(WASHINGTON) — Mayor Vincent C. Gray announced today that the District is filing a lawsuit against leading online travel companies to recover tens of millions of dollars in unpaid taxes. The Complaint, to be filed in D.C. Superior Court today by Acting Attorney General Irvin Nathan, charges that Expedia, Orbitz, Priceline.com, and Travelocity have been selling hotel rooms in D.C. at retail prices, but paying taxes to the District only on the hotel rooms’ discounted wholesale prices, thereby depriving the District government of millions of dollars of tax revenue each year.
“As part of the government-wide response to the fiscal challenges we face, one of the top priorities of the Office of the Attorney General is to pursue affirmative litigation to recoup funds owed to the District by corporations and wealthy parties who have refused to pay the District what they owe,” said Mayor Gray in a statement.
According to the District’s Complaint, the discounted wholesale prices that hotels have charged the travel companies have been 15 percent or more below the retail prices that the online travel companies have, in turn, charged their website customers. Under the District’s tax laws, hotel taxes are 14.5 percent of the gross receipts from sales of hotel rooms, based on the retail sale prices. The Complaint alleges that the online travel companies “have placed statements on their websites affirmatively denying or obscuring the fact that they are selling hotel rooms and are responsible for collecting the applicable sales taxes” based on the retail price charged end-users.
Councilmember Michael A. Brown, who in February introduced the Payment of Full Hotel Taxes by Online Vendors Clarification Act of 2010, which clarifies existing tax law to ensure that full hotel taxes are remitted to the city, commended the administration for the decision. “I’m glad the District has finally acted to collect what we are legally owed,” said Councilmember Brown, who attended the lawsuit announcement. “Year after year these companies have sidestepped current law to benefit their bottom line and today’s litigation is a needed action towards recovering hundreds of millions of dollars.”