Securing a hotel room through an on-line hotel or travel agency may be a good deal, but the City of Jacksonville is sure the Pricelines and Travelocitys of the world have shortchanging it over the years.
The City has hired the law firm of Brennan Manna & Diamond and has filed a class action suit against several Web-based agencies. The suit contends those agencies are selling blocks of hotel rooms but aren’t collecting the local 6 percent bed tax.
Michael Freed and Matt Jackson of Brennan Manna & Diamond have taken the case and filed the suit in the Fourth Judicial Circuit Aug. 4. City Council passed legislation last week approving the suit.
Freed said attorney R. Bryant McCulley researched the subject for several months and determined the online agencies may owe the City a lot of money. Similar suits have been filed by other government agencies all over the country, according to Freed.
The suit names priceline.com, travelocity.com, hotels.com, lowestfare.com, and several others, as well as many of those companies’ corporate ownership groups.
“We believe they have been collecting the tax based on the rate charged to the individual consumer but have only been reimbursing the county some of that tax, if anything at all,” said Freed.
Exactly how much may be owed isn’t known right now, according to Freed.
“We are going through the discovery process right now, but in fiscal year 2005, the Tourist Development Council and the Convention Bureau reported bed taxes of about $15 million,” said Freed. “How much more would it have been if the proper amount was remitted? We don’t know. We can easily assume it’s a significant figure.”
Freed said the suits in the other states haven’t been resolved. Even when they are, limited precedent will be set due to the legal differences in the different jurisdictions.
Another issue that still needs to be determined is how long the shortchange has been occurring. What Freed is pretty sure about is the intentional nature of the shortchange.
“Discovery will tell, but there are some public statements by the online companies and remarks in their corporate files with the SEC (Securities and Exchange Commission) that indicate they knew,” said Freed. “We believe at some point they knew and they became aware of what they were doing. As far as we know, they are still doing it.”
Freed said he figures the damages are in the six-figure amount and his firm will only get paid if the City wins and collects damages.
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