Travel websites being sued for hotel taxes
Nassau, Suffolk and dozens of other counties statewide can proceed with a class-action lawsuit against several travel websites that they claim owe them millions of dollars in local hotel taxes, a judge ruled Thursday.
One day after hearing testimony from attorneys representing Nassau and travel booking sites such as Travelocity, Expedia, Hotels.com and Priceline.com -- all defendants in the case -- State Supreme Court Justice Stephen Bucaria ruled that Nassau had met the legal criteria for a class action.
"A class action is superior to other available methods for the fair and efficient adjudication of the hotel tax controversy," Bucaria wrote in his ruling.
The suit centers on Nassau's ability to collect its 3 percent hotel and motel tax in an era of online travel brokers.
The booking sites typically purchase hotel rooms at discounted rates and then resell them to customers at higher prices. In Nassau, travelers who book a room pay the sites for the hotel tax at the retail rate.
The lawsuit claims the booking sites only pay taxes on the cheaper, wholesale rate at which the rooms were originally purchased. The difference in the two rates amounts to several million dollars of lost tax revenue for Nassau and tens of millions more statewide, said Nassau County Attorney John Ciampoli.
"These sites are depriving the county and the taxpayer of money they are entitled to," Ciampoli said.
But Brian Stagner, a Fort Worth, Texas, attorney who represents 17 booking sites in the case, told Bucaria Wednesday that the companies are merely "intermediaries" in the transactions and are not obligated to pay the higher tax rate because they do not own or operate the hotels.
The hotels themselves are responsible for collecting and paying taxes directly to the county, Stagner said.
Nassau originally filed the lawsuit in 2006 in U.S. District Court in Central Islip, but the case was dismissed for lack of jurisdiction. The U.S. Court of Appeals vacated the federal court order and remanded the case to state court.
Nassau brought the class action on behalf of 56 cities and counties statewide, including Suffolk and New York City, that have imposed hotel taxes since March 1995. The Suffolk County attorney's office did not respond to a request for comment on the suit.
The booking sites sought to have the case dismissed, but Bucaria rejected their motion last June. Nassau collected $4.7 million last year in hotel and motel taxes, according to the office of Comptroller George Maragos.In court on Wednesday, Stagner said the court should not certify the class action because the ordinances in each municipality that permit the hotel tax charge are written differently.
But Robert Schachter, an attorney representing Nassau, said forcing each municipality to proceed with its own suit would be "impractical and inefficient."