Seven of the country’s largest online hotel booking websites have agreed to pay the District of Columbia more than $60 million in disputed sales tax and interest — if the companies lose their appeal of a trial judge’s decision finding them liable.
The District accused the online travel companies-Expedia Inc., Hotels.com LP, Hotwire Inc., Orbitz LLC, priceline.com, Travelocity.com LP and Travelscape LLC-of failing to pay the proper amount of local taxes. City officials claimed the companies were unlawfully paying taxes based on discount rates they negotiated with hotels, instead of the higher rates they charged consumers.
A D.C. Superior Court judge sided with the city in September 2012, finding the travel companies were liable for unpaid taxes. The travel companies plan to appeal the ruling, but in the meantime reached an agreement with the District on what they would owe if they lost.
Many details of the settlement are confidential, but the $60.9 million sum includes agreements between the parties on what the travel companies owed in monthly sales taxes from as far back as 1994, plus interest.
For instance, Hotels.com would owe $10 million, plus interest, in sales taxes from February 1994 through March 2011.
Lawyers for the District and six of the companies, not including Priceline, filed court papers on Feb. 21 asking the court to approve the agreement. The city reached a separate agreement with Priceline, which it plans to file with the court soon, but the amount is included in the $60.9 million figure announced today.
“This case sends the message that the District will vigorously enforce its tax laws and that all corporations, no matter their size or industry, have to pay their fair share of taxes,” Attorney General Irvin Nathan said in a statement. “I look forward to defending on appeal the trial judge’s determination that the online travel companies owe the District back taxes for these hotel room sales.”
Nathan said the agreement announced today would “spare the District time and expense of litigating” damages, assuming the appeals court upholds Iscoe’s 2012 ruling.
Williams & Connolly has represented the defendants as a group. Partner John Villa declined to comment.
Individually, some of the travel companies have also hired separate counsel: Kelly Hart & Hallman of Fort Worth, Texas is representing Travelocity; McDermott Will & Emery is representing Orbitz; and Jones Day is representing Hotels.com, Expedia, Hotwire and Travelscape.