The battle over how much tax local governments receive when you book a hotel room online is heating up in another arena: the Florida Legislature.
Web travel companies such as Expedia and Priceline say they don’t need to collect taxes on the entire amount they charge consumers. That has sparked dozens of lawsuits nationwide by cities and counties. More than 50 of Florida’s 67 counties joined suits to recover tourist development taxes. Two were settled and the rest are working their way through the courts.
Now, legislators want to settle the issue in favor of online travel companies. Bills filed this month by Sen. Don Gaetz, R-Destin, and Rep. Jason Brodeur, R-Sanford, would exempt them from collecting or paying tourist tax proceeds.
Opponents don’t like their chances given anti-tax sentiments of the heavily Republican Legislature and Gov. Rick Scott, even though the tax has been on the books for years.
“It’s not an extra tax or an increased tax,” says Chad McLeod, spokesman for Pinellas tax collector Diane Nelson. “It’s an issue of collecting on the full rate paid by customers.”
A lot of money is at stake. Florida counties lose about $22 million a year in uncollected tourist development taxes, according to a legislative analysis of a similar House bill that failed to win Senate approval last year. Pinellas County’s loss in 2008 came to $1.4 million, Nelson says.
The business works like this: A hotel makes rooms available for an online travel company at a discount rate.
The company sells a room for a higher retail price, and charges a customer’s credit card.
When the customer checks in, the travel company pays the hotel the lower wholesale room rate and local tax on that price.
So, if wholesale price is $100 and retail is $150, local tax officials say, the online travel company has dodged paying tax on the $50 markup.
Financially struggling local governments are on a money grab to tax the services online travel companies provide, the companies’ lobbyists say.
Florida law requires lodging owners to collect tourist development taxes, said Andrew Weinstein, spokesman for the Interactive Travel Services Association, which represents online travel companies. The online sellers merely steer buyers to the hotels and make a profit on the markup.
“We don’t have control over the rooms or the inventory,” Weinstein said. “We don’t manage or operate the hotels. We have to confirm with the hotel whether a room is available.”
None of the Florida cases has reached trial. On Jan. 21, the state judge in Orange County’s suit against Expedia and Orbitz turned down the county’s motion for summary judgment. Circuit Judge Frederick J. Lauten ruled that entity “doing the renting appear to be the hotels themselves, not the online travel agencies.”
He also noted that language in state law and local tourist development tax ordinances was drafted long before companies like Expedia, Orbitz and Travelocity existed.
A federal class-action suit against 15 online travel companies in Monroe County was settled last year for $6.5 million, split among 32 counties.
The deal does not require the companies to start paying tourist taxes directly to counties for the full room price. It precludes the counties from suing Expedia, Travelocity and Orbitz through June 30, 2012, and Priceline through June 30, 2013.
In the settlement order, the lead attorney for the counties said lobbyists for the companies were working in Tallahassee and Washington to win the companies exemption from tourist development taxes. The bill that passed the Florida House last year only narrowly failed in the Senate.
“With the anti-tax sentiment that dominated the recent November 2010 state and federal elections … there is a real concern that such legislation will pass this year,” the settlement said.
Gaetz declined to talk about the bill and Brodeur didn’t return telephone calls to comment.