Louisiana Appeals Court Upholds Ruling on Hotel Taxes Related to Expedia and Affiliates

On April 17,2024, the State of Louisiana Court of Appeals for the First Circuit upheld a trial court’s ruling in the case Kimberly L. Robinson et al. v. Priceline.com Inc. et al, finding that Priceline, Expedia, and similarly occupied defendants are not responsible for remitting sales tax on the full price of hotel rentals facilitated through the defendants’ respective platforms.

The majority held that Expedia does not meet the definition of a hotel or of a dealer under Louisiana law, despite the State’s arguments otherwise. The State first claimed that Expedia should be charged for the retail hotel room rate charged to clients, not the wholesale rate they negotiate with hotel. The Appeals Court noted that in the recent case Lopinto v. Expedia Inc., only the services defined as “sales of services” would apply, and though the furnishing of hotel rooms is subject to that tax, the statute in question does not apply to Expedia, due to their actual business model. Since Louisiana law clearly delineates that a hotel is an establishment with sleeping rooms, cottages, or cabins at a particular location, and because Expedia does not own or operate any such properties in Louisiana, Expedia cannot be considered a hotel and thus they do not furnish the lodgings.

The State next argued if Expedia could not be considered a hotel, they should be considered a dealer, noting filings Expedia made with the SEC claiming their function as “buying the inventory and selling it to the customer” which was updated in 2005 to include that Expedia “facilitate[d] the booking of hotel rooms”, both of which the State claimed create a sale between customers and Expedia. However, the Court rejected this claim as well, finding that the service Expedia is providing is enabling hotels to reach and accommodate more clients, leaving the hotels themselves as the parties actually providing the taxable service (the furnishing of lodgings). The State additionally claimed Expedia had acted as a dealer by collecting tax. This is based on the prepaid option, where potential hotel guests can pay for their rooms in advance through Expedia’s website. It is noted on the website when picking between the prepaid option and the pay upon check in option, taxes may be different based on selection. The claim this tax collection (and subsequent transmission of collected funds and tax) made Expedia a dealer was refuted by the findings of the Louisiana Supreme Court in the case Normand v. Wal-Mart.com, which found that “the fact that an intermediary transmits funds to sellers does not… cause the intermediary to assume the sellers’ legal obligation to collect taxes.” Though Expedia facilitated the booking, the hotel was the actual seller of the hotel room, and the tax was to be charged on the rate the hotel sold the room for.

This case establishes both the importance of definitions under the law and the importance of understanding exactly what a potential taxpayer is buying or selling. Louisiana law specifically defines what a “hotel” is and what taxable services are, both of which came into this ruling and were applied when determining what taxes Expedia would or would not be liable for. The judgment in this case also highlighted the judges’ reasoning of what Expedia was actually selling (in this case, the ability for hotels to reach new clients and provide an option for travelers who wish to pay in advance for rooms) to determine tax liability. It is of utmost importance taxpayers clearly delineate the primary services they are offering when possible, to help sort through any confusion or discrepancy which may arise. (Kimberly L. Robinson et al. v. Priceline.com Inc. et al., case number 2023-CA-0069, State of Louisiana Court of Appeal, First Circuit. Judgement dated April 17, 2024, Decision authored by Judge Allison H. Penzato and joined by Judge Hunter Green, Judge Mitchell R Theriot dissenting)

Posted on June 28, 2024