For the past two years, various counties in Florida have been battling the on-line travel companies for local tourist development taxes on the portion of the fee paid by hotel guests but never paid to the hotel. It has been the long standing position of the on-line travel companies like Expedia and Travelocity that only the portion of the customer's hotel payment that actually goes to the hotel is subject to state and local taxes imposed on hotel rooms. The theory is that the other portion of the fee paid by the guest and retained by the online travel company was for the travel booking service, which is arguably not subject to the tourist development tax. While this is not a fight the Florida Department of Revenue has found any interest in waging, 17 counties in Florida have decided the local tourist develop tax revenues lost on this portion of the hotel guest fees were worth litigating – and litigate they have. In the last year along, there have been at least a half dozen law suits and at least one settlement (in Palm Beach County).
In every case that has actually evolved all the way into a judicial opinion thus far in Florida, the counties have lost. In the most recent case, Alachua County, et al vs. Expedia, Inc. et al, 1st DCA FL, Case No. 1D12-2421, Feb 28, 2013, 17 counties combined forces to wage war in the appellate court in hopes of millions of dollars in back taxes being imposed on the on-line travel company. However, once again, the counties were handed a dismal result with the court finding that the original intent of the tourist development tax was to be borne by the hotels, but could be passed on to the guest. Under this logic, the court reasoned that only the funds paid to the hotel for occupancy of a room would be subject to tax. So the portion of the hotel guest fees kept by the on-line travel companies escaped taxation all together.
In a surprise move, on April 16, 2013 the 1st DCA certified the case to the Florida Supreme Court with the deceivingly simple question:
DOES THE "LOCAL OPTION TOURIST DEVELOPMENT ACT," CODIFIED AT SECTION 125.0104, FLORIDA STATUTES, IMPOSE A TAX ON THE TOTAL AMOUNT OF CONSIDERATION RECEIVED BY AN ON-LINE TRAVEL COMPANY FROM TOURISTS WHO RESERVE ACCOMMODATIONS USING THE ON-LINE TRAVEL COMPANY'S WEBSITE, OR ONLY ON THE AMOUNT THE PROPERTY OWNER RECEIVES FOR THE RENTAL OF THE ACCOMMODATIONS?
As of the time this article was written, the Florida Supreme Court has not even acknowledged the certified question. As soon as updates on the case are available, we will post them here. In the meantime, my bet is on the on-line traveling companies.
About the author: Mr. Sutton is a Florida licensed CPA and attorney as well as a partner in the law firm the Law Offices of Moffa, Sutton, & Donnini, P.A. Mr. Sutton is in charge of the Tampa office for the firm and his primary practice area is Florida Sales and Use Tax controversy. Mr. Sutton worked for the state and local tax department of a big five accounting firm for a number of years and has been an adjunct professor of law at Stetson University College of Law since 2002, teaching State and Local Taxation. Mr. Sutton is a frequent lecturer on the topic of Florida sales and use tax for the Florida Institute of Certified Public Accountants, Florida Society of Accountants, & Lorman Education. Mr. Sutton is also a co-author of CCH's Sales and Use Tax Treatise. You can learn more about Mr. Sutton at his firm bio HERE.
AUTHORITY
Alachua County, et al vs Expedia, Inc., et al, 1st DCA Case No. 1D12-2421, April 16, 2013, (Certified Question to Florida Supreme Court)
Alachua County, et al vs Expedia, Inc., et al, 1st DCA Case No. 1D12-2421, April 15, 2013 (Original Court Opinion)
List of counties involved in the law suit: Alachua, Charlotte, Escambia, Flagler, Hillsborough, Lee, Leon, Manatee, Nassau, Okaloosa, Pasco, Pinellas, Polk, Seminole, St. Johns, Wakulla, & Walton.
ADDITIONAL RESOURCES
FL tax controversy ALERT – HUGE VICTORY for Online Travel Companies, March 1, 2013, by Jerry Donnini, Esq.
© 2013 All rights reserved - James H Sutton Jr