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In a Defeat for Flagler and 16 Counties, Judge Rules For Travel Companies on Tourism Taxes

| April 24, 2012

They win. (Eric Olson)

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 what effect the ruling might have on a similar pending case filed by Broward County. On Tuesday, Bob Nabors, who represents the counties, said they will appeal to the 1st District Court of Appeal in Tallahassee.

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 this: 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 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.

But those proposals have died, with the most-recent bills not getting heard during this year’s legislative session.

–Jim Saunders, News Service of Florida

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2 Responses for “In a Defeat for Flagler and 16 Counties, Judge Rules For Travel Companies on Tourism Taxes”

  1. palmcoaster says:

    The middle man has proven to make money without little or none investment just by having the right connections. They increase the cost of a service lowering the quality of the service for the tourist and eating at the profits of the hotels and counties to receive the tax bed from the vacationer occupancy. Because the middle man has to make a profit from somewhere or someone. This is the reason why I use in person a travel agent or most the time, I make my own hotel or flight reservations directly with the resort or the airline.
    I take in consideration that I have a background in the field as I used to be a travel corporate agent in the 80’s, but for the same reason is that I “never utilize the Internet reservation advertisers”. We can all get better deals if we bargain directly with the hotels/resorts and the airlines as well and we all save and get better service and the Florida counties get their share of hotel bed tax. After all Tourism is supposed to be the #1 Florida industry, so we better protect that revenue. One more thing for all to know, many if not most of the Internet reservation outlets are the one’s that collect the reservation fee or total payment and in many cases drag their feet paying the hotels back for the use of the rooms by their reserved guest. A hotel manager friend of mine said he had even to go to an attorney to get paid by one of them .coms. So buyer be aware!. This is why I consider this ruling a travesty in favor of the middle man and against us all, best interest including Florida.

  2. Sherry Epley says:

    I, as usual, agree with much of what Palmcoaster has to say :). I travel internationally extensively and always check the prices of hotels through “tripadvisor” to review the property and to get a price from these kinds of sites, just to get a baseline. Then I most often book my reservation directly with the hotel, if possible. Often I am able to get a better price or a better room in this way. Please be aware that many hotels reserve their worst rooms for guests coming through these kinds of sites.

    Saying that, imposing the bed tax on a company that merely books the room would then impose that burdensome tax on the few “brick and morter” travel agencies left. Also, please consider that there are also smaller hotels that would not be able to afford to advertise to a huge international customer base in any other way. I would not like to go back 20 years and only be able to know about, and stay in, big chain hotels. Hooray for the experience of enjoying the quaint, charming “mom and pops”!

    Please consider that if we start imposing taxes on services and products sold on the internet, we will be working against that entire new commercial realm. . . with world wide implications. I am so glad we have not yet started on that slippery slope. There are still bargains of all kinds to be had by shopping the internet (using reputable suppliers), enjoy it while you can. . . the tax man cometh!

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