Washington Journal of Law, Technology & Arts


Kerra J. Melvin


Online travel companies (“OTCs”) like Expedia and Hotels.com facilitate discounted hotel room rates for customers by contracting with hotels at a wholesale rate and then allowing customers to book rooms on their websites at a marked-up rate that is above the wholesale rate but below the market rate. Many states allow cities and counties to assess an occupancy or bed tax upon persons reserving hotel rooms, with the collections typically used to promote state and local tourism. Such statutes generally require the hotel operator to collect and remit the tax. OTCs have traditionally remitted the wholesale rate and the occupancy tax on that rate to the hotels, which in turn remit the tax to the city or state. This practice has recently come under scrutiny, however, with cities and counties arguing that OTCs should collect and remit the tax on the full retail amount paid to OTCs by the consumer. OTC litigation is occurring in state and federal courts across the country, and courts are split on whether the tax can be assessed on OTC profits. This Article will analyze recent decisions, examine the reasons why courts are split, and then briefly discuss potential resolutions for the OTCs and local governments.

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