In 2006, Appellant City of Atlanta filed suit against Appellee Hotels.com, L.P., and several other online travel companies “OTCs”1 seeking recovery for the OTCs’ alleged liability for unpaid hotel occupancy taxes. Following the trial court’s dismissal of the City’s action, the Court of Appeals affirmed based on lack of subject matter jurisdiction due to the City’s failure to exhaust available administrative remedies. City of Atlanta v. Hotels.com , 288 Ga. App. 391 654 SE2d 166 2007. We granted certiorari to address whether the Court of Appeals erred in holding 1 that the relevant tax statutes and ordinance require exhaustion of administrative remedies as a mandatory prerequisite to initiation of judicial proceedings; and 2 that no exception to the exhaustion doctrine applies under the circumstances presented. For the reasons set forth below, we find that the decisions below must be vacated to allow for the adjudication of the City’s claim for declaratory judgment as to the threshold issue regarding the applicability of the tax statutes and ordinance. As explained by the Court of Appeals, So that counties and cities can raise revenue for tourism promotion and the provision of other local government services, the General Assembly enacted OCGA § 48-13-50 et seq. the “Enabling Statutes”, authorizing local governments to levy and collect an excise tax pertaining to the furnishing of hotel rooms, lodgings, and accommodations. See OCGA § § 48-13-50; 48-13-51 a 1 A. The hotel occupancy tax is imposed upon “any person or legal entity licensed by or required to pay a business or occupation tax to the governing authority imposing the tax for operating a hotel or similar facility.” OCGA § 48-13-51 a 1 B i. The tax also is imposed upon hotel guests, who must pay the tax “to the person or entity providing the room, lodging, or accommodation.” OCGA § 48-13-51 a 1 B ii. The person or entity who collects the tax from the hotel guest then must “remit the tax to the governing authority imposing the tax.” Id. The failure to collect or remit the tax is subject to civil and criminal penalties. OCGA § § 48-13-58; 48-13-59. Under the Enabling Statutes, counties and cities that choose to impose the hotel occupancy tax are authorized to devise “the rate of taxation, the manner of imposition, payment, and collection of the tax, and all other procedures related to the tax,” unless otherwise specifically provided for in the Enabling Statutes. OCGA § 48-13-53. Pursuant to this authorization, the City of Atlanta enacted its Hotel or Motel Occupancy Tax Ordinance, § 146-76 et seq., which imposes “a tax of seven percent of the rent for every occupancy of a guestroom in a hotel in the city.” City of Atlanta Code of Ordinances the “City Code” § 146-79. City of Atlanta , supra, 288 Ga. App. at 391-392.
The City alleges that the OTCs, which operate as online retailers of hotel rooms and other travel-related products and services, are subject to Atlanta’s hotel occupancy tax. Specifically, the City asserts that the OTCs contract with hotel companies to “purchase” blocks of rooms at a wholesale rate and subsequently “resell” them to consumers at a marked-up retail rate, keeping the difference as profit. The City further asserts that, after reselling the rooms, the OTCs forward to the hotel companies amounts intended to cover the hotel occupancy tax on the rooms sold, calculated on the wholesale price rather than the higher retail price; the hotels then remit to the City the taxes on their rooms sold. It is undisputed that the OTCs do not directly remit any hotel occupancy taxes to the City. Indeed, the crux of their position in this and the “plethora of similar lawsuits across the country,” Orange County v. Expedia, Inc. , 985 So2d 622, 630 Fla. Dist. Ct. App. 2008, is that, because they do not physically operate any hotels, they are not subject to the hotel occupancy tax.
