Online travel companies withheld millions in hotel occupancy taxes from city

LOS ANGELES (August 4, 2010)—Russell Budd of Dallas-based law firm Baron & Budd, P.C. announced a $21.2 million award to the City of San Diego against a group of online travel companies accused of not paying millions in hotel occupancy taxes for online hotel bookings.

The ruling bolsters the cases of more than 275 other municipalities and public entities around the country whose tax revenues have been cut due to online travel companies such as Hotels.com, Expedia, Orbitz, Priceline and Travelocity failing to remit the proper  amount of hotel occupancy taxes.

“This ruling provides a powerful precedent for other cities involved in litigation against online travel companies and gives a wake up call to those municipalities who may be getting shortchanged by the same tax avoidance scheme,” said Russell Budd, president and managing shareholder of Baron & Budd.   “Our work on this case reinforces our desire to bring justice to individuals and municipalities harmed by corporate disregard for the common good.”

Baron & Budd shareholder Laura Baughman and attorney Thomas Sims, along with co-counsel Dallas-based McKool Smith and Los Angeles-based Kiesel, Boucher & Larson, represented the City of San Diego.

Sims and other counsel presented evidence in a hearing earlier this year demonstrating that San Diego is owed taxes, penalties and interest because the online travel companies collected taxes on the retail price of hotel rooms, but only remitted taxes on the wholesale price, and kept the difference.  After a contested evidentiary hearing, a Hearing Officer ruled that the online travel companies owe the City just over $17 million in taxes and $4.25 million in penalties.

Baron & Budd filed the first case seeking hotel occupancy taxes from online travel companies in 2004 on behalf of the City of Los Angeles and a class of other California cities and currently represents 41 cities, including San Diego, Santa Monica, Anaheim and San Antonio.