Travel Trends
August 4th, 2010

San Diego wins victory in occupancy tax battle

4 Aug, 2010 Hotel and Motel Management

SAN DIEGO -- The law firm of McKool Smith represented the City of San Diego in an administrative hearing that resulted in a $21.2-million award against a group of online travel companies accused of failing to properly remit millions of dollars in hotel occupancy taxes.

The ruling, which was made public by the defendants in a related case, supports the position of more than 275 other municipalities and governmental entities that are seeking proper payment of hotel occupancy taxes from online travel companies such as, Expedia, Orbitz, Priceline, and Travelocity.

Read "Legislative top priorities: Online booking tax, card check"

The City of San Diego was represented by attorneys Gary Cruciani and Steve Wolens of McKool Smith's Dallas office, along with co-counsel from Los Angeles' Kiesel, Boucher & Larson and Dallas' Baron & Budd.

During the hearing conducted in January, attorneys from McKool Smith presented evidence showing how San Diego was owed additional revenue based on online travel companies' paying taxes only on the wholesale price of hotel room bookings, but collecting and retaining taxes on higher, retail prices.

A San Diego ordinance, as is the case with many of the hotel tax ordinances in cases brought by other California municipalities against the online travel companies, required the city to first exhaust its administrative remedies before going to court. After a contested evidentiary hearing, the Hearing Officer ruled that the online travel companies owe the city slightly more than $17 million in taxes that have never been remitted, and $4.25 million in penalties.

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