Finance

Getting Back Taxes

Big cities go to court over online hotel-rate deals
by | June 2006
 

Travelers may enjoy the hotel discounts they get from Internet businesses such as Expedia and Travelocity, but those discounts have the city of Atlanta all riled up and headed for state court.

The city has filed a lawsuit against at least a dozen online booking companies for back taxes. The charge is that the companies billed customers taxes on the pre-discount room rate but were remitting only the taxes due for the discount-rate room.

Lawyers for the city believe that the taxes and fees charged but unremitted by the companies might add up to a loss of as much as $30 million. Lawyers won't know how many years of back taxes are involved until they see the companies' documents, but when it comes to failure to pay taxes, there is no statute of limitations. And with the trend toward more online reservations, Atlanta wants to make sure it gets what it is owed on future transactions as well.

Some smaller Georgia jurisdictions filed a class-action suit in federal court on the same matter. Atlanta decided that because the potential for lost revenue is so much larger for a big city, it would file a lawsuit on its own.

Big cities in other states are taking the online companies to court on similar charges. Boston, Chicago, Los Angeles and San Diego, among others, have filed lawsuits, and several others are considering doing the same.

"Clearly, this is money the city is entitled to," says Linda DiSantis, Atlanta's city attorney. Lawyers for the defense could not be reached for comment.

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