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Online Sites Make Settlement Offer to South Carolina
Local Goverments in Hotel Tax Lawsuit

By Allyson Bird, The Post and Courier, Charleston, S.C.McClatchy-Tribune Regional News

Aug. 09, 2010--Local governments that sued hotel booking websites, seeking additional tax money from them, now have an offer on the table.

Ronnie Bonds, an attorney representing the consolidated cases for Charleston, Mount Pleasant and Myrtle Beach, said the municipalities went through mediation with the online companies in federal court. The companies made a proposal that the governments should decide on by month's end.

The terms of those negotiations are confidential.

The dispute lies in how much money these Internet brokers, such as, Hotwire, Priceline and Expedia, should pay in taxes to the places where their customers stay. Municipalities collect a certain percentage of the gross proceeds from every hotel room night sold.

Online booking companies pay up based on the amount they agree to forward to the hotel, not the total they charge customers, which can include service fees and taxes.

Charleston imposes a 2 percent hotel tax that it launched in 1996 to offset expenses incurred "as a direct result of the demands placed on the City by the tourism industry," its lawsuit says. It goes on to allege that the online companies failed to pay that tax.

The lawsuit says the companies charged marked-up room rates but only paid taxes on the lower rates they negotiated with hotels, which in turn pay the city. Mount Pleasant's lawsuit, with a 1 percent tax rate at stake, makes the same argument.

In each case, the local ordinances specifically say taxes apply to the gross rate paid for the rooms.

In South Carolina, the tax money collected goes toward projects directly related to supporting the tourism industry.

Roadside attractions?

Two South Carolina motels, one in Walterboro and one in Dillon, hit the auction block Aug. 24 in West Columbia.

Each will sell individually with suggested opening bids at $125,000 for a Budgetel Inn on Sniders Highway in Walterboro and $95,000 for a former Kings Inn in Dillon. California-based Excel National Bank directed that the properties be sold to the highest bidders.

Reach Allyson Bird at


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