The Daily Record reports that Baltimore City will receive $1,675,000 from the online hotel-booking company Expedia to cover its tax liability dating from 2007 through June 2014. Expedia Inc. and its sibling travel websites settled Baltimore’s lawsuit in U.S. District Court earlier this month.
The settlement, apparent validation of (City Solicitor George) Nilson’s campaign to pursue “affirmative recovery litigation,” is slated for approval by the city’s spending panel on Wednesday and will surely be welcome news to the Board of Estimates, which passed the city’s lean Fiscal Year 2012 budget on Monday.
According to a summary contained in this week’s board agenda, the remaining proceeds “will be distributed as in the case of other hotel tax proceeds” and approximately $700,000 could make it to the city coffers.
Forty percent of the Priceline settlement went to Visit Baltimore, the city’s tourism arm; 18 percent went to Davenport and Crongeyer, and the rest went to the city.
“They’ve had to work for their cut,” Nilson said of the outside lawyers. “The [online travel company’s] defenses tend to be rigorously pursued here and everywhere.”
Baltimore’s suit, which joined a national trend and started a movement in Maryland when it was filed in December 2008, claims the hotel booking companies must pay room taxes on the rates charged to customers, not on the lower rates they actually pay to the hotels for the rooms.
The defendant companies claim they are simply providing a booking service, not operating the hotel.
Worcester County, which contains the popular beach destination of Ocean City, settled a similar suit for $150,000 a year ago. Like Baltimore, Worcester cannot sue the defendants again until 2012.
Nationally, the defendant companies have succeeded in dismissing many municipalities’ cases, including a victory in North Carolina that was affirmed at the 4th U.S. Circuit Court of Appeals. But others have succeeded by way of settlement or verdict.
Everywhere, the issues are “hotly contested,” according to the Board of Estimates agenda, and the result can turn on slight differences in the language of municipalities’ ordinances.
The city tax rate increased a year ago from 7.5 percent to almost 9.5 percent, with enhanced penalties, Nilson said, providing strong incentives for the defendants to settle.
He believes the companies have struck deals through 2014 to give themselves time to seek change legislatively. He expects “furious efforts” to that end. Nilson said neither Travelocity nor Orbitz has entered settlement discussions yet but that Travelocity began to make monthly payments in January.