Have you ever wondered why online travel companies are able to offer travelers virtually incomparable deals on hotel rates? Allegedly, the companies have been scamming the government by failing to pay taxes properly.
Online travel websites such as Expedia, Orbitz, Priceline, and Travelocity charge individuals who book through their website based upon discounted room costs and an additional service fee. However, hotels pay taxes to state and local government authorities based only on the room rate offered to the online travel website, not the full price paid by the customer.
Several government agencies are suing the travel companies for the unpaid taxes applicable to their service fees. A judge in Anaheim, Calif. has already ordered the companies pay $21.3 million in a private suit, which became public when Expedia, Orbitz, and Travelocity filed appeals.
The companies’ lawyers claim that the websites cannot be charged hotel taxes because they do not own or operate the facilities. Government agencies claim that receiving the additional taxes these companies owe would ultimately save the government, and thus its citizens, money.