Montana News

Montana Dept of Revenue sues online travel companies

Posted: Aug 25, 2011 12:45 PM by Marnee Banks - KXLH
Updated: Aug 25, 2011 12:50 PM

HELENA - The Montana Department of Revenue is suing nearly 20 Online Travel Companies (OTC) including Priceline, Travelocity, Orbitz, and Expedia for unpaid lodging taxes.

According to court documents, the OTCs contract with Montana hotels and acquire lodging from them at wholesale rates. The companies then mark up the prices add in a lodging tax and resell them to travelers.

The Department of Revenue claims when the OTCs submit their lodging taxes they pay tax on the wholesale rate not the rate charged to the customer.

Department of Revenue Contract Attorney David Paoli says the OTCs are underpaying their taxes by about 40%.

"No question this is a serious case. There is no question the impact of this case is large. Great consideration was made when this complaint was drafted and the allegations in it should be taken as true," Paoli argued in District Court Wednesday.

The travel companies attorneys say Montana law requires the hotel owner and operator to pay the lodging tax not the third party booking agent.

Travel Company Attorney Darrell Hieber is asking District Court Judge Kathy Seeley to dismiss the case.

"The OTCs do not own any hotels. They don't operate any hotels. They don't own any car rental facilities. They don't operate any car rental facilities in Montana or anywhere else," Hieber says.

Department of Revenue Public Information Officer Cynthia Piearson says she doesn't know how much money could be at stake in this case.

If the Judge rules in favor of the State the Department of Revenue will begin the discovery process to figure that out and then the case will be heard before a jury.

Judge Seeley did not say when she will issue a ruling on the travel companies' motion to dismiss.

Topics: Priceline, Travelocity, Orbitz, Expedia, Montana