Just like almost everybody I know, I shop for the best hotel rate when I plan to visit other cities, for personal and for corporate travel alike. Of the many sites I scope, I’ve used Expedia, Hotels.com, and Orbitz often enough to bookmark them. That’s why various cases (one, among several, in the U.S. District Court for Northern Ohio involving Expedia) caught my eye.
The general issue in this line of cases is the same, namely whether online hotel booking companies should collect and remit sales tax on the mark-up value of the booking or on the final, negotiated price paid by the consumer.
The online middlemen purchase hotel rooms at discounted rates directly from the hoteliers and re-sell them at marked-up rates to the online public. Evidently, several online hotel brokers have been remitting to the states a sales tax that is based on the discount rates, rather than the mark-up, and have been retaining the difference for themselves.
States, cities, and other jurisdictions have been filing claims that they should be entitled to the tax on the full rate that the consumer pays, asserting amongst other allegations, that the online hotel brokers are being unjustly enriched.
Another, no less important issue arises between hoteliers and online hotel room brokers: there may be cause to re-think, or at the very least re-examine, the indemnification clauses they have in the agreements they have in place. 
Filed under: Court Cases, E-Commerce, Taxability | Tagged: claims, Expedia, hoteliers, Hotels, Hotels.com, Ohio, online hotel brokers, Orbitz, sales tax, U.S. District Court, unjust enrichment |
Sales Tax Buzz 
This is an internet sale so why should it be subject to sales tax? Do these online sellers have nexus everywhere? This is the last loophole for travelers trying to avoid being gouged by outrageous local taxes on travelers.
In this economy the states need all the help they can get to help our deteriorating infrastructures across the country. Why shouldn’t the states get their fair share?
As an avid traveler, I consistently seek out the best and most competitive hotel rates. It is my opinion, travelers already pay enough taxes on travel related activities. From airline fuel surcharges (as a result of the high gas prices in months past), exorbitant hotel room tax fees, to charges for travel agent arranged travel plans etc., it seems no matter where I turn, there are additional sums added to the end of my hotel stay regardless of what state I am visiting.
If the states need all the help they can get (as Walter Sobchak98 mentions above), what will happen if this tax is implemented and the result is a decrease in tourism to these states because tourists are unable to afford the additional costs? Will the new instituted tax cover the state’s revenue loss as a result of decreased visitors and tourists? Careful consideration needs to be given to decisions of this nature because the long term consequences can far outweigh the short term gain.
Hornhill, online sellers do have to collect sales tax. Obviously, anywhere the company has property (eg. corporate headquarters) would be enough cause for “nexus.” But additionally, the way in which these companies do business could be enough to establish “physical presence.” My guess is that they are acting as a broker or as contract sales for the hotels and would therefore need to collect sales tax anywhere the hotels are located. It gets legally dicey in these situations and I don’t know the details, but like the Amazon vs. New York case, states don’t want to lose out on tax revenues that they so desperately need.
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