North Little Rock's Advertising and Promotion Commission joined a class action claim Tuesday against a number of online travel companies that haven't paid all taxes due to cities, counties or other commissions for hotel and motel rooms rented at a discount through the companies' websites.
To recover the unpaid taxes, the commission had to intervene in the case and submit a claim, according to a memo from City Attorney Amy Fields to the commission. How much the commission will recover from the unpaid taxes has not yet been undetermined.
On May 14, Jefferson County Circuit Judge Robert H. Wyatt Jr. ruled that Hotels.com and 11 other online travel companies are liable for back taxes dating as far back as 23 years. The judge set a four-month deadline for potential plaintiffs to intervene and make a claim for damages.
The Pine Bluff Advertising and Promotion Commission and Jefferson County were the initial plaintiffs in the 2009 lawsuit against Hotels.com, et al. North Little Rock was added as a plaintiff in 2011. North Little Rock's Advertising and Promotion Commission collects the city's lodging taxes.
The lawsuit said the online travel companies only disburse taxes to a hotel based on the discounted amount the hotel charges consumers on their websites, keeping the additional amount of taxes the travel websites collected from the consumers. Wyatt's ruling in May found the online travel companies are liable on the full gross receipts.
Fields had passed along to the North Little Rock commission a court-ordered notice from the Jefferson County Circuit Court to Arkansas cities saying they may be entitled to recover unpaid taxes. Commissioners voted 5-0 Tuesday to approve a Letter of Agreement sent to Fields by Thomas Thrash, a Little Rock attorney representing the plaintiffs, in order to intervene and submit the commission's claim in the litigation.
Thrash told the Arkansas Democrat-Gazette in May that the lawsuit could likely affect all of the state's 75 counties and that it is possible the damages can be calculated as far back as 1995.
Customers would pay for a hotel room through an online travel site, such as Hotels.com, but only pay the taxes on what the hotel received, not the full taxes paid by the customer, North Little Rock Assistant City Attorney Daniel McFadden told commissioners Tuesday.
For example, an online site may sell a hotel room through its website for $100, but pay the hotel company $50 for that room. The consumer pays the appropriate taxes on the $100, then half of the cost and half of the collected taxes go to the hotel. The hotel company then remits the taxes on the $50 it received.
But the online travel company hasn't been paying the taxes on the other $50 it made for the room rental, though it collected those taxes from the consumer.
The court directed the online travel companies to provide the transaction data for hotel room sales, and the damages will be calculated for free for the taxing entities, according to the court-ordered notice. The online travel companies will have 30 days from any entity's motion to intervene to produce the transaction data for all sales of hotel rooms in that particular city, the court notice said.
The commission also won't be responsible for any attorneys fees or expenses, according to the Letter of Agreement approved.
Until Jan. 1, North Little Rock charged a 3 percent lodging tax on overnight rentals for hotel and motel rooms, bed-and-breakfast inns, campgrounds and RV parks. As of Jan. 1, the lodging tax increased to 3.5 percent.
Metro on 07/18/2018