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twitterCounty considers suing over travel Web site room taxes
Saturday, Nov. 7, 2009 | 2 a.m.
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As other parts of the country win tens of millions of dollars in court judgments against online tourism companies, Clark County commissioners are talking about following suit.
At issue is the amount of hotel room taxes paid by online travel sites. They obtain blocks of rooms at wholesale prices from hotels and pay lower room taxes on those lower prices — but they are selling those rooms at higher prices.
Some municipalities and states have successfully argued that they should be collecting more taxes for the rooms sold at the higher prices. Travel Weekly, a trade magazine, reported that as of May, 46 cities and counties had filed lawsuits alleging just that. The number keeps growing. The latest case was filed Monday, when Florida sued Expedia Inc., Orbitz LLC and Orbitz Inc.
Some preliminary rounds have gone against the travel sites.
• In February an administrative judge said online travel booking sites owed Anaheim, Calif., $17.7 million — $8.2 million in taxes and $9.5 million in penalties.
• In July, Expedia Inc. and Hotwire Inc. paid $35 million in hotel room taxes to San Francisco. A California appeals court ruled the payment had to be made before the companies could pursue further legal remedies.
• A week ago in Texas a jury found 11 online companies underpaid hotel occupancy taxes. A federal court judge is to determine how much those companies should pay San Antonio and 172 other Texas cities.
The travel sites have won a few of the battles too, though. A federal appellate court, for example, in January dismissed a suit by Pitt County, N.C., against hotels.com, priceline.com, Expedia, Orbitz and Travelocity, saying that online travel companies are not retailers and do not control room inventories so they are not subject to room, or occupancy, taxes. Similar rulings were made in cases involving Findlay, Ohio; Orange, Texas; and Louisville, Ky.
But with so much money at stake at a time when their coffers are emptying, Clark County commissioners, prodded by lawyers, are now considering joining the march into court. In a letter to Clark County three years ago, local attorneys estimated that for 2000 through 2005, the “lost tax revenue” ranged from $677 million to $723 million.
Commissioner Chris Giunchigliani, who wants commissioners to discuss it at their Nov. 17 meeting, said one of the biggest selling points for her is the potential infusion of money for the School District. But she also figures there is potential upside for casinos: Forcing online sites to pay the full amount would level the playing field for the casinos’ own Web sites that pay the full amount.
Chris Giunchigliani
“I don’t see it being a negative for them,” she said.
MGM Mirage and many other casino companies do, however. They consider online travel agencies part of their team, not competitors.
The online agencies “play a large role in the marketing of Las Vegas and have been especially important in these economic times,” MGM Mirage spokesman Alan Feldman said this week. “They provide the flexibility to sell large quantities of available rooms through these channels, without which our occupancy and average daily rates would clearly suffer.”
Going after them for the additional room tax revenue “would have extremely negative consequences for our community and a positive outcome only for the lawyers pushing the issue,” Feldman said.
Feldman also noted that the Nevada Tax Commission nixed the idea in 2005.
A four-page legal opinion, which the Tax Commission said was vetted by the state attorney general’s office, says hotel operators are responsible for collecting the room taxes. An online “intermediary” company “neither operates a hotel nor licenses hotel accommodations, and therefore has no statutory obligation to collect” the tax, the opinion notes.
“This is something there is no ambiguity on,” Brent Thompson, an attorney for Expedia, said.
Will Kemp, a Las Vegas attorney vying to sue the online companies on behalf of the county, counters that the legal opinion is just that: an opinion, not a ruling by a judge. “It’s a one-sided presentation” that was produced at the request of a Texas law firm whose clients included an online tourism company, Kemp added.
Lawsuits across the country have made headway against online companies in states with laws that “pretty much say the same thing” as Nevada’s, Kemp said.
He posited this scenario: What if a Las Vegas casino set up a Caribbean online tourism site that purchased rooms wholesale from their own casino and sold them at higher rates without paying the room tax for the retail price of the room?
“Are they saying that would be OK, too?” he said.
Legal argument aside, what’s going to matter more than anything in trying to push a lawsuit forward in Clark County is the question of jobs, several commissioners said.
Will going after an online site lead to fewer businesses, hurt the bottom lines of casinos and cause more layoffs?
“My concern is, if we did sue even on a contingency basis, industry folks in the past have said that we’re unique and our economy relies so much on the ability to fill rooms that if we monkey with the current system, it might cost jobs,” Commission Chairman Rory Reid, a Democratic candidate for governor, said. “There’s nothing I’m more sensitive to than employment right now.”
Rory Reid
He added that he’s “not a believer that it’s a slam-dunk lawsuit we could win.”
