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Cabinet discusses whether online hotel bookers are skirting tax rules

TALLAHASSEE — The big-money battle between Florida counties and online hotel booking companies reached the apex of state government Tuesday, but there's still no solution in sight.

Only Chief Financial Officer Alex Sink expressed an urgency to resolve the long-running dispute.

For nearly a decade, online bookers such as Orbitz, Priceline and Expedia have successfully mined the Florida tourism market, buying blocks of hotel rooms and marking up the cost to consumers. But the booking firms pay sales and local tourism taxes on the wholesale price of the room, not the full price charged to consumers.

More than a dozen cities and counties, including Pinellas, have filed or are considering lawsuits, claiming the online booking industry refuses to pay hundreds of millions of dollars in taxes owed annually.

But online companies say they should not be required to pay tax on the full price of the room because they are providing a service that helps attract millions of taxpaying tourists to the state every year.

"The OTCs (online travel companies) are acting as an independent service provider who's ultimately engaged and paid by the consumer. They are a resource for the consumer," Richard Leavy, a New York lawyer representing Orbitz, told the Cabinet. "The tax as it currently exists should not be imposed."

Counties, strapped for tax revenues because of the real estate slump, say bookers use misleading billing to hide the room's true cost, while mom-and-pop hoteliers who rent rooms directly to visitors pay the full amount of tax owed. The counties' special tax counsel, Sarah Bleakley, described the bookers' billing practices as "very deceptive."

Sink, the only Democrat on the Cabinet and a candidate for governor, placed the issue on Tuesday's Cabinet agenda, saying a resolution has languished far too long.

"I'm just interested in fairness," Sink said. "I'm certainly not interested in seeing the online companies pocket our money, if that's the case. … I do believe our lawyers ought to figure out a plan of action."

The Department of Revenue, the enforcer the tax laws, has refused to say which side is right and has waited for clear direction from the Legislature, which has refused to act. "For a number of years, we have sort of stood on the sidelines," said the agency's executive director, Lisa Echeverri.

Gov. Charlie Crist, a Republican candidate for U.S. Senate, spoke last and characterized the effort to collect money from the online rentals as an additional tax on visitors.

"It would concern me if this panel moves in a direction of trying to add an additional burden or tax on those who want to travel to the Sunshine State," Crist said.

He then took a shot at counties for refusing to rein in spending. "We have tried to reduce the property tax burden on people in Florida and regrettably some, but not all — some counties — have then turned around and raised the millage on the backs of those people."

"Another opportunity to bash us," the counties' attorney, Bleakley, said afterward.

Attorney General Bill McCollum, a Republican candidate for governor, tried to clarify matters for Crist, noting that the disputed money is already being collected. "The question is whether they are collecting the tax already and keeping it," McCollum said. "Are they paying the taxes they should, or pocketing something they shouldn't?"

Revenue director Echeverri agreed: "Clearly, tax on transient rentals is not a new tax. … It's an existing tax," she said.

The latest lawsuit against the online companies is expected to be filed later this week by a consortium of six counties: Pinellas, Polk, Manatee, Lee, Collier and Leon.

Steve Bousquet can be reached at bousquet@sptimes.com or (850) 224-7263.

Cabinet discusses whether online hotel bookers are skirting tax rules 10/27/09 [Last modified: Tuesday, October 27, 2009 10:36pm]

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