The facts and arguments in this appeal are virtually identical to those in Expedia v. City of Columbus , Ga. Case No. S09A0567, decided June 15, 2009. Like its sister company, Expedia, Hotels.com, LP, is an online travel company which books hotel rooms and makes other travel arrangements for customers who access its services over the internet. Hotels.com’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.” Hotels.com then advertises and offers the rooms for sale to the public on its website. When a customer purchases a hotel room from Hotels.com, Hotels.com charges the customer an amount greater than the wholesale rate. This marked-up amount is the “room rate.” Using contracts substantially the same as those used by Expedia, Hotels.com provides in its contracts with hotels that it “shall collect all applicable taxes from its customers.” Thus, like Expedia, at the time a reservation is made, Hotels.com notifies the customer that it is collecting money for “taxes and fees” but it does not disclose to the customer how much of the payment is for taxes and how much is for fees. After the customer completes his stay, the hotel sends Hotels.com an invoice for the wholesale rate and the occupancy tax based on the wholesale rate. Hotels.com then remits the payment to the hotel which pays the tax to the municipal tax authority. Because the occupancy tax amount is calculated based on the wholesale rate and not the room rate, Hotels.com retains whatever monies it has collected over the amount of the remittance to the hotel.
In June 2006, the City of Columbus filed a complaint against Hotels.com seeking injunctive relief and a declaratory judgment to require Hotels.com to remit occupancy or excise taxes related to hotel stays. See OCGA § 48-13-50 et seq. municipalities may impose excise tax “at the applicable rate on the lodging charges actually collected”; Columbus Code § 19-110 et seq. Hotel-Motel Occupancy Excise Tax imposing tax of 7 percent of the charge to the public upon the furnishing for value of any room or lodging. The complaint alleged Hotels.com had a duty to remit to Columbus occupancy or excise taxes based on the room rate or “charge to the public” rather than the negotiated wholesale rate. Thereafter, Columbus sent a notice of assessment and collection to Hotels.com, which Hotels.com rejected. Hotels.com filed a motion for summary judgment for failure to exhaust administrative remedies and Columbus moved for injunctive relief. Because Expedia and Hotels.com are under common ownership and share the same business model, the parties agreed that evidence adduced in the similar lawsuit filed by Columbus against Expedia would be admissible in this matter. After reviewing the evidence, the trial court issued a permanent injunction against Hotels.com and ordered it to account for, collect and remit occupancy taxes based on the retail room rate in its merchant model transactions. Hotels.com appealed.
