Hotels and online travel sites share a conflicted relationship regarding the status of tax dollars paid for room nights. However, a decision made yesterday by the Florida Supreme Court has shifted the balance of power into the hands of the OTAs.
The Miami Herald reported that the Florida Supreme Court rejected the argument that companies such as Expeida, Travelocity and Hotels.com should pay more in county tourst-development taxes. Five of the state's seven justices sided with the OTAs, settling a long-standing legal dispute spanning at least 20 Florida counties on whether online booking sites are subject to paying tourist development taxes on the full room cost they charge to customers for hotel bookings.
Florida counties were in favor of OTAs paying taxes in full, while the industry argued only a portion of the bookings should be suject to taxes. These includes service charges, which skirt the hotel bed tax.
According to the Sun-Sentinel, Justices James E.C. Perry, Jorge Labarga and Peggy Quince pointed to what was referred to as the "plain language" of the state's tourist development tax law, finding that it contains no launguage stating it should be applied to "markup charges and service fees associated with merchant model transactions for hotel room rentals."
"Moreover, despite the operation of a given business model transaction, the monetary amount the hotels require for occupancy is the sole determinant for the charges that are taxable under the TDT," Perry wrote."
The Tampa Tribune reported on a 2011 study from the Center for Budget and Policy Priorities, a Washington-based think tank which found that local and state governments were bringing in $275 million to $400 million less in tax revenue yearly. Florida specifically is losing out on anywhere from $31 million to $45 million a year, the study found.
This is just one tax battle that has come to its conclusion, and the war is far from over. In February of this year, a review of multiple lawsuits spanning the country found Expedia could be on the hook for as much as $800 million in outstanding hotel taxes. Decisions like the one made yesterday in Florida could lessen the load, but it could be some time before we know who is getting their money.