County's dispute with online travel sites goes to appeals court
Published: Thursday, January 3, 2013 at 8:19 p.m.
Last Modified: Thursday, January 3, 2013 at 8:19 p.m.
Alachua County and several other counties will continue their lengthy tax dispute with online travel companies into 2013 as Florida’s 1st District Court of Appeal prepares to hear arguments in February regarding an ongoing lawsuit.
A court decision last year by a state Circuit Court judge in Tallahassee ruled against the 17 counties, which contend that companies like Travelocity, Expedia and Hotels.com have not paid tourist development taxes, also called bed taxes, properly on the rooms they rent. The judge ruled Florida law wasn’t clear about whether the companies must pay the tax on their service fee markups as well as room rates.
These online travel companies charge customers an overall price for the room rental as well as related service fees, applying the tourist development tax to the wholesale rate they pay hotels but not to their service fee markup.
Oral arguments for the appealed case are scheduled for Feb. 12, according to the News Service of Florida. Alachua, Leon, St. Johns and other counties argue that online-based companies should pay the taxes based on the total price customers pay for a room, while the online travel industry counters that taxing their service-based markup fees would be a service tax, not a bed tax.
A ruling in favor of the local governments could set a precedent that would help county coffers in the future, said John Pricher, assistant director of Visit Gainesville, the tourism sales and marketing organization for both the city of Gainesville and Alachua County.
“That’s the biggest thing, I think, going forward ... that precedent that they should pay (based) on what the consumer’s paying,” he said.
If the appeals court rules in favor of the counties, Alachua County could recoup about $600,000 in uncollected tax revenue from the past decade, said Jon Costabile, executive director of finance for the Alachua County Tax Collector’s Office. That figure would probably be lower because the county draws fewer visitors than more tourist-heavy areas of Florida.
The county loses about $100,000 a year due to the way online travel companies currently pay tourist development taxes, Costabile said. The county levies a tourist development tax of 5 cents per dollar, and the Tax Collector’s Office collects this revenue monthly.
Customer use of Internet-based companies to book hotel stays has become more prevalent in recent years, raising the amount of tax revenue derived from that sector, he said.
The nationwide industry standard states that about 17 percent of bookings are made through online travel companies — a figure upon which these county estimates are based, according to Costabile.
Alachua County collected $3.5 million in tourist development tax revenue for fiscal year 2012, he said. Revenue could rise as the economy improves and people travel more.
The money funds the Visit Gainesville office and is used for campaigns that encourage local tourism, according to Pricher. It is used to provide almost $500,000 annually to local arts agencies to promote their events and thus attract visitors, and about $150,000 a year is used to recruit organizations looking for a place to host meetings, such as large conferences, by offering reimbursements.
The tax is levied on rentals of spaces like hotel rooms and campgrounds.
Jonathan Hamilton, the R. Perry Frankland professor of economics at the University of Florida, said these online travel companies want to maintain that a reservation services fee is something sufficiently different from the wholesale price of a room rental in terms of taxation. But hotels already pay the tax on the total cost people pay for a room, including service fees.
“Everyone’s been living with that and nobody, until these online websites came up, (seemed) to think that the reservation should somehow be separate,” he said. “Why, doing it through Expedia, should the tax be any less than doing it through HolidayInn.com?”
Contact Morgan Watkins at 352-338-3104 or firstname.lastname@example.org.