In a dispute over calculating lodging taxes due the city, a Columbus judge has ruled against a national company booking hotel rooms online.
Superior Court Judge Doug Pullen issued a decision Monday saying that Expedia Inc., better known to consumers as Expedia.com, in the future must collect taxes based on the amount it charges customers for hotel rooms here, not on a wholesale rate it pays hotels for the rooms.
Represented by attorneys from Pope, McGlamry, Kilpatrick, Morrison and Norwood, the city government filed a complaint against Expedia in May 2006, claiming Columbus was being shortchanged on hotel tax collections, for which the city gets 7 percent of the rate lodgers pay. That provides funding for city agencies promoting tourism.
According to Pullen's ruling, Expedia negotiates with local hotels to get rooms at a discounted or wholesale rate, which is never disclosed to its customers. Expedia charges the consumer a higher amount and adds a charge for "taxes and service fees." Court testimony showed the amount Expedia sent back to the hotel was the discounted room rate plus funds to cover taxes based on that rate. Expedia kept the rest.
The city contended that under state and local law, the taxes should be based not on what the hotels charge Expedia but on what Expedia charges the customers. Pullen agreed, and ordered Expedia in the future to use that formula for collecting taxes.
Expedia argued that it was not subject to such regulation because it was not the entity providing the lodging and therefore not the one required to collect the taxes. Pullen disagreed, noting that the online company was the business charging the customer's credit card, not the hotel.
"There is no consumer interaction with the hotel at the time the consumer is charged for the room," the judge wrote. "Expedia calculates, charges and collects all monies associated with this transaction."
Expedia also argued that it no longer lists Columbus hotels on its Web site, so the city's complaint was moot. Pullen did not buy that, either, writing that Expedia could go right back to listing rooms in Columbus and may still have reservations here it made earlier, for which the taxes have not been paid yet.
According to Pullen's order, the amount of delinquent taxes in 2007 was estimated at $26,342 and today would still be less than $75,000. He is not ordering Expedia to pay the city back taxes, just enjoining it now "to collect the hotel occupancy tax based on the total amount it discloses to the consumer as the room rate, room charge or other comparable term."