A judge ruled Monday that online travel sites such as Expedia do not owe the city of Anaheim $21 million in hotel taxes

Calif. court nixes $21M claim against travel sites
Los Angeles court overturns Anaheim's $21M claim against Expedia, other online travel sites
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On Monday February 1, 2010, 9:21 pm EST

LOS ANGELES (AP) -- A judge ruled Monday that online travel sites such as Expedia do not owe the city of Anaheim $21 million in hotel taxes for rooms booked over the Internet, the first ruling of its kind in California on an issue that has bubbled up in cities across the country.

In her ruling, Los Angeles Superior Court Judge Carolyn Kuhl set aside last year's decision by a city hearing officer that the travel booking sites owed $21.3 million to Anaheim in back hotel taxes.

The city is reviewing its options, spokeswoman Marty DeSollar said in an e-mailed statement.

A coalition of the online travel sites, including Priceline, Expedia Inc., Orbitz, Hotwire, Hotels.com and Trip Network Inc., filed papers asking to overturn the hearing officer's ruling.

Such disputes are increasingly common between online travel companies and tourist-dependent cities.

Lawsuits or complaints have been filed around the country by cities or customers, including in Georgia, Maryland, Texas, New York, Illinois, Pennsylvania and in the California cities of San Diego and San Francisco.

Many of them have been dismissed at the federal or state level, but others are still pending.

The lawsuits hinge on the complicated pricing schemes used by online travel sites.

When consumers make reservations at the sites, they pay more for a room than the online outfits pay the hotels for the room, allowing the online companies to pocket the difference.

The taxes are paid on that cheaper rate. That means if a travel site buys a room from a hotel at $50 and sells it for $100, the site sends the hotel taxes for the amount it paid and not the price it charged. The companies say the exact markup rate is confidential.

Cities say they should be paid on the higher rate.

The online travel companies are hopeful the decision could influence cases pending in other municipalities, attorney Darrel Hieber said in a prepared statement.

"We are heartened by the court's decision and hope it will encourage other municipalities to work with (online travel companies) to increase tourism through cooperation, rather than wasting time and energy on frivolous litigation."