D.C. can collect sales taxes on the rates hotel guests pay for rooms they book through online travel companies, a judge has ruled.
The city has been collecting taxes on the wholesale rates that the companies pay to hotels. It claimed in a lawsuit that companies including Expedia, Orbitz, Travelocity and Priceline owe between $4 million and $10 million in unpaid taxes and interest dating back to 1998.
Dozens of similar lawsuits have been filed across the country, and cities have met with mixed success in cases already decided by courts.
On Monday, Superior Court Judge Craig Iscoe granted summary judgment to the district on portions of its lawsuit, while other portions are yet to be decided. The city can't immediately start collecting taxes because the case is not over. The city is still seeking damages from the firms, which also could appeal the summary judgment rulings.
“The Court's ruling today is an important step in our efforts to ensure that the district receives the substantial sums it is owed by online companies selling hotel rooms in D.C.,” Attorney General Nathan said in a statement.
Joseph Rubin, president of the Interactive Travel Services Association, a trade group that represents the online companies, said he was confident the companies would win on appeal if they decided to do so.
“We were disappointed by the decision, but this decision is clearly an outlier,” Rubin said. According to cases tracked by the trade group, the industry has prevailed in 22 of 29 similar lawsuits, and several state legislatures have decided against imposing the taxes.
The industry contends that the difference between the wholesale rate the companies pay and the rate charged to consumers is a service charge that should not be taxed.