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Major Cities Sue Online Travel Agents

     
2:10 pm on May 13, 2006 (gmt 0)

WebmasterWorld Administrator brett_tabke is a WebmasterWorld Top Contributor of All Time 10+ Year Member Top Contributors Of The Month



Major Cities Sue Online Travel Agents [chicagotribune.com] Associated Press

Several cities around the country have sued Web-based travel clearinghouses such as Expedia, Travelocity and Orbitz, claiming they have failed to pay millions of dollars in hotel taxes.

San Antonio filed a class-action lawsuit this week seeking to recover lost taxes, and Los Angeles, San Diego, Philadelphia, Atlanta and Chicago have filed similar suits. The state of Texas and two of its biggest cities, Dallas and Houston, are considering their own actions. San Antonio believes online travel agencies negotiate room discounts from hotels, and sell the rooms at a markup to consumers. The agencies, though, only pay hotel taxes on the wholesale price.

8:33 pm on May 16, 2006 (gmt 0)

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...my family has a small villas resort...

Yeah, I wish my family had enough money to buy a small villas resort...

3:28 am on May 17, 2006 (gmt 0)

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Last time I checked, I paid my INCOME TAXES on my earnings as required by law.
If some crooked politicians want to take more money out of my pocket, damn them all.

Texas, the state at the start of this thread, doesn't have a state income tax. The state government is funded through sales, franchise, and property taxes.
4:11 pm on May 17, 2006 (gmt 0)

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Last time I checked, I paid my INCOME TAXES on my earnings as required by law.
If some crooked politicians want to take more money out of my pocket, damn them all.

Income taxes are only one slice of the pie. Do you drive a car? A big chunk of the price of the gas you put in the tank comes from a variety of state, federal, and even local taxes. (What to you think your annual car registration fees are? Nothing but another disguised tax.) Does your state have a sales tax on things you buy? Don't forget the property tax (if you own a home or other real estate). Check out your telephone bill for a variety of federal and state taxes.

Yes, probably every politician has been damned numerous times. Vote them out so we can get some new people to come in and think up even new taxes.

8:56 pm on May 17, 2006 (gmt 0)

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Texas, the state at the start of this thread, doesn't have a state income tax. The state government is funded through sales, franchise, and property taxes.

I do not live in Texas, I live in Florida. So whats your point?

9:02 pm on May 17, 2006 (gmt 0)

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Exactly - Fair tax is necessary.

Trouble is, these issues over tax definitions are hard to determin [ or at least some of them ].

Most of the larger internet companies are having to do back flips to get a reliable position in relation to predatory interpretations by the authorities. "Predatory" is a bit unkind - perhaps "Probing for some understanding" would be better.

-Where does the transaction take place?
-Who are the parties?
-Is the supporting contract true in fact?
-How is the business defined?
-Is it marketing or selling?
-Where is it operated?
Where is it controlled?

Then:

-Is there a double taxation threat?
-How will a business defend it's position in terms of strategy?
-Which jurisdication is safest to ride this out?

And don't think you can abuse this confusion for your own advantage. If some jurisdiction locks onto you it can put co's out of business trying to sort it out.

In some cases business' have established a technology upon a strategy, that can in cases be irreversable. e.g. A sells to B and takes % at B then passes to C = operational process is cast in stone.

9:22 pm on May 17, 2006 (gmt 0)

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gamiziuk, the city referenced at the start of this thread is in Texas.
11:36 pm on May 17, 2006 (gmt 0)

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...Los Angeles, San Diego, Philadelphia, Atlanta and Chicago...

I guess you missed those.

11:55 pm on May 17, 2006 (gmt 0)

WebmasterWorld Administrator lifeinasia is a WebmasterWorld Top Contributor of All Time 5+ Year Member Top Contributors Of The Month



Another problem with the law suit is that often the end selling price of the hotel room can not be determined.

For example, suppose someone buys a package online that includes air fare, hotel, and a round of golf. There is no breakdown as to how much of the package is for the hotel room, so no way to allocate the "price" of the room for tax purposes. Any attempt to force an accounting would just cause the advertisers to determine the room rate at the lowest possible amount to avoid any extra taxation.

5:27 pm on May 18, 2006 (gmt 0)

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from an AP article:

"Art Sackler, executive director of the Interactive Travel Services Association, said governments misunderstand this business.

The companies do not buy and resell rooms, he said. Rather, they negotiate a lower price based on the value of the service they then provide - creating a marketplace for consumers to find rooms, he said. The markup is a service fee, he said."

I would venture to guess that will be central to the defense.

10:58 am on May 19, 2006 (gmt 0)

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Sooner or later, because of the system flaw, something like this must have happened.
Hotel taxes should be a determined amount of money instead of the percentage.

Just like airport taxes; you pay a fixed amount, regardless of the ticket price.

4:00 pm on May 19, 2006 (gmt 0)

WebmasterWorld Administrator lifeinasia is a WebmasterWorld Top Contributor of All Time 5+ Year Member Top Contributors Of The Month



Sooner or later, because of the system flaw, something like this must have happened.
Hotel taxes should be a determined amount of money instead of the percentage.
Just like airport taxes; you pay a fixed amount, regardless of the ticket price.

Still a flaw in the system. Do you tax by the room, so 1 person in the room pays the same amount as 4 people in the room (unfair to the single person who has to pay 4 times as muich tax as the others)? Or by the number of people in the room (so the family with 2 kids pays 4 times as much as the student who shares the room with 3 friends)? Or by the size of the room (unfair to the person who has to take a much larger room than he needs because all the smaller rooms are booked)?
4:52 pm on May 19, 2006 (gmt 0)

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Still a flaw in the system.
... Or by the number of people in the room (so the family with 2 kids pays 4 times as much as the student who shares the room with 3 friends)?

I don't see a problem. It should be per person, with minimum age defined.
I think the airport tax should be the clear model.

5:28 pm on May 19, 2006 (gmt 0)

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Actually, I guess I'm in favor of that, although the consumers will hate it, since it will be just one more tax added to their bill at checkout. (Since guests often show up at the hotel with more or less people than they put on the reservation, the responsibility for collecting the tax would have to be put on the hotel.) Consumers already don't like all the extra taxes that get dumped on them. So eventually this may lead to a mini-revolt that would either get some cities to revoke the tax or cause people to stay in other cities.

However, in principle, I am still strongly opposed to thse types of taxes as they violate the concept of taxatrion without representation, as the tax is primarily imposed on out of towners who have no say/vote in the tax. What we need is a class action countersuit from consumers against the cities suing the online travel agents.

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