Online travel companies move to dismiss Breckenridge lawsuit
October 21, 2011
BRECKENRIDGE – Several online travel companies (OTCs), the targets of a class-action lawsuit over unpaid taxes led by the Town of Breckenridge, are moving to have the litigation dismissed, saying they do not owe the town anything.Attorneys for the travel companies allege the online businesses do not owe the taxes under town codes because they are not licensed or doing business in Breckenridge and because they don’t own the rooms they are reselling.The motion to dismiss, filed by a Denver law firm on behalf of the travel companies, goes on to state that claims against the OTCs should be tossed out because Breckenridge “failed to exhaust mandatory administrative remedies before filing suit.”Attempts Thursday to contact attorneys with Holme, Roberts and Owen LLP, the firm representing the OTCs, for comment were not immediately successful.Breckenridge holds the OTCs, with the launch of a “merchant model” sales tactic in the early 2000s, began purchasing rooms from local hotels and then selling them to customers at higher rates, but have failed to pay sales and lodging taxes to the town government on the difference in price, according to a complaint filed in district court in July.”If a unit is sold to the online travel companies at a certain rate, let’s say $100, and they mark that unit up to say $125 to the person who rents it, they have not been paying (taxes) for the $25 increase,” said Breckenridge town manager Tim Gagen.Estimates of what is owed to the town due to the practice, including penalties and interest, exceed $1 million.The online travel companies likely charge customers the full taxes owed on the final price of the room, in the form of bundled taxes and fees, but do not remit the dollars to municipalities, according to Trey Rogers, a partner at Rothberger, Johnson & Lyons LLP, the law firm in Denver representing Breckenridge in the suit.The suit names such online giants as Expedia, Travelocity, Orbitz, Hotwire, Hotels.com and Priceline.Breckenridge is leading the litigation but, because it is a class-action lawsuit, as many as 80 other Colorado municipalities in similar positions could join in. Officials in both Frisco and Vail have considered becoming part of the suit.Mixed resultsBreckenridge isn’t the first government to go after online travel companies in court, but results in other lawsuits are a mixed bag.Local governments were successful in a similar case that went to a jury in San Antonio in 2009, but a number of cases in California, most recently in September, have been decided in favor of the OTCs.”Online travel sales provide global marketing opportunities for local tourism,” stated Art Sackler, executive director of the Interactive Travel Services Association in a recent release from PR Newswire. “Municipalities and OTCs should work together to promote travel and tourism for everyone’s benefit, rather than both sides expending precious resources on futile litigation.”In the most recent court decision out of California, the Los Angeles Superior Court ruled a San Diego occupancy tax did not apply to the OTCs’ bookings, according to the PR Newswire statement.Breckenridge levies both a sales and a lodging tax on all overnight room rentals within the town limits.