Expedia, Hotels.com, Egencia, and Hotwire prevail on summary judgment in hotel tax case
Client(s) Expedia, Inc. (WA), Hotels.com, Egencia, and Hotwire, Inc.
Jones Day recently secured an important summary judgment victory for Expedia, Inc. (WA), Hotels.com, Egencia, and Hotwire, Inc. on claims brought by Illinois municipalities for allegedly unpaid hotel occupancy taxes.
In 2013, 14 Illinois municipalities filed a lawsuit on behalf of 276 unnamed Illinois municipalities alleging that several online travel companies failed to pay local hotel taxes on the rate charged to online consumers. Jones Day twice defeated plaintiffs’ motions for class certification, leaving only the claims of the 14 remaining named plaintiffs. One plaintiff voluntarily dismissed its claim, and the 13 remaining plaintiffs filed a motion for summary judgment. The online travel companies filed a cross-motion for summary judgment in February 2016.
On June 20, 2016, the United States District Court for the Northern District of Illinois entered an order granting the online travel companies’ motion for summary judgment under 12 of the 13 remaining plaintiffs’ municipal ordinances. The court’s analysis was straightforward: (1) online travel companies are not “owners,” “operators,” or “managers” of hotels, and thus are not required to remit hotel taxes under municipal ordinances that impose remittance duties on “owners,” “operators,” and “managers,”; (2) Illinois law requires that ambiguous taxing ordinances must be construed against the municipalities and in favor of the taxpayer; and (3) online travel companies are not required to pay taxes on the fees they retain for their travel facilitation services in municipalities that impose their tax on the amount paid by travelers for “occupancy” of a hotel room. Indeed, the court made clear that even the subset of some Illinois municipalities that require entities engaged in the “business of renting” hotel rooms to pay a tax on the consideration received for occupancy have received all taxes that they are entitled to from online travel companies who already remit taxes on the rate set by the hotel for occupancy of the room. Thus, the court denied plaintiffs’ motion for summary judgment under 12 of 13 municipal ordinances, and granted the online travel companies’ cross-motion for summary judgment under 12 of 13 municipal ordinances.
Village of Bedford Park v. Expedia, Inc., Case No. 1:13-cv-05633 (N.D. Ill.)