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Orlando Officials Continue Fight In Court and in Washington, D.C. to Get
 Online Hotel Booking Companies to Pay the Full Hotel Tax
on Rooms They Sell
By David Damron, The Orlando Sentinel, Fla.McClatchy-Tribune Regional News

Jan. 17, 2009 - Orange County leaders Friday stepped up the fight to make online hotel-booking companies pay the full tourist-tax bill on rooms they sell and asked lawmakers to block any attempts to shield the Internet outfits from lawsuits to recoup unpaid taxes.

Orange County Mayor Rich Crotty and Comptroller Martha Haynie say companies such as Hotels.com, Expedia and Orbitz buy blocks of rooms in bulk from hoteliers and pay the 6 percent hotel tax on that reduced rate.

The companies then sell the same rooms to online customers at a higher price -- but usually don't collect tax on the final price. Crotty said that's wrong.

"It's important that all pay their fair share," Crotty said, calling his effort to collect the taxes "loophole reform."

Haynie said the practice could cost Orange County as much as $10 million a year.

Orange and other local governments have sued to recoup the tax-bill difference, but the lawsuit has been tied up in the courts for two years.

Stimulus exemption?

Now the companies are trying to secure a legal exemption from paying the tax difference, possibly in the economic-stimulus package that Congress will take up this month. Crotty said he wrote to U.S. Sen Mel Martinez, R-Florida, and other lawmakers to ask that they keep such exemptions out of any new laws.

The companies argue that they are "travel intermediaries" and therefore not subject to taxes that are paid by hotels. A federal appeals court in North Carolina ruled as much Monday.

"We are not hotel operators," Interactive Travel Services Association Executive Director Art Sackler said.

The price difference between what the online company pays for a room and what it sells the room for is "compensation" for the company's service to the consumer, Sackler said.

Orange County Attorney Tom Drage said the North Carolina federal appeals court ruling would not necessarily be binding in Florida, and the legal issues and this state's laws could also differ from that case.

Orange's case is pending in civil court. Drage said other courts around the country have initially sided with local governments in similar cases.

The fight has taken on new urgency as city and county leaders scramble to come up with more hotel-tax revenues to pay for a new $425 million performing-arts center and $175 million in Citrus Bowl renovations.

'Millions' in new revenue

Both projects face delays because of a falloff estimated at 10 percent or more in tourist-tax collections.

Haynie said recouping previously uncollected taxes could inject "tens of millions" of new money into the venue effort. Orange attorneys said court appeals could be resolved in six months. Some travel companies already are setting aside the disputed tax collections in the event the courts side against the industry.

David Damron can be reached at ddamron@orlandosentinel.com or 407-420-5311.

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Copyright (c) 2009, The Orlando Sentinel, Fla.

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