Booking Hotels Online? Court Ruling Could Make Your Rates Go Up

By: Eric Giunta | Posted: February 13, 2013 3:55 AM
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About 28 percent of hotel bookings are made through online travel agencies like Expedia, Orbitz, Travelocity, and Priceline.com, by lodgers looking to snag a deal. But if 17 counties have their way, Florida’s travelers might soon be paying higher taxes on those rentals.

Alachua, Charlotte, Escambia, Flagler, Hillsborough, Lee, Leon, Manatee, Nassau, Okaloosa, Pasco, Pinellas, Polk, St. Johns, Seminole, Wakulla, and Walton counties are plaintiffs in a lawsuit asking judges to interpret Florida law to require the agencies to charge tourist development taxes (TDTs, or “bed taxes”) on the full amount they charge customers for their services, not just on the wholesale cost of the rooms, as has been the customary practice up to now.

Florida’s Local Option Tourist Development Act allows counties to implement a special tax, of up to 3 percent, on hotel room rentals. What a three-judge panel of the Florida 1st District Court of Appeal, which heard oral arguments in the case of Alachua County v. Expedia Inc. on Tuesday morning, is being asked to decide is whether the Internet travel agencies are effectively renters, or whether they are mere service providers who are “facilitating” the rental by the hotels.

Last April, Judge James Shelfer of the 2nd Judicial Circuit Court of Florida ruled in favor of the travel agencies, ruling that state law was ambiguous, it was up to the Legislature to clarify its application to online travel agencies, and that in the meantime “the court should not expand the scope of the taxing authority by assuming that the Legislature intends to include this completely new method of doing business under the currently existing tax scheme.”

Attorneys for both the counties and the agencies told Judges Marguerite David, Philip Padovano, and Bradford Thomas that, under conflicting pressure from interested lobbyists, the Legislature has declined to act on several proposed clarifications put before them over the years.

"It does seem that the Legislature's grappling with trying to clarify this statute one way or the other,” Thomas said, suggesting the difficulty in gauging legislative intent.

Mark Sexton, Alachua County communications coordinator, defends the counties’ position on the grounds of sheer fairness.

“Everyone else has to pay sales tax on the retail price, and [these agencies] are paying it on the wholesale price; it’s not fair,” he tells Sunshine State News. “Those taxes are used for important services. They’re used to enhance destinations. They were put in place for a very specific reason, and just because you’re an Internet business doesn't mean that you shouldn't be paying the same taxes that support the same services that every other business has to pay for.”

Florida TaxWatch is following the case closely, though it is not taking a position on which way the court should rule.

“Certainly it would be cheaper for the consumers and cheaper for those businesses to not tax [on the full cost of services], but you also want to be fair,” Kurt Wenner, vice president of tax research at the watchdog group, tells SSN. “There’s a lot of things that one needs to take into consideration, and our stance is that there is enough uncertainty in the law that the Legislature should weigh the pros and cons and clarify it.”

Reach Eric Giunta at egiunta@sunshinestatenews.com or at (954) 235-9116.

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