Online Travel Companies Are Not “Hotels”
Seems like a pretty obvious statement, right? I mean, a hotel is a place made of bricks and mortar, with paper thin walls and overpriced room service, right? And an online travel company like hotels.com is, um, online. As in, no rooms, no keys, none of those little shampoo bottles. But a case in the federal court for the Northern District of Ohio has been chewing on this question since 2005. Late last week, though, the court issued a ruling that should put the matter to bed (not sure if there will be a mint on the pillow). The court had previously ruled that hotels.com is not subject to local municipal taxes assessed on hotels, because, as we noted, it’s not a hotel. But the municipalities took the position that, even if that were the case, hotels.com “collected” hotel taxes when it charged its customers for the discounted rooms. According to the municipalities, hotels.com receive a “wholesale” rate from the participating hotels and then mark that rate up when they sell the room to their online customers. The municipalities claimed that mark up was a disguised tax. The online companies claimed it was a service fee and not a disguised tax because it was never subject to the tax in the first place. The court sided with the online companies. I have to believe the municipalities will appeal this ruling. There’s just too much money at stake. But it may be an uphill battle. Unless hotels.com starts offering room service.