But if lawyers are willing to take the case on a contingency case, meaning the county wouldn’t have to pay them unless they win a judgment or settlement, maybe it’s worth a try, Commissioner Steve Sisolak said.
Steve Sisolak
Giunchigliani said she’d like a definitive answer on whether “taxes that should be paid on Internet bookings are not being paid.”
The issue was raised several years ago too but it failed to gain traction with county commissioners and a majority of the Las Vegas Convention and Visitors Authority, even though the LVCVA and the county stood to gain the most.
The LVCVA gets 5 cents for every dollar paid for hotel rooms, the county gets 1 cent for its general fund and another penny for a fund that pays for road construction. The Clark County School District gets a little under 2 cents for every dollar paid for hotel rooms and the state gets a little under a half-cent.
As a member of the LVCVA board six years ago, Robert Forbuss, a business and government affairs consultant, was “on a tirade” about online operations not paying additional room taxes.
“It has always rubbed me wrong that these organizations could drain our tax revenues,” Forbuss said.
Back then the economy was booming. But Commissioner Tom Collins, who sat on the LVCVA board then, recalls that the board was swayed by the argument that “ ‘Hey, if we do this, the online agencies will just push other destinations instead of Vegas.’ I mean, if Orlando and Denver and Vegas all have rooms at $100 and this Internet company can sell them for $80 and pay lower taxes in other states, then why would they sell here?”
Because people still want to come to Las Vegas, answered travel researcher Henry Harteveldt, vice president and principal analyst for Forrester Research.
“Las Vegas is a very, very distinct market when it comes to tourism and hospitality,” he said. “I assure you that the (online travel agencies), their owners and investors will be pushing these guys to continue to market themselves and Las Vegas because that’s where people want to go ... If people want to go to Las Vegas, I assure you Expedia Inc., Travelocity, Orbitz and priceline.com will all find ways to promote Las Vegas to their customers.”
These days, however, with the economy in such bad shape and gambling and tourism revenue so far down, even Forbuss isn’t certain that going after the online travel sites is such a good idea.
“Vegas is in such a predicament right now. Everybody is nervous. Will CityCenter overload us? We clearly need to understand how this would impact the market before anyone does anything.”
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The Sun
Locally owned and independent for more than 50 years.
Joe- Perhaps you could report on the subrogation of Clark County's catastrophic carrier. These settlements will be a drain on any monies the county might gain.
At first I thought a law suit against any of the travel partners is absurd. But then I thought about it and I still feel the same way.
I understand the premise. They bought an item in the state and paid tax. Then they resold it for more and only charged the buyer the tax they paid, thusly saving the buyer some money. I guess with tourism doing so well in NV, the nerve of saving these visitors to NV money. The nerve of the people that want to squeeze every penny they can out in taxes.
The way I see it if the State wants to charge tax, then charge it to the Buyer at the time they check out of the hotel at the room rate they paid to the travel partner. I would not charge the reseller tax, make them file for a resale certificate. Then inform their buyer's that all state and local taxes are the responsibility of the buyer at the time of check out.
Don't sue our partners, change the rules so that starts with a fresh playing field.
If you charge more taxes people will not stay in Las Vegas.Your state tax is to high now.What did your state do with all that money when the houseing boom was here.
What a terrible news story.....I think the Sun has finally proved that they many of their "news stories" are just full of bias opinion.
This is what the Sun decided to leave out the story.
Kemp, the county's attorney, specific said that one of Greenspun's operations, Vegas.com, should not be taxed as a matter of policy and not as a matter of law.
So the Sun published a story and did not diclosed the Sun's owner has a personal stake in the lawsuit not going forward.
They also seems to slant the story against the lawsuit proceeding.
I guess that they got to protect their boss.
I guess the Sun does not what to present the facts and instead is cranking out crap to help its owner.
SgtRock
You might be surprised to know that newspaper (now website)owners have always promoted their own agenda.
You must be very naive.
Talked with a local business owner yesterday that has laid-off 12 his work force, with numerous vehicles parked idol -- claims current business is barely keeping his doors open.
A business he's been operating in the valley since 1964; he was outraged that his property taxes have been going up despite declining property values.
Taxation is theft -- perpetrators suing victims of theft reveals the depths of a criminally twisted society.
: {
That is not true.
Most legit news media report stories that might be negative for their owners and always at least disclosed the ownership ties to the story.
You are right that some help the good-ole-boys including their owners in a slight degree.
You are correct that there are few that do it blatantly like the Sun. For instance, KVBC Channel 3 is own by Jim Rogers. They never have reported a negative story about Rogers even though he has done some emotional meltdowns in public.
