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Thursday, June 18, 2009

Atlanta may collect back hotel taxes, thanks to court ruling

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The AJC reported yesterday that the city of Columbus just won a big lawsuit against Expedia over the question of whether the online travel agency was cheating the city out of a portion of the hotel occupancy tax. The Georgia Supreme Court ruled 4-3 that, yes, the company was doing just that.

This is very good news for Atlanta, which is currently suing 17 travel websites — Travelocity, Orbitz,, etc. — over just the same issue. Says Atlanta City Attorney Jerry Deloach:

"Atlanta is pleased with the Supreme Court’s decision and looks forward to recovering past due occupancy taxes in its pending case, as well as securing compliance with state and local tax laws going forward."

The way the online travel agency business works is they buy up blocks of hotel rooms at a discount, then market those rooms to consumers at a higher rate. That's how they make money.

The cities, however, are claiming that while the websites pay the local hotel tax — 7 percent in Atlanta — based on their discounted price, they charge the customers the tax based on the full retail price, and pocket the difference. Their argument is that cities should be collecting taxes that correspond to the final rate that a customer pays to stay in a hotel room.

Look for Atlanta to announce a legal settlement in coming months.

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