D.C. Attorney General Irvin Nathan is filing a lawsuit against four Internet travel companies, seeking millions of dollars in what the city says is unpaid taxes.
Nathan said the lawsuit will be filed Tuesday, making the District one of dozens of jurisdictions across the country suing companies like Priceline, Orbitz, Expedia and Travelocity for taxes on hotel rooms they say have gone unpaid.
The travel sites get rooms at a discounted rate from hotels, then rent the rooms to customers at a higher rate. City officials say the companies collect tax on the higher rate but only pay taxes on the discounted value.
Nathan estimated between $4 million and $10 million have gone unpaid annually. The lawsuit will stretch back to 1998 and seek to recover the unpaid taxes, interest and penalties. Nathan wasn’t sure how much cash the lawsuits could bring into the city’s depleted coffers, but it would likely be in the “tens of millions of dollars.”
D.C. Council Chairman Kwame Brown has estimated the District is owed about $150 million in unpaid taxes from the travel companies.
Similar lawsuits filed by other jurisdicitons have met mixed success.
Update:
A spokesman for the Interactive Travel Services Association responded to the lawsuit with the following statement:
“We are disappointed that the DC government would choose to pursue frivolous litigation in this area, when the overwhelming majority of courts around the country have ruled in favor of the online industry on the facts and the merits. In case after case, common sense and the law have agreed: online companies are not hotels and thus should not owe hotel occupancy taxes on their fees.”
