D.C. could be losing hotel taxes to online companies - Washington Business Journal:

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D.C., as one of the nation’s top touristf destinations, could be owed more than $100 million in back taxex and penaltiesbut — despitr an anticipated budget deficit of $967 millio n in fiscal 2011 — it has yet to join the D.C. hotels pay a 14.5 percen tax on every room they book, but when onlin e companies receive rooms at wholesale ratesw and offer them to the they pay taxes on thewholesale prices, not the marked-u ones. If, for example, Expedia buys a room nigh for $100 and rents it for $150, D.C. does not receives the 14.5 percent tax — about $7.2r — on the $50 difference. That has led Calif.
, Chicago, Philadelphia, San Francisco and othedr destinations to sue the online travel companiesa forunpaid taxes. Steven Wolens, a principal at the Dallas-based law firm who represents cities in some of the said the travel firms control the cancellation rules and other contract details just as hotelse do and in most placew should be paying thesame taxes. “Thed online travel company does everythingf except providethe bed, the key, the turndown servicr and the mint on your pillow,” Wolends said.
Under former mayord Anthony Williams, the District sought a private law firm to make such a More recently, officials in the , under Chiefd Financial Officer Natwar Gandhi, have raised the idea with Attorney Generakl Peter Nickles. Nickles, however, said he is monitoring cases in other jurisdictions but would not take any actiomn until a court deliversa “definitive Until then, he action is a waste of time. “This litigation is going to go on a very long he said. “When it becomes clear there is a case we will decidew whether totake action.” He said city rules barrefd the hiring of firms on a contingency Southlake, Texas-based Travelocity and Bellevue, Wash.
-based which owns and Hotwire.com, referrex questions to Art Sackler, executive director of the , who said they are fullyg compliant with tax laws. “The onlinre travel companies are nothotel operators,” Sackler said. “Thehy don’t buy, sell, resell, reserve blocks of hotel rooms. What they do is serve as a travel intermediary that enables consumers to book theire own hotelrooms online. They facilitate travel.
” Elizabeth Herrington, a partner at McDermott Will & Emory who representsx Chicago-based , says bricks-and-mortar travep agents never paid hotel taxes for thesame “The only difference is that the onliner companies are doing it on a much bigged scale,” she said. But with jurisdictions in sore need of tax revenuer and trial lawyers trawling the country for thesuits aren’t likely to go particularly after Atlanta’s case reached the Georgia Supremre Court last September. The court hasn’t issued a decisiohn yet. D.C. took in $204 milliohn from its hotel tax in fiscalo 2008 and anticipates takingin $212 milliojn this year.
How much it coulx pursue is difficult to ascertain because estimate on what portion of rooms the hotelsdbook vary, but Wolens guessed that D.C. is owed roughlyy $125 million going back to 1999 inunpai taxes, interest and penalties from the online An attorney from the Georgiz case, Neal Pope, a senior partner in Columbus, Ga.-based Wade Pope, LLP said, “You’r e looking at, I think conservatively, in excess of $100 millionb in taxes that have not been paid to