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Online Taxes

Baltimore seeks hotel tax from online firms  Dec 11, 2008

BALTIMORE — Baltimore is joining dozens of governments nationwide going to court in hopes of collecting taxes from online travel sites that help people book hotel rooms.

The lawsuit, filed in U.S. District Court on Wednesday, asks that companies like Expedia Inc., Orbitz Inc., Inc. and Inc. pay the city's 7.5 percent room tax on the markup for rates customers pay for Baltimore hotel rooms.

The city is missing out on about $1.5 million a year, Mayor Sheila Dixon said.

"We feel that this is unfair," Dixon said. "It doesn't matter if it's good or bad economic times, it's incumbent on us to really focus on what's good for the citizens."

Hotels already pay the tax based on the prices the online travel companies negotiate, but the city wants to collect taxes on the total customers pay for the rooms.

The online travel companies consider the difference a service fee for booking through their sites that they do not have to pay taxes on. However, Baltimore argues in its lawsuit that it is part of the retail cost of the room and taxable.

"There's a fundamental misunderstanding of how the business model works," Art Sackler, the executive director of Interactive Travel Services Association, whose members include many of the companies being sued by Baltimore and other cities. "As a result, the cities which have been suing feel they've somehow been shortchanged, but they're not."

An Atlanta law firm that has represented other jurisdictions in similar suits is working with Baltimore's Law Department on the suit. Miami-Dade County, Los Angeles, Philadelphia, Atlanta and Chicago are among the other jurisdictions that have filed such lawsuits. There has been some success for some of the suits brought by the other jurisdictions, but none has resulted in a final judgment, City Solicitor George Nilson said.

"We can expect to meet strong resistance," Nilson said. "But we think that at the end of the day, we will prevail."

The suit is part of a larger effort by the city to collect money the city is owed — more than $50 million if they are all successful, Nilson said.

The city is also pursuing a lawsuit against San Francisco-based Wells Fargo Bank N.A. claiming the bank engaged in predatory lending that led to a higher rate of foreclosures in minority communities and seeking to recover costs of keeping up neighborhoods. Other suits filed on the city's behalf claim illegal business activities by the municipal bond industry and conspiracy to manipulate pharmaceutical drug prices by San Francisco-based McKesson Corp. and San Bruno, Calif.-based First DataBank, Inc.

Named in the hotel room lawsuit filed Wednesday are Norwalk, Conn.-based Inc.; Inc.; Travelweb LLC; Travelport Inc.; Cheaptickets Inc.; Trip Network Inc.; Chicago-based Orbitz Inc. and Orbitz LLC; Bellevue, Wash.-based Expedia Inc.; Dallas-based, LP and GP LLC; San Francisco-based Hotwire Inc., Springfield, Mo.-based Inc.; Southlake, Texas-based Sabre Holdings Corp., Inc. and LP; and LLC.

Baltimore seeks hotel tax from online firms
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