E-Commerce News: Law: The Front Line of the E-Commerce Tax Battle, Part 1

On the front line of the e-commerce tax are online travel companies, or OTCs, such as Expedia (Nasdaq: EXPE) More about Expedia, Hotels.com, Priceline (Nasdaq: PCLN) More about Priceline.ComTravelocity More about Travelocity and Orbitz (NYSE: OWW) More about Orbitz. The issue is whether the OTCs should be collecting hotel room occupancy taxes on the difference in the price between what the OTC pays the hotel operator and the amount that customer pays to the OTC. For example, assume that an OTC in a jurisdiction with a 10 percent hotel room tax pays a hotel US$100 for a room night and then charges its customer $150. The OTC pays $10 in room taxes -- but must the OTC collect a 10 percent room tax on the $50 markup? Increasingly, local tax authorities are saying that the additional tax must be paid.

The stakes are huge. On May 1, the San Francisco Tax Collector determined that Expedia owed $32 million in hotel room taxes, penalties and interest to the city. Expedia has filed a lawsuit to appeal this ruling, but this is just what a single city says it is owed by a single OTC in back taxes -- albeit a city that is one of the top tourist destinations in the United States.

E-Commerce News: Law: The Front Line of the E-Commerce Tax Battle, Part 1

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