Ga. Supreme Court backs Columbus on Expedia hotel tax

By Dennis Schaal

The Georgia Supreme Court, in a 4-3 ruling, affirmed a lower state-court ruling that Expedia Inc. "henceforth" must collect 7% hotel-occupancy tax on the full room rate, including service fees, when taking merchant-model hotel bookings for properties in Columbus, Ga.

The state's highest court also concurred with the lower court that Expedia must separately break out its service fees and all hotel taxes either when the merchant-model booking occurs, when the traveler occupies the room, or at both times.

The city of Columbus, seeking enforcement of a local hotel occupancy tax ordinance, initiated litigation against Expedia Inc. on May 30, 2006, seeking a judgment that Expedia's tax remissions to the hotels be based on the full room rate or "charge to the public" and not on the net rate that Expedia negotiates with hotels.

That led to the trial court issuing a permanent injunction Sept. 22, 2008, which ordered Expedia to pay taxes on the room rate in merchant-hotel sales either through the hotels, as it does in Columbus and across the country, or directly to the city.

Expedia had ceased selling Columbus hotel rooms on a merchant basis prior to the injunction in 2008 and appealed the lower court ruling to the Georgia Supreme Court on a variety of grounds, including an allegation that the trial court mistakenly held that Expedia was required to collect hotel occupancy taxes because of state and local law.

But the high court ruled that Expedia "misconstrues" the lower court ruling and actually collects hotel taxes because of its hotel contracts, and not because of local statutes.

"Having contracted with city hotels to collect hotel occupancy taxes, Expedia has rendered itself duty-bound to remit the taxes it has collected to the city's taxing authority," the appellate court ruled.

The George Supreme Court decision does not hold Expedia liable for back taxes, and although the case was decided on the merits, rather than on a procedural issue, it did not rule on whether Expedia is a hotel operator -- a key issue in a torrent of litigation throughout the U.S.

Instead the Georgia Supreme Court held that regardless of whether Expedia is a "hotel, motel or innkeeper," it is an "entity" that collects taxes and therefore "is required to remit tax payments belonging to the city."

Expedia issued the following statement about the high court decision:

"The Georgia Supreme Court's decision ... does not hold that Expedia is obligated to collect and pay taxes under the city's ordinance and therefore does not address Expedia's liability under the city's ordinance. In its ruling, the court specifically stated that it was declining to determine whether Expedia is 'an innkeeper or operator' subject to the requirement to collect taxes under the city's hotel-motel occupancy excise tax.

"Nevertheless, this decision has no impact because Expedia ceased doing business in the city of Columbus in 2008. The ruling by the Georgia Supreme Court yesterday is contrary to the decisions of five United States federal courts that have interpreted 16 ordinances and determined that the online travel companies were not subject to the relevant local occupancy tax ordinances applicable to hotel operators.

"Similar to these decisions, Expedia will continue to pursue a determination that it is not liable under the city of Columbus' hotel-motel occupancy tax ordinance which for years the city has only sought to apply to hotels and motels and not travel agents."

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