Tax lawsuit against Expedia and other online travel agents is tossed out by judge

PHILADELPHIA — A judge tossed out a lawsuit filed against 17 online travel services by the city, which contended the businesses shortchanged the city government on its 7 percent hotel occupancy tax.

Common Pleas Judge Howland W. Abramson ruled that the city should seek assistance from its Tax Review Board if it believes the online travel brokers owe more money.

"This court is troubled by the fact that it does not appear that the city has ever performed an audit, provided notice or attempted to collect the tax from defendants, other than by filing the instant lawsuit," Abramson wrote. "This court is not in the business of original tax collections, nor should it be."

The judge did not address whether the case had merit, only that his court was not the appropriate forum.

Web-based travel agencies such as Expedia, Travelocity and Orbitz negotiate room discounts from hotels and then sell the rooms at a markup to consumers. The agencies typically only pay hotel taxes on the wholesale price, meaning the tax is only applied to part of the actual fee paid by consumers.

San Antonio, Los Angeles, San Diego, Atlanta and Chicago have filed similar suits against the online travel clearinghouses, claiming they have failed to pay millions of dollars in hotel taxes.

City solicitor Romulo L. Diaz Jr. said his office is reviewing the opinion and will decide whether to appeal the ruling.