- The Washington Times - Tuesday, March 22, 2011

D.C. officials on Tuesday announced plans to sue popular online hotel-booking firms such as Travelocity, Expedia and Priceline in order to recoup millions of dollars in unpaid taxes.

Taking a cue from destination municipalities as far away as San Diego and San Antonio, as well as nearby Montgomery and Arlington counties, Mayor Vincent C. Gray made the announcement at a time when the citys tourism industry, which pumps more than $5.2 billion a year into the District, begins warming up with the annual cherry blossom festivities.

The D.C. Superior Court complaint is similar to an estimated 200 lawsuits across the nation, which accuse leading online travel companies of basing their tax receipts on wholesale prices paid by the online booking agency — not the retail rate that guests actually pay. The practice has deprived the D.C. government of tens of millions of dollars.

City officials could not nail down a specific dollar figure, but they did estimate that the lost D.C. retail-rate haul falls between $4 million and $10 million annually.

The annual $5.2 billion travel and tourism industry accounts for 13 percent of the citys tax revenues, including $1.9 billion from spending on lodging and $1.4 billion on food and beverages. Visitors also spend an additional $1 billion on shopping and transportation.

The Districts 16.4 million visitors also spend $806 million on arts and entertainment, according to the Hospitality Alliance, a coalition that includes the Hotel Association of Washington, D.C., the Washington Convention and Sports Authority, the Restaurant Association of Metropolitan Washington and Destination D.C.

The lawsuit follows legislation approved last winter by the D.C. Council as lawmakers began trying to plug gaps in the fiscal 2011 and 2012 budgets because of declining revenues.

The Interactive Travel Services Association (ITSA), which represents online booking agents, opposes expanding hotel-occupancy taxes to intermediaries, and an ITSA spokesman has said his group is seeking federal relief because laws and lawsuits seeking such taxes could “choke” the travel and tourism industry.

“Without federal legislation to make clear that intermediaries are not hotels and should not be taxed as such, travel and tourism around the country will be choked by a web of competing, contradictory, illogical and often invalid new taxes on nearly every participant in the hotel-booking arena,” ITSA spokesman Andrew Weinstein told Travel Weekly after the D.C. bill passed in December.

Council member Michael A. Brown, at-large independent, who authored the measure, said Wednesday that the hotel association backed the bill, which goes after online travel agents, not hotel owners and operators.

Mr. Gray said the measure closed an important loophole and the legal action pursues needed revenue.

“As part of the government-wide response to the fiscal challenges we face, one of the top priorities of the Office of the Attorney General is to pursue affirmative litigation to recoup funds owed to the District by corporations and wealthy parties who have refused to pay the District what they owe,” Mr. Gray said.

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