The Georgia Supreme Court on Monday handed the city of Columbus an important victory in a high-stakes lawsuit against online travel companies.
The 4-3 ruling sets a precedent for other cases, including one brought by the city of Atlanta. Both cities contend Internet reservation companies are not paying their full share of hotel occupancy taxes.
“It’s the highest court in any state that has interpreted the online companies’ business model and determined they have to pay the taxes they are withholding from the taxing authority,” said C. Neal Pope, a lawyer representing Columbus and Atlanta. “It’s a tremendous decision.”
The cities contend online reservations companies underpay hotel taxes because they base them on the wholesale rates at which they buy rooms —- not the retail rates at which they sell them. Columbus sued in 2006.
Monday’s ruling applied to an injunction by a Columbus judge, saying he was correct to require Expedia to collect and pay hotel taxes at the retail rate under its contracts with hotels. But the high court also said the judge could not require Expedia to collect and remit taxes in the future because its business model could change.
Expedia said the ruling conflicts with federal court decisions and “has no impact” because the company hasn’t listed Columbus hotels since 2008. The company said it will “continue to pursue a determination that it is not liable” for further payments under Columbus’s hotel tax.
The Columbus judge now will resume his consideration of the case. Bill Norwood, another lawyer for Columbus, said he will ask the judge to determine how much Expedia owes the city.
The hotel occupancy tax in both Atlanta and Columbus is 7 percent. The online travel industry has been under legal assault nationwide as cities and counties seek to recoup millions of dollars in tax money they claim is rightfully theirs.
Expedia and other online travel companies have delisted Columbus on their Web sites. Expedia, for example, only lists hotels in nearby Phenix City, Ala. “They tried to intimidate us to make us withdraw our suit,” Pope said. “It didn’t work.”
Atlanta has sued 17 Internet travel reservations companies, including Expedia, Travelocity, Hotels.com, Priceline and Orbitz. In a statement, Jerry DeLoach, an attorney in Atlanta’s law department, said the state Supreme Court ruling “validates” the city’s lawsuit.