Hoteliers, Online Hotel Bookers

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.