The internet has revolutionized the hospitality and service industry. Online travel companies (OTCs) such as Expedia, Priceline,, Orbitz, and Travelocity allow an internet user to visit a single website to search for all hotel rooms available in a specified area. In a single transaction, a customer can choose a hotel, book a room, and pay for their entire stay. Under what some courts have termed the “merchant model,”[1] a customer pays a lump sum to the OTC, which in turn sends a portion to the hotel to pay for the room and any hotel occupancy taxes. The OTC keeps the remainder as a service fee, which is how they generate a profit.

Cities and municipalities in 34 states, the District of Columbia, and Puerto Rico have begun suing OTCs claiming that the OTCs are not paying an adequate amount of taxes on the online bookings. These cities all have laws that impose hotel occupancy taxes on rooms rented to transients. They claim the occupancy tax should be paid on the lump sum the customer pays to the OTC, and not merely the amount the OTCs remit to the hotels. Despite the nationwide nature of this issue, court rulings on whether OTC services are indeed taxable under this model have lacked consistency. Part of the inconsistency stems from the differences in each local statute or ordinance, which tax the customer in some cases and the hotel in others.[2] Laws also vary in their definitions of key phrases, some of which are ambiguous, leaving a court to interpret them with little guidance.[3] In many cases, courts have found the OTC was not the “operator” of a hotel or a “vendor” – both of which are taxed under certain statutes or ordinances.[4] Overall, of the currently 49 decisions on the merits, 39 courts have concluded that OTC services were not taxable and 10 have decided that their services were taxable. To date, no federal circuit court has ruled that OTC services are susceptible to hotel occupancy taxes, but appeals in multiple federal district courts are currently pending.

In Louisiana, many cities impose a hotel occupancy tax on the hotel customer (occupant), but require the “dealer” to collect and remit the tax. Generally, tax collectors may seek to collect delinquent taxes (including, for delinquency due to insufficiency of an otherwise timely payment) from either the customer or the dealer. Laws defining “dealer” for purposes of the occupancy tax vary from city to city, however. In some cases, “dealer” is specifically defined as the owner or operator of a hotel. In others, “dealer” is defined in a way tax collectors will contend includes OTCs. Additionally, some cities impose occupancy taxes on the gross amounts charged to a customer, which may be read as including the OTCs service fee. Finally, there may be varying definitions among local laws of key terms, including “transient guest.”

Litigation similar to that in other states has yet to be filed in Louisiana; however, because this state is a tourist destination and a litigation hotbed, OTCs should be prepared. Litigation involving OTCs will surely come at some point as Louisiana cities discover the potential tax revenues available on OTC booking. If you or your client needs assistance evaluating state and local hotel occupancy tax statutes or preparing for what’s to come, Kean Miller is here to help.


[1] In re Transient Occupancy Tax Cases (City of San Diego v., 225 Cal.App.4th 56 (2014), review granted 329 P.3d 192 (Cal. 2014).

[2] See City of Atlanta v., 710 S.E.2d 766 (Ga. 2011); Travelocity v. Wyoming Dept. of Revenue, 329 P.3d 131 (Wyo. 2014); City of Chicago v., 2013 WL 3185061 (Il. Cir. Ct. Cook Cnty. No. 2005-L-051003, Jun. 21, 2013); Village of Rosemont v. Priceline, 2011 WL 4913262 No. 09-C-4438 (E.D. Ill. Oct. 14, 2011) (Finding that the language of the statute charged the amount paid by hotel guests, and thus the total amounts paid by OTC consumers were taxable). See also City of Birmingham v. Orbitz, 93 So.3d 932 (Ala. 2012). (finding that rather than taxing the customer, the statute taxes “every person, firm or corporation engaging in the business of renting or furnishing any room or rooms, lodgings, or accommodations are regularly furnished to transients for a consideration.”).

[3] See Expedia v. District of Columbia, 120 A.3d 623 (D.C. 2015) (defining the term “furnishing” of a hotel room); Louisville/Jefferson county Metro Gov’t v., 590 F.3d 381 (6th Cir. 2009) (defining the phrase “like or similar accommodations businesses” to not include OTCs); City of Houston v., 357 S.W.3d 706 (Tex. App. 14th Dist. 2011) (defining “cost of occupancy” not to include OTC service fees).

[4] See City of Goodlettsville v. Priceline, No. 3:05-cv-00561 (M.D. Tenn. Feb. 21, 2012); Expedia v. City of Anaheim, 2012 WL 5360907 (Cal. App. 2nd Nov. 1, 2012), rev. denied Jan. 23, 2013; In the Matter of Travelocity v. Dir. Of Taxation, 346 P.3d 157 (Haw.2015) (finding OTCs not classified as hotel “operator”); Expedia v. City and County of Denver, 2014 WL 2980979 (Colo. App. Jul. 3, 2014), appeal granted 2015 WL 5215961 (Colo. Sep. 8, 2015) (finding OTCs are not “vendors” under the statute.).