The city of Los Angeles is suing a number of internet-based travel companies for failing to pass on to the tax authorities the full amount of hotel occupancy taxes collected from their customers.
According to the lawsuit, filed in the Los Angeles Superior Court last week, several well-known names in the industry, including Priceline.com, Expedia, Orbitz and Travelocity, have been accused of under-paying transient occupancy taxes.
It is believed that the firms, which buy hotel rooms at a discounted rate and pass them on to customers at a marked-up price, charge and collect room tax on the full price offered to customers, but only pass on tax based on the discounted price, pocketing the difference.
In its latest quarterly filing with the US Securities and Exchange Commission, InterActiveCorp, the firm behind the Expedia website, revealed that discussions are taking place with several tax jurisdictions concerning this practice, although the company added that it expects its financial results to remain unaffected.
However, Reuters reported that Orbitz plans to “aggressively defend itself” against a lawsuit which the company believes “has no merit.”
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