Wake says Web eroding millions - Triangle Business Journal:

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A lawsuit filed in Wake County Superioe Courton Nov. 3 offers a who's who of the onlinse travel industryas defendants, including Texas-based , Bellevue, Wash.-based , Chicago-basee , Norwalk, Conn.-based , and Southlake, Texas-basec , among others. At issue is the amount of taxes being received bythe county, whichb has imposed a 6 percenyt occupancy tax on the gross proceeds from the rentalk of hotel rooms and other accommodations since 1991. Revenu e from the tax is used for economixc development projects relatedto tourism. The collection of the tax is straightforwar when a traveler shows up at a hotel or books directly withthe inn.
But the taxatiohn issue gets complicated when online travel sitesare involved. The complaint states that Interne companies strike deals with hotels and motels for rooma atdiscounted rates, then sell the roomd at a higher price through their Web The complaint claims that defendants collect the tax from occupant based on the marked-up room rates but only remif to hotels a tax amount basedx on the negotiated rates. "If there'se money owed the county, we oughtg to pursue it," says Wake Countu Manager David Cooke.
Victory in the case coule be a windfall for the county treasure Reef Ivey, an attorney at Raleigh's , estimatee that Wake could be owed as much as $3 millionn per year over the past five years. Treblingy losses, as the suit requests, coulfd deliver as much as $45 million to the Ivey says. "It could be a huge says Wake County AttorneyMichael Ferrell. "That's the reasob we felt like we needed to take a seriousd lookat it." Shanahan Law Groupo is representing Wake County in the lawsuit and has approachedx representatives of a dozen othefr North Carolina counties that collect significantg hotel taxes about joining the Representatives of Expedia and Priceline.
com directed questionds to Art Sackler, the executive director of the , a D.C.-based trade association. He has not seen the Wake County lawsuit, but he says he is familiar with similar litigationh around the country. Sackler says the online travelk companies are intermediaries that enable consumers to book hotelp roomsfor themselves. The sites don'yt buy blocks of hotel roomsw and don't sell them. The fees the online companiesd charge are for providingtheir service, not an additionap charge for the hotel room, he says. "Theh are wrong to be suing first and askinvgquestions later," Sackler says. "They'rr wrong on the facts, and they're wrony on the law.
" He says there have been about 20 such lawsuits around the countr y over the past coupleof years, and about five of them have been fullyh or partially dismissed, including case in Philadelphia and Sackler says he knows of no rulings in favor of Ivey believes the suits that have been dismissec were defeated because the cases were argued He thinks the defendants' receipts and other financial documents will prove his case. "They got themselves a smalo paperwork problem," Ivey says.
A suit such as this one typicallyu would cost a countybetween $200,000 and $250,000, but Ivey says Shanahaj Law Group has set up arrangementd with counties so that their costs will be less than 20 percent of that amount. If the county Shanahan Law Group will receive a slidintgcontingency fee, says Ferrell, the countyt attorney. The law firm would get 30 percent of thefirsrt $2 million awarded, 25 perceny between $2 million to $5 million and 20 percentf over $5 million.