Do Cities Deserve More Hotel Taxes?

"Online travel companies are under legal assault throughout Georgia — and across the nation — as cities seek to recoup tax money they claim is rightfully theirs. The hotel and occupancy tax for Atlanta hotel and motel rooms, for example, is 7 percent. The tax, like others nationwide, was enacted into law as a way to generate money that could be used to promote tourism."

"According to court filings, the online companies contract with hotels and motels for a number of rooms at negotiated 'wholesale' rates. The online companies determine a markup and set the 'retail' rate the consumer will pay. The online companies accept credit-card payments for the room rate, plus taxes and services fees. They return the 'wholesale' rate, plus the estimated tax on that rate, to the hotel.

No hotel and occupancy tax is being paid on the difference between the wholesale rate and the retail rate, Bill Norwood, a lawyer for the city, said Monday.

But Kendrick Smith, a lawyer for the online companies, said that because the Internet-based firms do not buy or rent hotel rooms, they are not subject to the tax."