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New York, like Texas, sues ‘Expedia et al’ for $50 million
The legal battle brewing against online travel agencies for back taxes took two steps forward last week, as courts in New York and Chicago granted local governments permission to file class-action lawsuits.
Tens of millions of dollars are at stake in each of the dozens of lawsuits now winding their way through the courts.
The fight is over whether online travel agencies should pay taxes on the wholesale price they pay for hotel rooms or on the retail price for which they sell them.
A group of 56 local New York governments—led by Nassau County on Long Island but also including New York City, with its massive hotel infrastructure—were certified as a single class action on Friday. Several Chicago suburbs also were given class-action status to sue as one entity last week.
The New York lawsuit claims that online travel sites such as Expedia, Orbitz, and Priceline—all of which are named as defendants in the case—have not paid their fair share of occupancy taxes.
The online sites, in turn, argue that the difference in rates is a service fee, not part of the room’s price, and therefore not subject to occupancy taxes.
Nassau County estimates that $50 million or more is at stake in New York alone.
Previous legal decisions on the issue have gone both ways. This month, a Texas court ruled that the online sites should pay more than $55 million in back taxes; the sites are planning an appeal. But a Florida court in February ruled in favor of the online agencies.
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