Orbitz, Expedia sued by state of Florida

Orbitz, Expedia sued by state of Florida
November 09, 2009 12:28 PM

Tallahassee, Florida - Online travel companies Expedia and Orbitz are being sued by Florida Attorney General Bill McCollum.

Now it's up to a court to clarify a tax law, which is the basis for the lawsuit.

McCollum said those online companies aren't paying the state as much as they're supposed to in taxes. He claims the companies are paying taxes based on the wholesale rate, not the rate customers are actually paying.

Here's how it works: McCollum said an online booking service might charge $159 a night for a hotel room, for four nights, for a total of $636 -- but it might negotiate a rate of $118 a night with the hotel, actually paying only $472. A 6 percent tax on the retail rate would be $38.16 for four nights, but McCollum said the companies are calculating their sales taxes on the wholesale rate, paying $28.32.

He said the companies thus keep $9.84 that the traveler pays in "taxes."

McCollum stated, "If we win this suit, I would fully expect them to comply immediately by paying the taxes on the retail level that they have not been paying and then I would expect there will be some discussion about back taxes owed."

McCollum is waiting for a declaratory judgment from the courts whether this is a violation of Florida law. If it is, Mccollum said he will make sure the state is paid the money it's owed and he might seek back-pay as well.

The exact amount is unknown but expected to be in the millions of dollars.

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