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Florida Attorney General Bill McCollum said today his office has sued online travel companies Expedia and Orbitz for failing to pay the right amount of taxes on hotel room rentals.

The lawsuit states that while the companies have been collecting these taxes from consumers all along, they have only been paying a portion of the taxes to the state and keeping the rest as profit.  Florida says the practice denies it of millions of dollars every year in tax revenue.

"Consumers are already paying 'taxes and fees' when purchasing a Florida hotel room online, yet the online travel companies have been keeping too much of those taxes as profit," said Attorney General McCollum.

"If these taxes are due to the State, the companies should pay them for the benefit of the people of Florida."

For transactions not completed via an online travel company, Florida hotels pay the "transient rentals tax" similar to a sales tax on the rate they charge the consumer for the room. The hotel which receives the consumer's payment for the hotel room owes the tax and is responsible for paying it to the Florida Department of Revenue.

According to the lawsuit, online travel companies purchase hotel rooms at a lower, wholesale rate they negotiate directly with hotels. The companies than resell the rooms to consumers at a higher retail rate and keep the difference as profit. The online travel companies are the merchant of record in these transactions and are responsible for paying the taxes to the state.

The Attorney General's lawsuit claims Orbitz and Expedia have admitted they do not pay taxes to the state of Florida based on the amount a consumer is charged for the hotel room. Consumers are unaware that taxes have not been paid to the state on the rate they paid for the room.

Florida is the first state to file this kind of lawsuit, which will help clarify the application of state tax laws to online travel companies.
 

You can read the lawsuit here.

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