"I don't see it being a negative for them," she said.
Giunchigliani proves once again she knows nothing about business or the tourism industry. She's a disgrace and is actually HURTING the people she's supposed to be representing.
To me, the idea of trying to tax resale of hotel rooms, when the resales occur outside Nevada, is simply ludicrous, and another ill-thought-out attempt to derive revenue to pay our state's and county's lazy and incompetent employees.
Clark County pursuing out of state resellers to tax revenues is just another foot downhill on the slippery slope leading to business income taxes in Nevada.
In case anyone hasn't noticed, the area south east of McCarran Airport is full of telephone customer service centers recruited to Nevada based on our no-tax environment, to lessen our region's dependence on gaming jobs.
Can you imagine how quickly Amazon will shut down its newly purchased Zappos in Henderson, if Nevada or Clark County starts messing around with a "broad based business tax" or if Clark County suddenly decides that shoes purchased by phone/internet by a buyer in Dubuque and shipped from Memphis are subject to sales tax in Clark County? The legal logic behind the County taxing out-of-state resales of hotel rooms is the same as the logic behind taxing call center "revenue".
In this economic crisis, Nevada is sending out all sorts of anti-business messages in its regulatory and tax schemes. The Nevada Secretary of State's forms, regulations, and filing requirements for business entities are so badly written, confusing and expensive that I am pulling all of our family's estate planning entities out of Nevada. It is now cheaper and less confusing to organize an entity, and operate it, out of the Ritz of the corporate world, the State of Delaware.
Clark County suing companies doing business outside Nevada, for sales outside of Nevada, will send businesses across the country yet another loud and bad message: "Tricky tax structure. Stay away!"
It's a sad state of affairs when government's need for revenue overwhelms it fulfilling its duty to foster the creation of jobs and preserve those which presently exist.
Let's do all we can to raise the cost of coming to Las Vegas and reduce the number of visitors. You might think these people are trying to destroy this city on purpose.
WHAT A LAME BUNCH OF ELECTED (WORD DELETED) WE GOT.
MORE MONEY ON MORE ATTORNEYS ON MORE LAWSUITS ON MORE TAXES ON MORE BUSINESSES TRYING TO DO BUSINESS IN CLARK COUNTY.
MOST OF THESE COMPANIES YOU WANT TO SKIM FOR TAXES, OPERATE HERE YOU ELECTED GOOF-BALLS.
START WITH THE COUNTY GOVERNMENT'S TOP to BOTTOM and SIDEWAYS
OUTSIDE AUDIT (and not by 'cronies),
FIRST,
THEN we'll talk about lawsuits and taxes and lawyers and all of that other crap-ola you want on the agenda, LATER.
(I bet if these travel people were donating to your "campaigns" you would keep your mouth shut, HuH...?)
"...The LVCVA gets 5 cents for every dollar paid for hotel rooms, the county gets 1 cent for its general fund and another penny for a fund that pays for road construction. The Clark County School District gets a little under 2 cents for every dollar paid for hotel rooms and the state gets a little under a half-cent...."
Here's a starting point for the audit:
WHY does LVCVA, Las Vegas Visitors and Convention Authority get,
way over TWICE the money the School District gets...?
To do what, RUN ADS SOMEWHERE ELSE and PARTY LIKE ITS 1999..?
Has anyone actually seen LVCVA's salaries? I've seen their job ads, and, YOWZA!, do they pay BIG TIME.
AUDIT AUDIT AUDIT AUDIT AUDIT AUDIT AUDIT AUDIT
Oh, and did I mention, AUDIT?
NO MORE MONEY FOR LVCVA BLOATED BUDGETS AND PARTYING...
NO MORE MONEY FOR CLARK COUNTY UNTIL THE AUDIT IS DONE...
save a nickel, lose a dime. FUGGEDABOUTIT!
NVConcernedCitizen.
You have a point. After all, when you book a room on a chain hotel site, They always say "Subject to additional local room tax" and that $80 room becomes a $90 room. I booked a room at Luxor on Vegas.com a few weeks back. The Luxor web site had the "resort fee" (ripoff) added into the total "checkout" price. The Vegas.com had the same basic room rate listed but unless you were looking for it (I called them to verify) the fee was not listed and in fact was charged separately at check-in. (wow $10.95 a day for a USA today paper)! If they can charge the resort fee at check-in, why not the room tax too.
SgtRock: Honestly, do you really think the RJ is giving us the whole, unbiased picture? Get some education.
The LVRJ would never do this. Reporting on a story and not disclosing that topic of the story might have a material economic impact on the owner of the story.
LVRJ keeps its opinions out of its news stories. Yes its does express it opinions in columist sections and editorial sections where it belongs.
