New York counties continue fight against unpaid OTA taxes

Attorneys in Livingston County, N.Y., joined a lawsuit against multiple online travel agencies for allegedly dodging hotel and motel taxes. The suit also seeks to prove that OTAs misrepresented hotel rates to travelers.

According to the Genesee Sun, the Livingston County Ways and Means Committee voted unanimously to investigate the OTAs in a suit originally filed by Nassau County, Fla. Nassau County offered to recover tax losses from other counties in exchange for a share of the winnings from the suit. The suit is also includes Erie, Orange, Rensselaer and Saratoga Counties

"This is a contingent based law suit, where Nassau county will keep 28 percent of what is recovered, but Livingston County will not have to pay for the suit even if they recover nothing,” county administrator Ian Coyle told the Genesee Sun. "Basically, these sites would contract with hotels for rooms at a discounted rate and turn the rooms around to customers at an increased rate."

At the same time, Westchester County, N.Y., is also considering legal action against booking sites over underpaid hotel taxes. According to Lohud, in 2013 Westchester joined with over 50 governments in New York State in a similar class-action suit, which was shot down this June by a Florida Supreme Court due to a provision in Nassau county's hotel-tax law preventing it from reaching class-action status. 

Westchester's hotel tax adds 3 percent to all room bookings, and the county earned $5.7 million from the tax last year. There is currently no estimated figure as to how much Westchester believes it is owed by OTAs.

When we last checked at the beginning of the year, Expedia alone was facing a potential debt of roughly $847 million in unpaid tax payments for online bookings. At the time, the company had less than one-tenth the amount of its estimated debt set aside to address such liabilities, a debt that has most likely grown with its recent acquisition of Orbitz.

Online home-sharing industry disruptor Airbnb also recently made the announcement that it will begin to pay its "fair share" of hotel taxes, according to The Seattle Times. 

"Given the size of the Air­bnb community, this just seems like the right time for us to be very specific about the types of commitments we’re willing to make,” Chris Lehane, Airbnb’s head of global policy and public affairs, told The Seattle Times. “Cities are looking to do the right thing, and they need the right information to do so."

While this may come as a surprise to hoteliers and a relief to local governments looking to collect taxes, The Washington Times reported that recent tax collections from Airbnb activity in Rhode Island brought in lower returns than expected. Tax administrator David Sullivan told the Times that the tax resulted in additional revenue between $60,000 and $100,000, much lower than the $2 million to $3 million the state initially predicted.