LA Sues Hotel Booking Websites Over Tax Issue

from the pocketing-a-few-extra-tax-dollars dept

When travel sites offer rooms to end users, they've often prenegotiated a lower rate from the hotels in question. When they do so, they pay tax based on the rate at which they paid for the room -- which seems reasonable. However, when they turn around and sell the room to someone on their site, they charge tax based on the higher selling price. So, where does that extra tax revenue go? Right into the pockets of the online travel sites -- and not into the government coffers who set up the tax in the first place. It appears that someone in LA finally realized this, and decided they want that extra tax money and have sued all the big name hotel booking sites over the issue.
Hide this

Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.

Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis.

While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.

–The Techdirt Team


Reader Comments

Subscribe: RSS

View by: Time | Thread


  1. identicon
    Anonymous Coward, 4 Jan 2005 @ 4:51am

    Damnit...

    2 wrongs dont make a right... oh yeh but its always about the green and never

    link to this | view in thread ]

  2. identicon
    BtG, 4 Jan 2005 @ 6:12am

    No Subject Given

    Shouldn't that "tax" money actually go back to the consumers who overpaid it?

    link to this | view in thread ]

  3. identicon
    No one important, 4 Jan 2005 @ 10:35am

    retax

    That is not correct. With Sales tax the reseller is required to pay the state all the tax it collects. First they pay the Hotel tax on the amount they agree to, say $100 and then $6 for tax for a total of $106 to the Hotel. Then they resell that to the consumer for say $200 and $12 in tax. When the reseller files it's sales tax return they will show they collected $200 in sales and $12 in tax. They will then deduct $100 from the gross sale because it was purchased retail. As well as take a credit for the $6 in tax they paid to the hotel.
    So if you do the math on tax the Hotel pays $6 tax to the state. The reseller pays $6 to the hotel and $6 to the state and then the Customer pays $12 to the hotel. Everything balances out. None overpaid tax on anything.
    Ok now lets look it it the other way. Lets say the Hotel sells it to the reseller with no tax for $100. The hotel will file return which would state $100 gross sales. And then claim the $100 as credit because it was sold to an approved reseller. The hotel would pay no tax. The reseller then sells it for $200 and collects $12 in tax. Wehn they file their return it will show $200 in sales and $12 collected in tax. they would then send a check for $12 to the state for the sales tax.
    If you are going to complain about something, look at car sales. Everytime it is sold tax has to be paid. So say I buy a Hummer for $100k in 2005. I'll pay say $6k in taxes. Then I trade it in a year later for a prism cause I can't afford the gas on the pig. Well the dealer will sell it again and say this time it fetches $80k in 2006 that generates about $5k in taxes. Now lets assume this happens every two years and the price drops 20% each time it's resold. 2008 sale price (SP) $64k tax $4k. 2010 SP $51k tax $3k. 2012 SP $41k tax $2k. 2014 SP $33k tax $2k. All amounts rounded for ease of calculating. So we have ONE vehicle when new was $100k and in nine years the state collected $22k in taxes. By the law this applies to almost everything that is resold. Why should the state get paid mutiple times on the same item.?

    link to this | view in thread ]

  4. identicon
    Michael Bluett, 4 Jan 2005 @ 1:49pm

    The Register's coverage includes a denial by Orbit

    "The lawsuit has no merit," Kendra Thornton, a spokeswoman at Orbitz, told the news service. The Register

    link to this | view in thread ]


Follow Techdirt
Essential Reading
Techdirt Deals
Report this ad  |  Hide Techdirt ads
Techdirt Insider Discord

The latest chatter on the Techdirt Insider Discord channel...

Loading...
Recent Stories

This site, like most other sites on the web, uses cookies. For more information, see our privacy policy. Got it
Close

Email This

This feature is only available to registered users. Register or sign in to use it.