By Howard Fischer | Capitol Media Services via Arizona Daily Star
Online travel companies such as Orbitz, Travelocity and Priceline have to pay city sales taxes on the portion of the reservation dollars that they keep, the Arizona Supreme Court ruled Monday.
In a split decision, the justices concluded that these companies effectively are engaged in the business of operating a hotel. And given that the Model Cities Tax Code used by the 11 cities involved in the lawsuit taxes hotel operations, that makes any money kept by these travel “brokers” subject to the levy.
That conclusion drew derision from Justice Ann Scott Timmer.
Writing for herself and Chief Justice Robert Brutinel, she suggested the position of the cities — and the majority ruling — was stretching the concept of what it means to operate a hotel.
“Online travel companies neither put hotels into a functional or operative state nor keep them in that state,” she wrote. “Online travel companies do not own hotels, oversee hotel operations, or let hotel rooms.”
But Justice John Lopez, writing for the majority, saw it different, saying the services provided by these hotel brokers are “central” to keeping the hotels in operation.
The victory for the cities, however, was not absolute: The justices said they cannot collect taxes that were owed before 2013.