Suit Alleges Hotels.com, Expedia, Travelocity and others collect full amount of applicable taxes from customers, while only partial amounts of the applicable tax are paid to the City.
ATLANTA - The City of Atlanta today filed suit in Fulton County Superior Court against online travel companies Hotels.com, Expedia, Travelocity and others alleging that the companies have wrongfully pocketed millions of dollars in unpaid hotel occupancy taxes owing from, and actually paid by, customers who make reservations online for lodging in Atlanta.
The suit alleges the online travel companies privately negotiate with hotels and other lodging establishments for rates significantly lower than the rates they will eventually charge the customers who book online. The online travel companies purchase blocks of rooms at a lower price and when online customers purchase them, taxes are only remitted on the lower, undisclosed amount.
When selling the reservations to the customers the companies assess a "taxes and fees" amount to cover all applicable taxes on the marked-up room rate which they charge to the customer. For the City of Atlanta, that means the companies collect, but do not remit the full amount of the City's 7% hotel occupancy tax.
The City contends that it does not receive the full amount of tax charged by the online travel sites and paid by the customer. The only tax actually remitted to the City is the amount remitted by the hotels, calculated against the lower rate which the hotels are paid by the online companies. The result is an alleged windfall of millions of dollars for the online travel companies - and a corresponding loss of millions in legitimate revenue for the City of Atlanta. The suit seeks to recover these unpaid taxes and hold the online travel companies accountable to pay them fully in the future.
"By failing to remit their fair share of taxes, the online travel companies have short-changed the City of Atlanta of millions of dollars in tax funds that are expressly designated to promote tourism and for the public benefit of the citizens of Atlanta", says Linda K. DiSantis, City Attorney of Atlanta. “Tourism plays a vital role in the City's economy, and everyone who benefits must do their part to support continued investments in the tourism infrastructure of the City. The City's hotel occupancy tax is dedicated to the enhancement of the City's tourism industry and the online companies must be held fully responsible for the taxes they collect from tourism in the City but do not remit to the City.” adds DiSantis.
The City has retained the law firms of Powell Goldstein LLP and Pope, McGlamry, Kilpatrick, Morrison and Norwood LLP to represent it, along with the City's law department, in the suit.
A copy of the complaint is available.
Additional information
Linda K. DiSantis, City Attorney, Department of Law: (404) 330-6400
L. Lin Wood, Powell Goldstein LLP: (404) 572-6600
Michael L. McGlamry, Pope, McGlamry, Kilpatrick, Morrison and Norwood LLP: (404) 523-7706
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