Monday, July 27, 2009

Travelocity Pays $2.7 Million Hotel Tax to San Francisco

Travelocity paid $2.7 million to the City of San Francisco on July 23 as part of its obligation to "pay first" before being able to appeal the city's hotel tax assessment.

The payment covers what the city argues was Travelocity's outstanding hotel-tax obligation on the retail rate -- as opposed to the tax recovery charges Travelocity previously remitted to hotels on its net rate under the merchant model. The payment covers the period from the beginning of 2000 to the third quarter of 2008, including taxes, penalties and interest.

As I wrote, Expedia and its Hotwire unit already paid the city $35.6 million and Priceline wired over $3.4 million. Orbitz is believed to be in the assessment process.

The payments -- some $42.7 million -- do not "prove" that the three online travel companies ultimately will owe the city the tax. Instead, a Superior Court in Los Angeles ruled that San Francisco's pay-first ordinance was proper, and thus it did not decide the merits of the tax issue.

So, the utlimate outcome of the case is undecided. It would be premature to count out the OTCs because they've recorded their share of victories around the country.

Still, this has not been a great few months for the OTCs.

As I reported , Expedia reached a proposed settlement with Washington State consumers in a class-action suit that revolved around the way the OTC presented its "taxes and fees" in merchant model hotel sales.

The judge in the case earlier found that $184.5 million in damages would be "warranted" in the case. The actual amount of the settlement has not been disclosed.

And, in another downer for the OTCs, New York City recently adopted a law that taxes the service fees of hotel "remarketers" -- a provision that not only targets the OTCs, but traditional travel agents and wholesalers, as well.

(industry associatons

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