The city of Atlanta has sued several major Internet travel sites, including Expedia Inc. (Nasdaq: EXPE), Hotels.com and Travelocity.com, claiming that the companies bilked it out of tens of millions of dollars in hotel occupancy taxes.
In its lawsuit, filed March 29 in Fulton County Superior Court, the city says the companies are collecting the full 7 percent Atlanta occupancy tax -- a major revenue source for the city -- from customers but remitting only part of it and keeping the rest as profit.
Suppose a travel site buys a room from Holiday Inn for $50 and sells it for $75, said partner L. Lin Wood of Atlanta law firm Powell Goldstein LLP, who is heading up the city's case. The site sends the hotel an amount equal to 7 percent of the price it paid (which the hotel then remits to the city), when it should be sending 7 percent of the price it charged, Wood said.
Atlanta's suit, which also names Hotwire Inc., Orbitz LLC and Priceline.com Inc. (Nasdaq: PCLN), follows similar actions by the cities of Chicago, Los Angeles, Philadelphia, San Diego and Rome, Ga. City attorney Linda DiSantis and Michael McGlamry of Columbus-based law firm Pope, McGlamry, Kilpatrick, Morrison and Norwood LLP are also representing Atlanta.
The remittance issue received some attention at the state capitol earlier this year when legislators quizzed representatives of Expedia and other travel sites on the subject.