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Monday, May 1, 2017

Hotel Tax Not Apply to Online Travel Company Fees

An Illinois appellate court recently ruled against the City of Chicago in its lawsuit against Expedia, Hotels.com, Hotwire, and other online travel search companies regarding collection of the City's hotel tax. City of Chicago v. Expedia, et al., 2017 IL App (1st) 153402.

In 1973, the City of Chicago adopted an ordinance requiring all owners, managers, or operators of hotel accommodations to collect from the occupant and pay to the City a hotel tax. The City subsequently tried to apply the hotel tax to the upcharge imposed by online travel companies such as Expedia, Hotels.com, and Hotwire, and filed a lawsuit when the companies failed to collect and pay the tax to the City. The defendants, all online travel companies, claimed that they were not liable for the tax because they were merely travel intermediaries, and not hotel owners, managers or operators. 

The circuit court had previously ruled in the City's favor that the companies were operators under the hotel tax ordinance and were liable for collecting and paying the taxes. However, on appeal, the appellate court reversed, and ruled against the City. The appellate court determined that the online travel company was not an owner, manager or operator of hotel accommodations under the City's ordinance. The court also held that the City was not entitled to additional tax revenue on the difference between what the hotel charged the online company for its inventory, and what the online company charged the occupant when the occupant booked the reservation online. Instead, the court held that this difference was more in the nature of a facilitation and service fee, and not "rent" for the hotel room that would be subject to the tax.

There's a decent chance the City of Chicago will appeal this decision.

Post Authored by Julie Tappendorf


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