The city of Bellingham, Wash., filed a lawsuit against hotels.com, Priceline.com, Travelocity.com, and Orbitz.com, saying that they buy in bulk and pay the low bulk taxes, but the city loses out when customers pay the higher rates after buying the discounted rooms, according to a Knight-Ridder/Tribune article.
Court documents filed on behalf of the city outline how the Web sites offer customers hotel rooms at cheap prices by buying rooms in bulk. The lawsuit contends the companies pay lodging taxes at the bulk rate rather than the high retail rate their customers pay, cheating cities and counties out of money through an "illicit tax evasion scheme."
The lawsuit mirrors similar cases across the country as other counties and cities try to collect lodging taxes from online brokers.
Of course, they may end up dropping the suit at the request of the State Revenue Department, which would rather handle the matter administratively than in the courts. I can feel the city's pain over losing those extra lodging tax dollars (and that of other cities feeling the crunch). But there are so many gray areas—when is that room actually considered sold? When the discount site buys it, or when the customer buys it from the site? If they should be taxed at a higher rate, who determines what that rate should be? Etc., etc. When I first heard rumblings about this out of Los Angeles, I had a hard time getting my mind around all the potential implications, and it hasn't gotten any less convoluted since.