Internet travel companies arguing over taxes

Historic City News reported that at the June 2nd meeting of the St. Johns County Board of County Commissioners, a motion was approved to adopt a Resolution authorizing the County Attorney to execute a Class Representative Employment Contract with four Florida law firms.

The Resolution seeks representation of the County’s interest in connection with claims and remedies it may have arising out of web-based travel companies who may have withheld tourist development or other county taxes due.

In a June 24th article published at Historic City News, we reported that Commissioners in Lee County voted unanimously to pay $2,500 to Nabors, Giblin & Nickerson Law Firm of Tallahassee to represent Lee, Broward and Orange counties in a lawsuit against online travel companies to recover money that they say they are due.

At issue is how Internet companies like Orbitz, Priceline and Expedia have been booking hotel rooms for people across the country; specifically with regard to how those companies calculate and remit taxes.

Although several counties in Florida are starting to argue in court that the tax should be paid on the total amount the hotel guest pays, the Internet companies say they are appropriately paying taxes on the wholesale amount that they actually pay for the rooms. Making the companies pay more in taxes would obviously not favor the Internet hotel reservation businesses.

The Nabors, Giblin & Nickerson documents suggest that, when factoring in the three-year statute of limitations, losses of as much as $79.3 million in sales taxes for the state, and $62.6 million in tourism taxes for the counties may be recoverable.

Tax counsel for the Florida Association of Counties Sarah Bleakley, told the Cabinet that the counties were very interested in pursuing a judgment from the courts on the question.

“There’s a lot of action going on in the courts because this is a legal issue,” Bleakley said. “Leon County is expected to file a lawsuit by the end of the week”.

In an article reported by The News Service of Florida, State Chief Financial Officer Alex Sink was quoted as saying that she was “not interested in seeing the online companies pocket our money,” but she added that there needs to be some clarity on the issue.

“The bottom line is we’re in limbo and we’ve been in limbo for years,” Sink said.

According to an article that appeared in The New York Times, Expedia faces lawsuits from 46 cities and counties around the country.

In May, Superior County in the Seattle area ordered Expedia to pay $184.5 million in damages for service fees charged to consumers from February 2003 through December 2006. Expedia is appealing.

Florida Attorney General Bill McCollum’s office has been investigating the issue as well, trying to make a determination on how to best resolve it.

Paul Chronis, a lawyer for Orbitz, told members of the Florida Cabinet to keep in mind that online travel companies significantly help boost tourism revenues throughout the state — because when tourists visit Florida, they spend money not only on hotels, but also on restaurants, and attractions.

The position at Orbitz is that without their bookings, some tourists might not come to Florida and spend money. “What the online travel companies do is put heads in beds,” Chronis said.

As St. Augustine continues to ramp-up for the 450th Anniversary Commemoration in 2015, it will be essential that Internet promotion of the events, including the availability of hotel rooms, has the participation and interest of the companies where travelers start out when making vacation plans.