Online Travel Companies

Baron & Budd represents cities and other governmental entities in a variety of cases to benefit the communities and constituents they serve. For cities where the travel industry is especially important to local economies and a major source of tax revenue, Baron & Budd is going to bat against online travel companies that have for years underpaid hotel occupancy taxes.

For over a decade, it’s become commonplace for people to make their travel arrangements through the Internet.  When consumers reserve hotel rooms through the online companies that offer such services, they pay the rent for the hotel room plus taxes and service fees.  The Internet companies typically collect the taxes based on the price that customers pay for hotel rooms, but they only remit taxes to the hotels, which then forward the money to the cities, based on the wholesale prices the companies paid the hotels for the rooms.  The Internet companies also charge a “service fee” but do not collect or pay taxes on such fees.  These companies are therefore paying only part of the taxes due to the cities—and pocketing the difference.  The estimated losses to the cities, counties, and states that rely on such revenue is substantial.

Baron & Budd filed the first class action of its kind against the online travel companies in 2004 and currently represents 41 cities—including San Diego, Santa Monica, Anaheim, and Los Angeles, California and San Antonio, Texas—in lawsuits to recoup the taxes owed by these companies.  Recently, Baron & Budd and its co-counsel won a jury trial in a class action suit filed by the City of San Antonio on behalf of it and other Texas cities and an administrative ruling for the City of San Diego against a dozen major online travel companies.   Read more about case developments in these and other cases as they proceed through the legal system.

In July 2010, NPR Radio also reported on a case the City of Atlanta won against the online travel companies.  But these companies are not willingly giving up their tax loopholes and are lobbying Congress and state legislatures to create laws that would deny cities of these important tax revenues.  Many city leaders fear that if the online companies prevail in winning such tax loopholes, other industries will follow, fleecing cities of tax dollars sorely needed to pay for important city services.  Baron & Budd will therefore continue to fight on behalf of cities and communities that need and deserve tax revenues based on the full price paid by travelers for hotel accommodations.