Seeks Taxes From Online Travel Sites

L. Lin Wood, who with fellow Powell Goldstein partners John Bielema Jr. and Gregory Worthy are representing the city of Atlanta, explains that if an online reservation company buys a block of rooms at $50 a room and then leases those same rooms for $75 each, the online firm -- in a practice common throughout the industry -- pays hotel-motel taxes only on the wholesale room rate it has secured. But, Wood explains, each online firm bills each customer for taxes based on the room's online markup price.

The difference "is, in effect, pocketed by the online company, which, as a practical matter, is taking tax revenue owed to the city of Atlanta and turning it into profit for the online company," Wood says. "That flies in the face of the fact that the [hotel-motel] statute and ordinance are designed to collect the tax on the full value paid for the room."

Wood says that if the city is successful in its suit, "it's not going to impact the amount of money ultimately paid by any hotel guest who comes to visit the city. . . . At the end of the day, it's simply a matter of having these online companies appropriately pay all the tax owed on the full value of the room."

To view the full article, please look for The Legal Times; Vol. 11

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