Also, LVRJ reports on stories that are negative on Republicans.
Vegas.com is own by the Greenspuns, who also owns this website.
sgtrock.......
HA! Good one! THAT is absolutely HISTERICAL!
Sherman Fredericks would not know journalistic ethics if they smacked him right in his ugly kisser.
The wholesalers are charging the full tax amount to the consumers based on the retail rates, but then they only pay the hotels (and consequently the county) the tax amount based on the net (or discounted wholesale rate), and the online companies keep the tax difference as a profit margin. For instance, the online companies sell the room to the consumer for $100 and collect $12 in taxes. They then pay the hotel $70 for the same room, and the hotels only collect and pay the county $8.40 in taxes. The online company keeping $3.60 of the money the consumer thought they were paying in taxes as an additional profit. You tell me if you think this is fair.
gmag39....I am sure if journalistic ethics smacked you in the face if you knew what they where.
Are you Ok with Sun not disclosing the conflict of interest in the topic?
My understanding is that the hotels become liable for the room tax when the room is sold, with the obligation to pay a stated percentage of the price negotiated. It doesn't appear to matter whether that sale is to an individual, an online reseller or anyone else.
If an online reseller collects a tax beyond what they were charged by the hotel, that would seem to be fraudulent, and a cause for criminal and/or civil action. Such an action though, would not be for the relief of a governmental entity like Clark County, but would instead be intended to 'make whole' those consumers who were defrauded.
Maybe Clark County simply needs to learn how to tighten its belt in these tough economic times, as so many of us outside of government already have. These litigious wild goose chases serve no worthy purpose.
nance... NO. I am not ok with it.
I majored in Mass Communications, and yes, I am cognizant of what constitutes "journalistic ethics." Of course, common sense would tell me as much as my education about Mr. Frederick;
Sherman is a snotty, spoiled, overly-opinionated, right-wing nut-job. And it shows in every piece he's ever put pen to.
That said, journalistic ethics have gone the way of the Edsel, as corporate GREED has pretty much ruined the newspaperin' industry.
Your agrument just proves you have no clue about journalistic ethics because you have no understanding of the difference between clearly marked opinion articles and news stories.
Nope....you are clueless.....you need to retake the class because you clearly did not understand the material.
sue the people that bring paying customers to Las Vegas. Great idea! idiots everywhere...
nance, haven't you learned to read, for God's sake? I AGREED WITH YOU.
Here is a novel concept: why not start going after the unlicensed businesses that are collecting room taxes, but not paying them! I have a perfect example:
Take a look at Konstantinos Anastasio Kouris, he is the owner of Travel Link Unlimited, and this is what he did:
http://www.merchantcircle.com/business/T...
http://www.complaintsboard.com/complaint...
First of all Travel Link Unlimited has never been licensed to do business in Clark County, but has been renting Condominiums at the Meridian Private Residences, located on the Northeast corner of Koval Lane & Flamingo, for years. Mr. Kouris & his side kick Alex Wong have been caught renting out bank owned units, a perfect example of this is the $40,000+ that he charged a company from Boston for their stay at the Meridian, for multiple clients, who were attending a convention here in Las Vegas in April of this year. At least, two of the units he rented were bank-owned at the time, this is known because two of the condominiums were locked up by the bank during their stay. The stay itself was for less than 7 days, which is an illegal use of the property per Clark County DA Warhola. Mr. Kouris collected room tax for the stay, but being unlicensed and off the radar he is pocketing the tax. He is not paying income tax on what he is collecting as he tries to deal as much as possible in cash, which cannot be traced...so he thinks. Mr. Kouris was busted for running an illegal limousine service earlier this year, which he had been packaging with his vacation rental business. He is in Chapter 7 bankruptcy, and he is hiding his assets from the bankruptcy trustee, along with the money he is illegally taking in. We have numerous signed leases with Mr. Kouris's name on them, even though he is not licensed as a Property Manager in this state. Mr. Kouris lost his Mortgage Agent license for something that he did. He was Director for a company called Travilliant, which bilked investors out of over a million dollars!
Currently, Mr. Kouris is working with Carl Marcello, Meridian LV, LLC, a company that Mr. Kouris originally formed as a partnership with Nicholas S. Gouletas/American Invsco, according to Konstantinos himself.
The County has been trying to audit Mr. Kouris since May/June of this year, but they have been unsuccessful getting anything out of him thus far...big surprise. If someone at the County started doing their job, maybe the County might be able to start collecting all of the monies due them, but that would take some effort on their part...not gonna happen!
In the meantime, if you happen to run across Mr. Kouris, don't walk away...run!