Florida Attorney General Suing Expedia and Orbitz
Attorney General Asks Court to Clarify Florida Tax Issue
TALLAHASSEE, FL - November 3, 2009 - Attorney General Bill McCollum today announced that his office has sued Expedia, Inc., Orbitz, LLC, and Orbitz, Inc., the leading internet travel companies, asking for a declaratory judgment that the companies' failure to remit the appropriate amount of taxes on hotel room rentals is a violation of Florida law. The lawsuit states that while the companies have been collecting these taxes from consumers all along, they have only been remitting a portion of the taxes owed to taxing authorities, keeping the rest as profit. This practice allegedly denies the State millions of dollars every year in tax revenue - money that could be used for the benefit of the public.
“Consumers are already paying 'taxes and fees' when purchasing a Florida hotel room online, yet the online travel companies have been keeping too much of those taxes as profit,” said Attorney General McCollum. “If these taxes are due to the State, the companies should pay them for the benefit of the people of Florida.”
For transactions not completed through an internet travel company, Florida hotels pay the “transient rentals tax” - similar to a sales tax - on the rate they charge the consumer for the room. The entity which receives the consumer's payment for the hotel room owes the tax and is responsible for remitting it to the Florida Department of Revenue.
According to the lawsuit, internet travel companies purchase inventories of hotel rooms at a lower, wholesale rate they negotiate directly with hotels. The companies then resell the rooms to consumers at a much higher retail rate and keep the difference as profit. The internet travel companies are the merchant of record in these transactions and thus are responsible for remitting the taxes to the State.
The Attorney General's lawsuit claims Orbitz and Expedia have admitted they do not pay taxes to the State of Florida based upon the amount a consumer is charged for the hotel room. Consumers are unaware that taxes have not been remitted to the State of Florida on the rate they paid for the room. Additionally, Florida hotels have no way to know the retail rate paid by consumers on the internet.
The Attorney General's staff has been discussing the issue with the Department of Revenue since early 2008. Florida is the first state to file this kind of lawsuit, which will help clarify the application of state tax laws to internet travel companies. Six Florida counties also filed a similar suit today seeking clarification on the laws applicable to county tourist development taxes.
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