Ga. Counties Lose in Online Tax Fight

Appeals panel rejects bid for 'tens of millions' in back taxes from online travel companies that sold hotel rooms

, Daily Report


Atlanta Attorney Frank Lowrey, Bondurant Mixson Elmore. Photo By John Disney 8-10-12
Frank Lowrey IV argued the case for the travel companies and said the Eleventh Circuit returned "a very careful opinion" that "brings an appropriate end to eight years of litigation."

A group of Georgia cities and counties has suffered a major loss in its quest to recoup millions in what it says are back taxes owed by online travel companies.

The Dec. 13 decision by the U.S. Court of Appeals for the Eleventh Circuit means the travel companies don't have to pay the localities taxes they allegedly collected from customers. A three-judge appeals court panel said that the localities hadn't shown the travel companies actually collected taxes on the retail rates they charged customers and that it was unnecessary to ask the Georgia Supreme Court to offer further guidance on what remedies the localities had.

Frank Lowrey IV of Atlanta's Bondurant, Mixson & Elmore, who argued the case for the travel companies, called the decision "a very careful opinion" that "brings an appropriate end to eight years of litigation."

Atlanta lawyer Robert Lamar of Lamar, Archer & Cofrin, who represents the more than 250 cities and counties in their lawsuit, said last week that his clients will ask the court to reconsider. He said the appeals court judges had misunderstood the localities' position in the case.

Lamar's clients—all of Georgia's counties and cities that charge taxes for hotel room sales, minus Atlanta and Columbus, which filed separate suits—already had obtained part of the relief they sought. In a partial settlement last year, online travel companies such as Expedia,, Hotwire, Orbitz, Priceline and Travelocity agreed to begin paying local taxes on the amount they bill customers for room reservations.

Until the deal, the travel companies paid taxes on only the lower wholesale prices they pay hotels to reserve blocks of rooms.

The travel companies also agreed to pay the difference between taxes collected on the retail and wholesale rates for transactions occurring after May 16, 2011, the day the Supreme Court of Georgia said in Atlanta's case that online travel companies that book hotel rooms via the Internet must collect and pass along to the government taxes on the room rate they charge their customers.

But the settlement left open the question of liability prior to that date. The localities had hoped the Eleventh Circuit would say the travel companies owed them back taxes prior to that point, or at least ask the state Supreme Court to look at the issue. According to Lamar, millions of dollars already have been remitted under the settlement in his case. The part of the case decided by the Eleventh Circuit was worth "in the tens of millions," he said.

The city of Columbus settled its lawsuits with online travel companies. The city of Atlanta has filed a notice of its intent to appeal a summary judgment ruling against it in the latest iteration of that case.

The case at the Eleventh Circuit started as a class action filed by the city of Rome in 2005. U.S. District Judge Harold Murphy granted summary judgment to the online travel companies on claims for back taxes allegedly owed by them for the pre-May 2011 transactions. The localities appealed, but at the Eleventh Circuit, U.S. District Judge J. Randal Hall of Augusta, sitting on the Eleventh Circuit as a visiting judge, wrote the opinion affirming Murphy. Hall was joined by Judge William Pryor Jr. and Senior Judge James Hill of the Eleventh Circuit.

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