to pay the full taxes owed. A Georgia judge recently released documents that show that since 2003 Expedia and other online travel companies acknowledged they owed taxes but avoided paying them as they tried to persuade legislators to exempt them from the levy.
But Vickers said uncertainty remains and the state Department of Revenue “has not taken a position on it, hopeful that the Legislature will bring clarity to the issue.”
Bills were introduced — to either require the companies to pay the tax or exempt them from paying it — every year since 2003, with the exception of 2007, Vickers said.
She noted that her predecessor, former Attorney General Bill McCollum, filed an unfair trade practices lawsuit against the travel companies in 2009, saying they were intentionally deceiving customers. But McCollum, a candidate for governor at the time, never served the parties with the complaint, leaving the issue unresolved.
Vickers said the Department of Revenue initially had concerns about how the taxes were portrayed in 2003, but since then the companies have changed how they refer the charges — often replacing the word tax with the word fee.
Bondi said Thursday it’s time for Florida to take a new approach.
“We need a resolution to this issue,’’ she said after the meeting. “That’s why I’m asking [Vickers] to come with some recommendations about the possibility of rulemaking, instead of waiting every year for the Legislature. We know it’s going to be challenged, but we’ve got to have a resolution to this.”
Neither Bondi nor Gov. Rick Scott and other Cabinet members would say whether they believe the companies ought to pay the taxes.
Calculations from the Department of Revenue indicate that if the tax had been applied since 1999, the companies would owe as much as $4.3 billion to the state.
Jon Moyle, a Tallahassee attorney representing Broward and Osceola counties, which have filed a lawsuit to compel the companies to pay their share of the tax, welcomed the discussion about a new tax rule. But he said internal company documents indicate that lawyers and accountants for Expedia show that the company thought it owed taxes on the amount it charged customers — not on the amount it paid hotels.
“It is not fair to consumers, and hotels doing business in Florida that actually employ thousands of people, to give out-of-state online travel companies an undeserved tax advantage.” he said.
Jennifer Green, a lobbyist for Expedia, said that “it does not appear that a DOR rule would provide certainty in the law.”