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The tax man cometh for online travel sites, others
By Shelia Watson
Contributing Writer
The Internet has made several cumbersome tasks more manageable—most notably booking travel. These days, all it takes is Internet access and a credit card to take off for a business trip or vacation.
If this is good news for consumers, it’s even better news for online travel sites. In fact, according to a Forbes magazine report, after the dot-com bubble burst five years ago, travel sites were among the few online survivors.
The report suggests the travel sites are well aware of their fundamental role and are striking while the iron is hot to the tune of $74.4 billion in sales expected for 2006, a 17% increase over the $63.6 billion spent in 2005, according to a report by Forrester Research.
The report predicts that by 2009, online travel spending in the United States will rise to $110.5 billion. Overseas, the reports are even brighter: A 42% rise in online travel spending is expected for the United Kingdom and Western Europe.
In 2005, Travelocity alone, founded in 1996 by Sabre Holdings, had revenue of $830 million on bookings of $7.4 billion.
If this is good news for consumers and better news for online travel sites, it should reach euphoria for the legal teams handling lawsuits filed against the online travel sites by several communities claiming that tax monies from these billions aren’t making their way into cities’
coffers.
Charleston is the most recent city to file a lawsuit against the online travel sites, following Atlanta, Philadelphia, Chicago and Los Angeles.
The basis of the lawsuit is that “the accommodations fees from the Internet sales of hotel rooms are not being properly remitted,” said Charleston Mayor Joseph P. Riley Jr.
Guests in Charleston hotels pay 12.5% in local and state taxes, of which 2% goes to the city. At issue is the online site getting a hotel room for a reduced rate, charging the customer the higher rate with taxes, then paying taxes to the city based on the discounted rate.
According to Adelaide Andrews, the city’s deputy corporate counsel, the money being lost due to the improper tax and fee remittance is in the six-figure range.
A city council committee has recommended suing several travel Web sites, including Travelocity.com, Expedia.com, Priceline.com, Hotwire.com, Hotels.com and Lowestfare.com.
Charleston is the first city in the state to consider litigation. Other municipalities, including Columbia, North Charleston and Mount Pleasant, are considering whether to join in the battle.
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