Update: D.C. Court Rules that OTCs Must Pay Hotel Tax

I wrote earlier that the Hawaii attorney general is seeking upwards of $500 million from online travel companies (OTCs) such as Expedia and Travelocity  for unpaid transient accommodations and general excise taxes.

While the vast majority of courts nationwide have held that OTCs do not owe hotel taxes on their retail markup, the DC Superior Court has granted partial summary judgment that OTCs are liable for DC’s gross sales tax on their hotel room retail markups.  For DC, this could mean an additional $6 million annual revenue plus another $200 million in back taxes, penalties, and interest.

The court reasoned that OTCs are considered taxable “vendors” under the DC gross sales tax law.  No doubt the Hawaii attorney general will cite to this case in his briefs to the tax appeal court.  However, its persuasive value may be limited as Hawaii taxes hotel “operators” and not necessarily hotel “vendors.”

Click here to see the DC Superior Court order.

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