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ONLINE SERVICES: Tax issue may spur lawsuit

Commissioners consider legal action against hotel booking sites

Clark County might sue online travel companies such as Expedia and Orbitz for unpaid room taxes that one attorney said could total $200 million to $500 million.

The agencies pay the 12 percent lodging tax on rooms they buy wholesale from hotels but not on the marked-up prices they charge customers online.


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  • State and local officials have resisted going after them for a potentially huge sum in back taxes because they didn't want to punish businesses that bring in visitors.

    But county commissioners have become open to legal action as the recession drags on and as governments throughout the nation are winning court battles against the core group of travel companies for unpaid taxes.

    Commissioners will discuss on Nov. 17 whether they should hire an attorney to represent the county in a lawsuit.

    "I don't know why anyone should feel uncomfortable with it," said Commissioner Chris Giunchigliani, who is bringing the issue to the board.

    Online companies aren't needed to lure people to Las Vegas, she said, noting that travelers can book rooms directly with hotels.

    Three years ago, two local attorneys tried to persuade the county to sue the Internet travel agents for unpaid room taxes, but county leaders passed. In August, the state tourism commission decided not to pursue the matter, saying the board lacked the authority.

    Based on the current 12 percent rate, 3 cents goes to the state, 5 cents to the Las Vegas Convention and Visitors Authority, 2 cents to Clark County schools, 1 cent to transportation and 1 cent to county government.

    Most local resorts oppose suing the companies for lodging taxes because they help the hotels keep an occupancy rate of more than 80 percent, said Vince Alberta, spokesman for the convention authority.

    That's well above the national average of 55 percent occupancy, Alberta added.

    Nevada tax law states that hotels are responsible for collecting lodging taxes when they sell the rooms and then paying the government the proper amount, said Gordon Absher, MGM Mirage spokesman.

    The taxes aren't imposed directly on outside companies like Priceline, Alberta said.

    State tax officials issued an opinion in 2005 that said the online companies had not acted improperly by paying no room taxes on the fees they charge patrons, Alberta said.

    These agencies spend tens of millions of dollars promoting Las Vegas worldwide and should be able to recoup their costs through booking fees, said Chuck Bowling, MGM Mirage's vice president of marketing.

    If the Internet companies were forced to pay more taxes, they would have less money to promote Nevada at a time when the state needs all the marketing it can get, he said.

    "That's stepping over dollars to pick up pennies," Bowling said. "These companies are helping us to drive tourism ... in a way that we couldn't otherwise. We need all the faucets on."

    But Commissioner Steve Sisolak said there's no way to know how much of the travel companies' fees are used to boost tourism and how much is pure profit.

    "You don't know if they're buying yachts, planes and taking trips around the world," Sisolak said.

    He also questioned how their actions are considered OK in Nevada if they've been found to be improper in other states.

    Will Kemp, an attorney seeking to represent the county, estimates that there's $200 million to $500 million in uncollected taxes.

    Kemp said the travel companies have argued in every case that they shouldn't pay room taxes because they aren't brick-and-mortar businesses like hotels.

    But the Georgia Supreme Court in June found this argument lacked merit and ruled that the city of Columbus, Ga., was entitled to back taxes, Kemp said.

    In February, the online travel businesses were ordered to pay $21.3 million to Anaheim, Calif. Last week, San Antonio, Texas, won a $20.6 million judgment. And on Tuesday, the state of Florida sued the companies.

    If Clark County leaders decide to sue, law firms would bid on the job.

    Kemp said he would suggest that Vegas.com, owned by the Greenspun family, be exempt from the room tax enforcement. The company, which also books rooms online, creates local jobs and benefits the area economy, he said.

    Giunchigliani said that will be something for the commission to address.

    "It's a policy decision," she said.

    Contact reporter Scott Wyland at swyland@reviewjournal.com or 702-455-4519.

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    Gary j paquette wrote on November 11, 2009 07:31 PM: I have been in the travel industry for
    the past 41 years, and gradulated unlv
    Hotel administration. I was on the ground floor of product development,and
    most likly the first to market air/hotel packages with WESTERN AIRLINES UNDER DE-REGULATIONS OF THE
    AIRLINE INDUSTRY IN 1978-1980 PERIOD.
    Precieved value of air/hotel package's by the consumer is what made this town. Keeping the cost of these packages as low as possible will keep
    Las Vegas in the for front in tourist
    destinations. I suggest a complete marketing study be done on this issue
    before any law suits comes about, because the hotel/ casino markets themselves through packaging, and the formula- product development is done
    the same way.


