Los Angeles sues Internet travel sites, alleging they underpay hotel room taxes

Thursday, January 6th 2005, 12:32 pm
By: News On 6

LOS ANGELES (AP) _ The city sued Priceline, Expedia and other Internet travel sites over a practice the city says costs it millions in lost hotel room taxes.

The lawsuit says the companies improperly pay taxes only on the discount rates they get for buying in bulk, but consumers pay the 14 percent city tax on the higher online price. The companies pocket the difference, according to the lawsuit filed last week in Superior Court.

``The Web sites can't have it both ways,'' said Katie Buckland, a spokeswoman for City Attorney Rocky Delgadillo. ``They can't charge consumers taxes based on retail price but give back to the city only part of the money.''

The city seeks payment since 1999 from travel sites Travelocity, Hotwire, Priceline, Expedia and Orbitz.

InterActiveCorp, which owns Expedia and Hotels.com, said in a Securities and Exchange Commission filing in November that it did not pay room taxes based on the consumer prices but believed resolution of the issue would not affect the company's finances.

Priceline was reviewing the lawsuit but the company did not immediately have any comment, said spokesman Brian Ek. Messages left Thursday with Travelocity, Orbitz and the Interactive Travel Services Association were not immediately returned.

Orange County, Fla., which includes Orlando, said similar practices cost it $5.5 million last year. The county plans to work toward changing the tax law, and has not plans for a lawsuit.