Ga. Court: Travel Web Site Shorting City On Tax

The lawsuits hinge on the complicated pricing schemes used by Expedia, Orbitz, Travelocity and other 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. In Columbus and Atlanta, where the hotel taxes are at 7 percent, that could translate to millions of dollars in lost revenues, city attorneys said.

In the Columbus, Ga., case, a lower court judge said Expedia must begin collecting the tax "on the total amount it discloses to the consumer as the room rate."

Expedia, Orbitz and several other hotel sites have responded to Columbus' complaints by de-listing hotels from the west Georgia city. A search of those sites for rooms in the area instead lists nearby Phenix City, Ala.