X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.

Expedia, Inc. is an online travel company OTC which books hotel rooms and makes other travel arrangements for customers who access its services over the internet. Expedia’s main business model, known as the “merchant model,” is to contract with hotels for the right to broker or facilitate the reservation of hotel rooms at a discount or “wholesale rate.” Expedia then advertises and offers the rooms for sale to the public on its website. When a customer purchases a hotel room reservation from Expedia, Expedia charges the customer an amount that is greater than the wholesale rate. This “marked-up” amount is the “room rate.” Although Expedia states that the room rate is a combination of the wholesale rate and its facilitation fee, it does not disclose to the public which portion of the “room rate” is for its facilitation fee. Expedia also does not disclose to the hotel the amount of the room rate charged to Expedia’s customers.1 Expedia provides in its contracts with hotels that it “shall collect all applicable taxes from its customers.” Thus, at the time a reservation is made, Expedia notifies the customer that it is collecting a certain amount of money for “taxes and service fees.” Expedia does not disclose to the customer which portion of the “taxes and service fees” is for “taxes” or which portion is for “service fees.” At the end of the transaction, the customer pays Expedia directly in a total amount that equals the “room rate” plus “taxes and service fees.”

Upon checking into the hotel, the customer does not pay the hotel any money for the room or any fees or taxes, but only provides a credit card for incidentals. After the customer has completed his hotel stay, the hotel is required to send Expedia an invoice for the wholesale rate and the occupancy taxes based on the wholesale rate. Upon receipt of the invoice, Expedia remits the payment to the hotel which pays the taxes to the municipal tax authority. Under Expedia’s merchant model method of conducting business, the hotel occupancy tax amount is calculated based on the wholesale rate Expedia negotiates with hotels. Expedia retains whatever it has collected over the amount of the remittance to the hotel. If the hotel fails to submit an invoice to Expedia in the time period designated by contract, then Expedia retains all monies collected from the customer, including any money purportedly collected for taxes.

 
Reprints & Licensing
Mentioned in a Law.com story?

License our industry-leading legal content to extend your thought leadership and build your brand.

More From ALM

With this subscription you will receive unlimited access to high quality, online, on-demand premium content from well-respected faculty in the legal industry. This is perfect for attorneys licensed in multiple jurisdictions or for attorneys that have fulfilled their CLE requirement but need to access resourceful information for their practice areas.
View Now
Our Team Account subscription service is for legal teams of four or more attorneys. Each attorney is granted unlimited access to high quality, on-demand premium content from well-respected faculty in the legal industry along with administrative access to easily manage CLE for the entire team.
View Now
Gain access to some of the most knowledgeable and experienced attorneys with our 2 bundle options! Our Compliance bundles are curated by CLE Counselors and include current legal topics and challenges within the industry. Our second option allows you to build your bundle and strategically select the content that pertains to your needs. Both options are priced the same.
View Now
May 01, 2025
Atlanta, GA

The Daily Report is honoring those attorneys and judges who have made a remarkable difference in the legal profession.


Learn More
December 11, 2024
Las Vegas, NV

This event shines a spotlight on how individuals and firms are changing the investment advisory industry where it matters most.


Learn More
February 24, 2025 - February 26, 2025
Las Vegas, NV

This conference aims to help insurers and litigators better manage complex claims and litigation.


Learn More

McCarter and English s Chambers-ranked Government Contracts group is seeking an experienced, diligent, and proactive government contracts as...


Apply Now ›

McCarter & English, LLP is actively seeking a litigation associate for its office located in Hartford, CT. One to three years of experie...


Apply Now ›

Borteck & Czapek, P.C., based in Florham Park, is a boutique estates and trusts law firm specializing in estate planning and administrat...


Apply Now ›