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State Looking at Taxes Paid by Online Travel Companies

Companies like Orbitz, Priceline and Expedia have been booking hotel rooms for people across the country for years now, but state officials are starting to question whether Florida counties are collecting as much tax money from online travel companies as they should.

Online travel sites, which boomed with the blossoming of the Internet, often negotiate a price with a hotel as the base booking cost. They then mark up that number and sell the room to a customer for a higher price.

Not an unusual way to make money, but state officials are questioning which amount should be taxed – the base cost or the marked up price.

Currently, online travel companies pay taxes to the state and counties on the base booking price. But several counties in Florida are starting to argue in court that the tax should be paid on the total amount the customer pays, not the base amount. Officials from Orange County have gone to court over it and estimated at one point that the county is missing out on $6 million per year.

The Florida Department of Revenue hasn't taken a position either way, but would like the issue clarified. The law, DOR director Lisa Echeverri said, is a little unclear because it was written in the 1940s, prior to the advent of the Internet.

Several lawmakers have proposed bills the past few sessions, some forcing the travel companies to pay up and others saying they don't have to. But the legislation has gone nowhere. Senate Finance and Tax Chair Thad Altman, R-Viera, also held hearings last year on the issue of Internet taxation, but they yielded no result.

Members of the Cabinet, who slated a discussion about the issue on their agenda, were rather noncommittal about what the next step should be on the subject. They could join in on a county lawsuit to get a ruling from a judge on what the law actually requires. They could pursue legislation on the matter. Or they can just sit and wait.

State Chief Financial Officer Alex Sink said she was “not interested in seeing the online companies pocket our money,” but added that there needs to be some clarity on the issue.

“The bottom line is we're in limbo and we've been in limbo for years,” she said.

Attorney General Bill McCollum's office has been investigating the issue as well, trying to make a determination on how to best resolve the issue.

Paul Chronis, a lawyer for Orbitz, told members of the Cabinet to keep in mind that online travel companies significantly help boost tourism revenues throughout the state because when tourists visit Florida, they spend money not only on hotels, but also on restaurants, and attractions.

Making the companies pay more in taxes would obviously not favor businesses such as Orbitz, and without those companies’ bookings, some tourists might not come to Florida and spend money, Chronis said.

“What the online travel companies do is put heads in beds,” Chronis said.

Sarah Bleakley, tax counsel for the Florida Association of Counties, told the Cabinet that the counties were very interested in pursuing a judgment from the courts on the question. In addition to Orange County, Duval, Leon and Broward counties are also looking at litigation.

Leon County is expected to file a lawsuit by the end of the week, Bleakley said.

“There's a lot of action going on in the courts because this is a legal issue,” she said.

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