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- 2012 - April - 24th -

Online travel companies win in tax case

by Jim Saunders, The News Service of Florida

A Leon County circuit judge has sided with the online travel industry in a long-running legal battle about whether companies such as Expedia and Orbitz owe disputed county hotel taxes.

Judge James Shelfer ruled in favor of the industry last week, going against 17 counties that argue they have improperly lost out on millions of dollars in tourist-development taxes.

Shelfer announced the decision during a hearing, though a written order has not been issued.

Orbitz lead attorney Beth Herrington said Monday that Shelfer found the online travel companies were not obligated to collect and pass along the disputed taxes. She said a written order will follow.

“The case is over,’’ said Herrington, who argued on behalf of the industry at the Thursday hearing. “The judgment is in our favor.”

Roberto Martinez, an attorney for the counties, could not be reached for comment. It was not clear whether the counties would appeal the ruling or what effect it might have on a similar pending case filed by Broward County.

The ruling comes after years of litigation and legislative debate about the tax issue, which involves a key part of the way the popular online travel sites do business.

The counties that have been involved in the lawsuit are Alachua, Charlotte, Escambia, Flagler, Hillsborough, Lee, Leon, Manatee, Nassau, Okaloosa, Pasco, Pinellas, Polk, St. Johns, Seminole, Wakulla and Walton.

Online travel companies, which serve as middlemen between hotels and travelers, charge customers for room rentals and fees related to providing the service.

The core question in the lawsuits comes down to: Should county tourist-development taxes apply to the total cost? Or only to the portion that go for the room rentals?

The industry and its supporters argue that trying to impose the tax on the fees would amount to a services tax, which is not allowed in Florida.

“The record conclusively establishes that (online travel companies) provide online travel-related services and do not engage in the activity that is subject to the (tourist development tax): renting, leasing or letting hotel accommodations in the plaintiffs’ counties,’’ the industry said in a February court document that helped set the stage for last week’s ruling.

But counties say the tax should apply to the total price that travelers pay for rooms and that the online travel companies are involved in renting rooms.

In the lawsuit, the counties said customers “pay defendants (the online travel companies) directly for the lease or rental of the hotel rooms. After the customer’s credit card is charged, defendants inform the selected hotel of the transaction. At check-in, the customer provides the hotel with identification and receives access to the room leased or rented from or through the defendants.”

The case decided last week and the similar Broward County case, which is before another Leon County circuit judge, were initially filed in 2009. While they have been pending, lawmakers have considered proposals to change state law to make clear that the online travel companies don’t owe the disputed taxes.

Those proposals have died, with the most recent bills not heard during this year’s legislative session.

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