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Another Local Government Joins Tax Movement
Against Online Hotel Booking Agencies

By Brian Bowling, The Pittsburgh Tribune-ReviewMcClatchy-Tribune Regional News

Sep. 9, 2009--Lawrence County has joined a growing number of local governments nationwide that are trying to claim that online hotel reservation companies are underpaying state and local taxes.

Robert Peirce, a lawyer representing the county, said companies such as Expedia, Travelocity and Priceline rent rooms from local hotels at a lower rate and then charge customers a higher rate. The companies only pay the local taxes, such as the 3 percent hotel occupancy tax, on the lower rate, he said.

"They have been doing it for years across the country," he said.

Andrew Weinstein, spokesman for the Interactive Travel Services Association, said the members of his industry group never rent the rooms. Instead, they broker rentals the same way that travel agents and convention organizers do.

"The trial lawyers have decided that there's a potential for deep-pockets settlements here, and they're aggressively misinforming municipalities," he said. "They're saying taxes are being collected but not remitted. It's absolutely not true."

According to Priceline's Feb. 20 annual report, at least three dozen lawsuits have been filed nationwide against the online booking companies. One case in Illinois was settled, most of the others are still in the litigation process. Apparently, the highest ruling has been in the 4th U.S. Circuit Court of Appeals, which ruled against a North Carolina county attempting to collect taxes from the companies.

Weinstein said the cases are all built on the same misconception about how the industry operates.

"The on-line travel companies never buy these rooms. It's not like they buy a block of rooms and then sell as many as they can," he said.

Instead, they negotiate a price that the hotel will agree to accept and then try to find people interested in renting the room. If they succeed, they charge a service fee for setting up the deal the same way any other agent would, Weinstein said.

"If you're not a hotel, you shouldn't be forced to pay hotel taxes," he said.

Peirce said the only other case in Pennsylvania was brought by Philadelphia and was dismissed on a technicality. The companies can claim they're not renting the rooms, but what they sell their customers is use of those rooms, he said.

"When the room is actually being rented at a higher rate, our position is that the tax on the additional amount should be paid to county," Peirce said.

JoAnn McBride, executive director of Lawrence County Tourist Promotion, said the county has 154 hotel rooms that could be booked online. Her agency received about $57,000 last year from the occupancy tax, she said.

Peirce filed the case as a class-action lawsuit. While Lawrence County officials haven't contacted officials in other counties yet, they're hoping that other counties will join the lawsuit, he said.

Brian Bowling can be reached via e-mail or at 412-325-4301.


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