Expedia could possibly owe more than $800 million to multiple U.S. states in outstanding hotel taxes.
According to the Seattle Times, a review of multiple lawsuits and tax-revenue records revealed Expedia's potential outstanding debt of approximately $847 million in tax payments for online hotel bookings. These payments are for bookings made over a period longer than a decade, and Expedia avoided paying local governments by instead paying taxes on the whole price it pays for hotel rooms.
Local governments are arguing that Expedia should be paying taxes based on the full room price paid by online customers, a few dollars per room, per night. Or, as much as $400 million per year in state and local government receipts from online travel brokers.
Expedia has less than one-tenth the amount of its proposed debt set aside to address liabilities such as this, as of Sept. 30, according to a filing with the Securities and Exchange Commission. The Star Advertiser reported that Hawaii's Supreme Court will be deciding the case in the coming weeks, and the state has appealed one part of a lower-court decision that was earlier in favor of Expedia and other online travel agents.
"The online travel companies are grossly under-reserved," Steven Wolens, a principal at the law firm McKool Smith PC in Dallas, who has helped file cases for cities and other jurisdictions across the country, told the Star Advertiser. Expedia told investors that its reserves are adequate, and maintains that the ordinances do not apply to the services they provide.
According to its filing with the Securities Exchange Commission, Expedia has been the target of 88 lawsuits involving the room-tax issue. The company won dismissal in 23 cases, while 35 remain active.
Meanwhile, Expedia posted weaker-than-expected earnings for 2014, as the company's higher bookings were unable to offset a 10 percent decline in revenue per available room, the Wall Street Journal reported. Overall, Expedia reported a profit of $55 million in 2014, down from $95 million in 2013. Revenue grew 18 percent to $1.36 billion.