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Court Rules Online Travel Companies Must Pay Taxes On Hotel Rooms Sold in Chicago

June 25, 2013 Corporate No Comments Email Email

In a major win for taxpayers, Judge Robert Lopez Cepero of the Cook County Circuit Court ruled today that online travel companies such as Expedia, Orbitz and Priceline are required to remit taxes to the City of Chicago on gross receipts from hotel room sales in Chicago, according to Cohen Milstein Sellers & Toll PLLC, which represents the City of Chicago.

Chicago’s lawsuit against the online travel companies was based upon violations of the Chicago Hotel Accommodations Tax, at Chapter 3-24 of the Municipal Code. Judge Lopez Cepero granted the City’s motion for summary judgment, finding that the defendants violated the Code by failing to remit the proper amount of hotel taxes to the City on their rentals of hotel accommodations to their customers, the hotel guests. The Court found that by refusing to remit taxes to the City based on the gross rental charges paid to them by their customers the online travel companies violated the Code.

In the ruling, Judge Lopez Cepero found that “Defendants attempt to wag the dog by arguing that they provide ‘travel services,’ which merely include the rental of hotel accommodations.” He added that regardless of how Defendants seek to classify their transactions, “it would be absurd to find that they do not rent rooms to the public.” He pointed out that the customer’s transaction is with the OTC’s, “When Defendants accept money from the customer, they are granting the customer the right to lease or occupy the room.”

“We are pleased with Judge Lopez Cepero’s decision to hold online travel companies accountable for unpaid taxes owed under the Code. The decision makes clear that they must collect and remit taxes on the gross amount paid by customers for hotel rooms in Chicago going forward, as well,” said Plaintiffs’ Lead Counsel Carol V. Gilden, of Cohen Milstein Sellers & Toll PLLC, Chicago office.

In addition to Gilden, the City was represented by Sherrie Savett and Michael Fantini of Berger & Montague P.C., as well as Whitney R. Case of Cohen Milstein Sellers & Toll PLLC, Washington D.C.

For more information about City of Chicago v. Hotels.com, et al., No. Case No. 05-L-051003, http://www.cohenmilstein.com/news.php?NewsID=584

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