District could reap $60 million in back taxes under settlement with travel firms


Hotel-tax settlement is a big win for D.C. Attorney General Irvin B. Nathan and his deputies. (Bill O’Leary/The Washington Post

Years of efforts by District officials to collect back taxes from online travel companies could pay off in a big way. D.C. Attorney General Irvin B. Nathan announced Monday a conditional settlement with six major firms worth more than $60 million.

There is a catch: The six travel firms — which include industry heavyweights Expedia, Orbitz, Priceline and Travelocity — reserve the right to appeal the D.C. Superior Court decision that placed them on the hook for the back taxes.

The deal comes after nearly two years of litigation and still more years of political wrangling over whether and how much Internet hotel bookers owed the city money after years of paying the city’s 14.5 percent hotel room tax based on the wholesale price of the rooms they sold, not the full retail price.

In the lawsuit, the city pursued payments between 1998 and 2010, when the D.C. Council mandated bookers pay tax based on the retail price. Total losses to the city over than period have been estimated at upward of $200 million.

In September 2012, Judge Craig S. Iscoe ruled that the travel companies did in fact have to pay tax on the full retail price, handing the industry a rare loss on an issue that has been frequently litigated, but the companies have yet to take the matter to the D.C. Court of Appeals.

With $60.9 million plus interest now on the line, expect that decision to be appealed in short order. Should the District ultimately collect, Nathan’s office said Monday, it would be the largest recovery the city has ever secured in a case it has litigated.

A spokesman for the Travel Technology Association, a trade group representing several of the litigants, did not immediately have a comment on the settlement.

Nathan said in a statement that the deal will “spare the District time and expense” in litigating the amount of potential damages and praised his deputies for prevailing against industry lawyers from some of the nation’s biggest and best-equipped law firms. “These attorneys did a tremendous job on behalf of the District to bring this matter to a prompt and successful conclusion,” he said.

Mike DeBonis covers local politics and government for The Washington Post. He also writes a blog and a political analysis column that runs on Fridays.
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Mike DeBonis | February 24