MarketWatch reports -- and I have now confirmed -- that major online travel agencies, plus ASTA and the U.S. Tour Operators Association, filed a lawsuit against New York City over its new law that holds intermediaries responsible for the tax on the retail rate when they sell hotel rooms using the merchant model.
This marks the first time that tour operators have taken sides in the OTAs' national battle with cities and counties about the hotel tax issue.
The law, which went into effect in September 2009, says "room remarketers" are responsible for the full rent, meaning they would remit tax on the net rate to the hotels, as OTAs customarily do, and then pay tax on the remaining rent, including service fees, directly to the NYC tax commissioner.
And the law defines rent thusly: "The consideration received for occupancy valued in money, whether received in money or otherwise, including all receipts, cash, credits, and property or services of any kind or nature, including any service and/or booking fees that are a condition of occupancy, and also any amount for which credit is allowed by the operator or room remarketer to the occupant, without any deduction therefrom whatsoever."
The travel agency association, ASTA, has long sided with the OTAs in arguing that the dozens of suits by cities and and counties suits against the OTAs across the U.S. are unjust because intermediaries are agents of hotels and don't control room inventory.
Tour operators have so far not been targeted in the lawsuits, but many people, including some tax commissioners, have pointed out that their wholesale model works in a similar manner to the OTAs' merchant model.
The suit against the NYC tax law marks the first time that the USTOA actively has become involved in the fray.
The NYC law is a major challenge for travel agents and tour operators because of the size of the city's hotel business and New York's place as a tourism destination.
MarketWatch says the OTAs involved in the suit include Expedia, hotels.com, Orbitz Worldwide, Priceline and Travelocity, and that the plaintiffs allege that the new NYC tax is "unconstitutional and illegal" and that the city "has no inherent power to tax."
UPDATE: Here are a few more details about the suit, a copy of which I now have.
The suit was filed Dec. 21, 2009, in New York state Supreme Court.
Here are the plaintiffs:
EXPEDIA, INC., HOTELS.COM, L.P., HOTWIRE, INC., ORBITZ, LLC, TRIP NETWORK, INC. (D/B/A CHEAPTICKETS.COM), TRAVELOCITY.COM LP, PRICELINE.COM INCORPORATED, AMERICAN SOCIETY OF TRAVEL AGENTS, INC., and UNITED STATES TOUR OPERATORS ASSOCIATION,
And, the defendants are:
THE CITY OF NEW YORK DEPARTMENT OF FINANCE and THE CITY OF NEW YORK.
The defendants seek a judgment that the new NYC law is not constitutional because the state -- and not the city -- has the authority to impose taxes. In addition, the defendants argue that even if the court finds the new law is constitutional, then it doesn't apply to them because they are intermediaries and don't control hotel inventory.