    Paul Eugene Morgan wrote on November 08, 2009 01:44 AM: I believe the main issue is fairness. How can you expect a senior citizen on a fixed-income to pay sales tax at Kmart on a $20 purchase, if you say it's okay for a large internet travel agency (such as Travelocity) to delay or avoid the tax? Travel agencies purchase large blocks of rooms, realizing there will be unsold rooms from time-to-time. The travel agency prices the rooms so high demand, higher priced rooms offset loss for non-occupied rooms. The County should pursue the suit against the travel agencies.


    Jerry wrote on November 08, 2009 12:00 AM: I posted this morning and I still think this is a STUPID idea on the part of our Commissioners. Like Help said

    "... If I buy a $10 shirt @Walmart ($9 shirt + $1 tax) and I sell the shirt online for $20...now I gotta go back to Walmart and give another $1? "

    So if the Commissioners can shove this new higher tax on business, what stops business from simple selling the room at the same price they pay (at the bulk rate) and just charging a internet access fee, or service fee for processing?

    Like John said "the cow only has so much to give..."

    STOP penalizing Captialism and free trade. Find ways to support business and make them grow.


    John wrote on November 07, 2009 07:40 PM: At issue that someone should consider is the FEDERAL ban on sales taxes for internet sales. This is not much different then me buying 100 Hard Rock shirts and selling them on ebay all over the US. Only sales delivered in Nevada are subject to sales taxes. These companies buy the rooms in Nevada, pay the taxes when they buy them and then sell them via the internet. They do not have a store front or office per se in Nevada.

    And the other question that I would like to know, what "tax rate" do they charge the end customer? If they charge the consumer MORE then they pay that is actually tax fraud which is a whole new set of rules. But if they charge the customer what they pay, let it be, rooms are already taxed to the point that consumers have less to gamble with and then the casinos and the county taxmissioners complain that gambling is down.

    The casinos doubled the prices of 'extras' such as shows and eating and the taxmissioners have doubled the taxes in the last 10 years. The cow only has so much give to give even in good years you can not milk it more in dryer years just because you want more milk.

    Drink only the milk you get.


    They sure are creative, NOT wrote on November 07, 2009 06:56 PM: Oh, why don't these crazy kids just tax everyone on the air we breath, because we must be using the oxygen allocated to the Las Vegas valley faster than the earth can replenish it.

    Yeah, that's the ticket. And if you have pets (breathing oxygen) then you get a luxury tax.

    Or better yet, why don't these crazy kids stop cooking the books and live within rational balanced budget means, for once?


    guru wrote on November 07, 2009 03:40 PM: I see this as frivolous. Going after people for PAST matters seems wrong. If the County wants these internet creators to pay more room taxes, then pass a law that requires such. It is also sad how law firms are salavating to sue the creators, and begging the County for the assignment. And I thought taxpayers were already paying for County lawyers.

    Things seem to continue to get more desparate and immoral in America. Anyone who actually makes money is a target. I suspect some persons in "poverity" are actually richer (have more net income) than some who make $100,000 a year, considering the subsidies, tax credits, refunds etc. In otherwords, it might now make financial sense to relax and live in poverity in America.


    SgtRock wrote on November 07, 2009 03:34 PM: The Las Vegas Sun had a similar story on its website.

    It did not have part about Kemp saying Vegas.com should be exempt from the law enforcement of the tax.

    Nor did it disclosed that owners of the Las Vegas Sun might be economically impacted from the topic being reported on.


    lol wrote on November 07, 2009 01:30 PM: "Kemp said he would suggest that Vegas.com, owned by the Greenspun family, be exempt from the room tax enforcement." - WTF you mean they are a client or just benefiting from their good ol boy campaign contributions.


    Ca Commentor wrote on November 07, 2009 12:08 PM: Just another way for the government to take advantage of the people. These incompetent worthless morons seem to forget that people are tired of paying tax after tax after tax.


    Greenspun is a DL wrote on November 07, 2009 11:26 AM: Greenspun is a moron, trying to wimper out of paying taxes. Who the hell does he think he is? Past time to tax his lousy paper back to the stone age, too.


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