A D.C. Superior Court judge has ruled that online travel firms should pay taxes on the full retail price of hotel rooms that they sell to consumers.
In a filing released Monday, Judge Craig Iscoe said that the online travel companies, including Expedia, Orbitz, Travelocity and Priceline, must pay a 14.5 percent tax on the full retail price of hotel rooms. The travel companies have been paying taxes on the wholesale price, which is cheaper.
In his ruling, Iscoe said that the online travel firms are “making a retail sale that is taxable under this statute” and that their services are “taxable under the D.C. gross sales tax law.”
In March 2011, the District joined a lawsuit against the companies, asking to recoup the difference in taxes.
D.C. Council member Michael A. Brown applauded the decision in a statement.
The ruling paves the way for the District to collect an additional $6 million to $10 million in annual revenue, Brown’s statement said. It could also result in the payment of back taxes and penalties worth more than $200 million, the statement said, citing legal experts.
“The residents of the District of Columbia are one step closer to collecting millions of dollars annually in hotel taxes, that are largely paid by out of town tourists and business travelers,” Brown said.
Expedia did not immediately return a call for comment. Priceline declined to comment. Orbitz and Travelocity referred questions to the Interactive Travel Services Association, which represents the travel sites.
The association called the decision “incorrect.”
“It is also an outlier as most other courts nationwide that have reached judgment have ruled in favor of the online travel companies,” Joe Rubin, director of the D.C.-based Interactive Travel Services Association, said in a statement.
“Each company will make its own decision about appealing,” he said. “But an appeal should not be surprising, and we expect the online travel companies will prevail if there is an appeal.”