Do OTA’s Owe Taxes To Atlanta?
Travelfli is in Atlanta this week meeting with some of the top airline and hotel loyalty programs (more on that later) and enjoying some good Southern cooking. Keeping in theme with our Georgia visit, the city of Atlanta filed lawsuits with a variety of online travel agencies today, including Travelocity, Orbitz, Expedia and 14 others.
The city claimes the OTA’s owe them millions in unpaid taxes from hotel bookings on their sites. The same charges have been filed in Los Angeles, Philadelphia, Miami, Chicago and Missouri.
The sites’ argue that they were not in violation of the law, and even if they were, the city should have disputed the tax issues with the agencies directly instead of going straight to court. The court is reviewing a ruling last year in support of the OTA’s argument, and if they rule in their favor a three-year statute of limitations will prevent the city from pursuing taxes collected by the online companies. This will be a huge windfall for the OTA’s.
For instance, let’s say an OTA charges $110 for a room online, which is a $60 markup from the $50 the OTA pays the hotel. Should the OTA then, pay taxes on the difference? The city argues that walk in customers pay taxes on the regular room rates, while OTA’s only pay on wholesale. The OTA’s argue that their business model provides value for consumers as it allows them to compare hotel prices to get the lowest one, consequently facilitating toursism.
