Hotel Online
News for the Hospitality Executive

advertisement
.
Lawyers in Orange County, Florida, Want Clarification to Bed
Tax Laws; Eyeing Online Booking Services, Certain Time
Share Rentals and Reward Program Free Nights
By David Damron, The Orlando Sentinel, Fla.
Knight Ridder/Tribune Business News 

December 28, 2005 - Booking hotels online might save travelers money, but Orange County officials say it's a bum deal for Central Florida.

The companies haven't been paying enough tourist taxes, leaving the region $5 million short each year, county lawyers contend. That's money that could be used to help pay for civic projects such as a new or renovated downtown sports and concert arena, Citrus Bowl stadium upgrades and a new performing-arts center.

County lawyers plan to ask an Orange circuit judge next month to clarify a tax law that could help them collect the money.

Right now, companies such as Expedia.com and Orbitz.com purchase or reserve blocks of rooms from hotels, often at lower rates. The Internet companies pay tourist taxes based on the reduced prices.

But then they turn around and resell the same rooms to online customers at marked-up costs. It's the higher, final sale prices that dot-coms should be paying taxes on, county officials argue.

The dot-coms say the final price they charge online customers reflects additional services, costs and profits added to the room rate, which a bed tax should not apply to. The companies say they shouldn't be taxed on the money they make by providing a link between hotels and their customers.

"We don't think any judicial conclusion would differ from our own conclusion on this," said Brent Thompson, head of government affairs for InterActiveCorp, which owns Hotels .com, and the recently spun-off Expedia Inc., two major room-booking outfits.

Orange County officials want a judge's input on the tax law because a ruling would give them more leverage to negotiate with the companies, sue them or lobby for the law to be tightened.

"We think the law is clear on this," Orange County Mayor Rich Crotty said.

The fight comes at a pivotal time for the county. The tax took in $120.2 million this fiscal year, nearly all of which goes toward paying off debt on the convention center and for promotional marketing campaigns to draw more tourists.

Now various sports and arts groups want to use hotel-tax revenues to help pay for civic projects. Crotty said he would divert some of the existing tourist-tax revenues toward such projects, but he wouldn't be willing to raise the existing 5-cent tax by a penny to pay for them.

Major hoteliers in the area are reluctant to embrace the ambitious civic-project wish list, and instead want increases in tourist taxes directed toward bigger advertising campaigns to ensure more tourists stream into the area. A bloody political fight over the bed-tax revenues could unfold during the next year or so, making the online hotel-booking revenues more critical than ever.

Third-party, Internet-booking Web sites have grown dramatically in past years and have come to account for one in 10 hotel-room purchases nationwide, according to PhoCusWright, a Connecticut-based travel-research company. Even though business ebbed somewhat in the past year, there were nearly $9.2 billion in online room bookings by these Internet travel companies in 2005, the company estimates.

Although Orange County's main target in the tourist-tax battle is the online-booking services, county lawyers also have their eyes on other, smaller sources. They are examining losses from certain time-share rentals and free nights given away to regular hotel customers, such as free rewards programs.

"It's lost revenue for the county," said Orange County Comptroller Martha Haynie, whose office is joining Crotty's legal fight. "We're looking at the potential erosion of that tax base."

Recouping losses from all the sources may eventually require changes to state law, although Orange County Attorney Tom Drage suggested in a memo to Crotty that losses from the online companies, such as Travelocity.com, could be collected under existing law.

"Both hotels and dot.coms are selling the same thing," the memo read. "They should therefore both be paying taxes on the basis of the total amount paid by the consumer."

But InterActiveCorp's Thompson said state revenue departments across the country already have formally sided with the Internet companies on this issue in New York, Georgia and Pennsylvania. These various laws, including Florida's, generally require taxes to be paid on the "rent received by the hotel," and that's what online companies are doing, he said.

Drage says getting a judge to settle that disagreement, plus any appeals, could take more than a year.

But such a ruling could avoid launching a full-blown, costlier lawsuit, and may get lawmakers to craft a stricter law. A bill to tighten the tourist-tax law filed in the Legislature this year died for lack of support. So far, Orange officials have not asked lawmakers to try again next year. And it may have to wait.

"If we prevail on this, and I believe we will," Crotty said, "this will give us some ammunition to go to the Legislature."

-----

To see more of The Orlando Sentinel -- including its homes, jobs, cars and other classified listings -- or to subscribe to the newspaper, go to http://www.OrlandoSentinel.com.

Copyright (c) 2005, The Orlando Sentinel, Fla.

Distributed by Knight Ridder/Tribune Business News. For information on republishing this content, contact us at (800) 661-2511 (U.S.), (213) 237-4914 (worldwide), fax (213) 237-6515, or e-mail [email protected]



To search Hotel Online data base of News and Trends Go to Hotel.OnlineSearch
Home | Welcome| Hospitality News | Classifieds| One-on-One |
Viewpoint Forum | Ideas&Trends | Press Releases
Please contact Hotel.Onlinewith your comments and suggestions. 

Back to December 13, 2005 | Back to Hospitality News | Back to Home Page