Thwarted by Georgia's courts, online travel companies are now asking the General Assembly to exempt them from paying potentially millions of dollars more in hotel and occupancy taxes that local governments say are needed to promote tourism.
Senate Bill 244, to be considered Tuesday at a hearing before the Senate Finance Committee, is opposed by city and county governments. The panel is taking time during the ongoing special session called for redistricting to consider the legislation.
"We see this as an attempt to circumvent the law and the court's rulings," Atlanta's deputy city attorney Eric Richardson said Monday. "The city is vehemently opposed to this legislation."
If cities can not collect the taxes in full, there will be less money to promote tourism, local government officials say. The city of Atlanta, for example, turns over much of its $40 million in annual occupancy tax revenue to the city, the Georgia World Congress Center and the Atlanta Convention and Visitors Bureau and also uses it to help pay down debt on the Georgia Dome.
The bill's sponsor, Sen. Joshua McKoon, R-Columbus, said the legislation is needed because online travel companies removed Columbus from their websites after a judge ordered the companies to pay full taxes to the city. Now, travelers visiting the online sites for hotel reservations in Columbus only get listings for nearby Phenix City, Ala.
"That's had a tremendous impact on our tourism," McKoon said, estimating the city's tourist industry has lost $7.4 million in business. "The innocent bystanders of all this are the local hoteliers and the people they employ. We have to have a uniform solution that allows the online travel companies to conduct business statewide."
Online travel companies such as Expedia, Hotels.com and Travelocity have been under legal assault in Georgia and in courts across the country over occupancy taxes. In two separate rulings, the Georgia Supreme Court ruled that online travel companies must pay the cities of Columbus and Atlanta the occupancy tax on the room rate an online travel company charges its customers.
Since the online travel companies were ordered to pay the full rate to Atlanta, the city has seen an increase of about $40,000 a month in revenue, Richardson said. The city is also seeking more than $3.8 million in unpaid occupancy taxes from the industry dating back to 2003.
In the past, online travels companies paid Atlanta's 7 percent occupancy tax on the wholesale, not the retail, rate for hotel or motel rooms. If an online travel company charged a customer $100 for a room, for example, it paid occupancy taxes on the $60 the online company paid the hotel for the room. Now, the online companies must pay the occupancy tax for the full $100 charged to the customer.
Lamar Norton of the Georgia Municipal Association said every extra tax dollar is needed in today's economy. "It's a considerable amount of money statewide," he said. "We could use it to help pay policemen, firemen and repave the pot holes in front of the hotels."
A class-action lawsuit against the online travel companies filed on behalf of numerous Georgia cities and counties -- including all five metro counties -- is pending before a federal judge in Rome. That suit would become moot if SB 244 is enacted.
Art Sackler, executive director of the Interactive Travel Services Association, said the legislation is needed "to remedy the misadventures of the city of Columbus and its plaintiffs lawyers who continue to do harm to local merchants and tax collections."
Attorneys Michael McGlamry and Kirk Pope, who represent Atlanta and Columbus in the litigation, dispute such economic portrayals. Since the online companies removed Columbus from their websites, the lawyers said in a memo to committee members, the city's gross bookings for hotels have increased by 14 percent and its hotel occupancy tax revenues have increased from $4.2 million in 2008 to $5 million last year.
The online travel companies have long prepared to fight efforts by local governments to collect the full occupancy taxes, according to internal company documents ordered released by a judge overseeing the Georgia litigation.
In a tax analysis prepared in July 2003, Mark Britton, then Expedia's senior vice president and general counsel, said if the company had to begin paying substantial occupancy taxes, "I am guessing the pain will become too great to simply absorb." For this reason, Britton wrote, "the stakes are high enough that we should resist, delay and make it as difficult as possible for any state to require us to collect occupancy tax." Legislative options should also be pursued, he said.
In 2005, the online travel companies hired the public relations firm Burson-Marsteller, which recommended the industry "fight an aggressive grassroots political battle in a targeted jurisdiction to send a message and make an example for others," according to court documents. In particular, the firm said, "make an example out of Georgia to put other states/jurisdictions on notice."
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