Florida Supreme Court
Florida Supreme Court ()

County governments scratch around for money to market tourism along with funds for other public needs, while websites like Expedia, Travelocity and Hotels.com push for profits.

The Florida Supreme Court will hear oral arguments April 30 in a case of competing financial interests that poses this question: Should counties tax the services that online deal-finder websites provide on top of what they already assess hotels for accommodations?

Seventeen Florida counties, plus Broward in tourism-dependent South Florida, say yes. They argue that online fees and room charges comprise a flat rate subject to the tourist development tax, commonly called the bed tax.

The counties are appealing a 2-1 decision of the First District Court of Appeal that only the Legislature can impose a new tax. The full First District refused a rehearing and handed the case up to the high court.

Panel dissenter Judge Philip Padovano interpreted the law to impose a tax on the total sum—including travel site fee—a tourist pays to rent a hotel room.

“The matter is no more complicated than that,” he wrote.

Edward Dion, a lawyer for the counties, agreed, saying, “This is real easy for us.”

“These guys charge a certain rate for a hotel room. That’s the deal that’s struck with the customer,” said Dion of Nabors Giblin & Nickerson in Fort Lauderdale. “We believe that’s the ‘total consideration,’ and that’s what our argument’s going to be,” he added, quoting from the statute.

Financial Stakes

The only certainty is that the bed tax issue is complicated.

Consumers would probably take the hit when online companies pass along their higher costs.

A sympathetic amicus wrote: “If these intermediaries are at risk of incurring tax liability unique to Florida travel, they will be under pressure to guide potential tourists to other destinations.”

The amicus American Society of Travel Agents offered Mexico and the Caribbean as alternative warm-weather havens.

Dion sounded unconcerned.

“That’s a business decision that those companies are going to have to make,” he said. “I find it hard to believe that someone won’t pick up the slack.”

“I’m sure there are plenty of people out there who would like to make the money these people are making,” Dion said.

Indeed, a lot of tourist dollars could be repurposed into tax revenue.

In Broward County, for example, the bed tax is 5 percent. If the online companies must pay the county tax, they also may eventually have to pay the 6 percent Florida sales tax, so by fighting the counties they stave off the state.

A victory for the online companies in the Expedia case would cost $70 million a year statewide, according to an amicus brief filed by an association of local tourism councils.

That’s not much compared to the drain on the state economy from a ruling for the counties, the Florida Chamber of Commerce said in its friend-of-the-court brief. The chamber noted the Florida Department of Revenue hasn’t collected the new tax and the Legislature hasn’t directed the agency to impose it.

The inaction shows “the Legislature agrees that it is the appropriate approach under current law,” the business group concluded.

Widespread Litigation

Most Florida counties have been parties to individual or class action lawsuits seeking bed taxes from the online companies. They are part of a campaign conducted by counties and municipalities across the country.

South Florida is an active participant. Miami-Dade took part in a 32-county class action led by Monroe County that settled for $6.5 million in 2011.

In 2012, Palm Beach County reached a settlement with the companies agreeing to pay $1.9 million. The county said it would hold off enforcement for two years, allowing the Legislature to decide how to compute the tax. It hasn’t yet.

Later that year, Travelocity agreed to pay Broward $400,000. The county is still pursuing the tax from eight other companies as an amicus in the Expedia litigation.

Alachua and 16 other counties went to Leon Circuit Court in Tallahassee seeking a declaration that the bed tax applies to the entire amount an online company collects from a hotel customer who reserves a room through the company.

The trial judge ruled summarily for the companies. He decided the bed tax law was ambiguous and applied the precept that ambiguity favors the taxpayer. If the Legislature wants to assess a new tax on online companies, it can do so, but the courts can’t, the judge said.

Legislative Role

The First District affirmed the lower court ruling last year.

The majority distinguished the 1981 opinion in Miami Dolphins v. Metropolitan Dade County in which the Florida Supreme Court rejected an equal protection challenge by nonresidents to the bed tax.

Does the First District decision in the Expedia case conflict with the Miami Dolphins ruling from above? The counties say it does; the companies say the two complement each other.

Although the Supreme Court accepted discretionary jurisdiction Sept. 10, it could still bow out with the formulaic explanation that jurisdiction was “improvidently granted.”

Dion doesn’t think that will happen, given the great public interest in the case.

Or, the court could defer to the Legislature. He hopes that doesn’t happen.

“Sometimes when the Legislature gets involved, instead of correcting the issue it makes it a little more complicated,” he said. “We would prefer to rely on the wisdom of the Florida Supreme Court than the efforts of the Legislature.”


Case No.: SC13-838

Case type: Hotel bed tax

Court: Florida Supreme Court

Jurisdiction accepted: Sept. 10, 2013

Lawyers for petitioners: Roberto Martinez, Maureen E. Lefebvre and Stephanie A. Casey, Colson Hicks Eidson, Coral Gables; Edward A. Dion, Fort Lauderdale, and Robert L. Nabors and Harry F. Chiles, Tallahassee, Nabors Giblin & Nickerson

Lawyers for respondents: Darrel J. Hieber, Skadden, Arps, Slate, Meagher & Flom, Los Angeles; Mark E. Holcomb, Madsen Goldman & Holcomb, Tallahassee

Originating court: First District Court of Appeal

Author of opinion below: Judge Bradford L. Thomas