Tax & Accounting Blog

Wyoming Supreme Court: Online Travel Companies Can’t Name Their Price When it Comes to Sales Tax

Blog, Indirect Tax, ONESOURCE, Sales Tax Calculation May 2, 2014

In the recent case of LP et al, v. Wyoming Department of Revenue, the Wyoming Supreme Court held that on-line travel companies must increase the amount of sales taxes that they remit to the state of Wyoming. This case is the most recent in a line of rulings holding that on-line travel companies must remit taxes based, not on the price that they reserve rooms for, but instead on the price that they resell those rooms to consumers.

Travelocity, and the other on-line travel companies named in the case, offer hotel rooms to the public via their websites. LP et al, v. Wyoming Department of Revenue, 2014 WY. 43 (04/03/2014) (slip op. at 4). The companies did not own any hotels in the state of Wyoming, and did not own any property in the state of Wyoming. Id. Instead, the on-line travel companies enter into agreements with representatives of the hotels to reserve a number of rooms at a fixed rate. Id. The on-line travel companies then rents those rooms to consumers by collecting the full amount of the room fee and the tax on that room, and by adding on a “service” or “facilitation” fee. Id at 5. The on-line travel companies then remit the room rental fee and the tax on that fee to the hotels (who then remit it to the state).  Id.  Under this model, the customer booking a hotel via an on-line travle company has no knowledge of the amount paid by the on-line travel company, and the hotels have no knowldege of the amount paid by the customer.  Id.

The Court discussed the myriad of approaches other courts had taken in reviewing these on-line travel company cases, and held that the on-line travel companies should remit tax to the state of Wyoming based on the amount the customer pays for the room inclusive of all taxes and fees. Id. at 27. Among the reasons the Court gave was that the on-line companies were in fact vendors of lodging services when renting those rooms to consumers. Id at 12-13. The Court further reasoned that the purported “service” or “facilitation” fee was not a fee separate or apart from the cost of renting the room itself. Customers could freely access the site without incurring a service fee, but were only required to pay a fee for actually booking a room. Id.  In addition to finding that the full price of the bookings were subject to tax, the Court also found that the on-line companies had nexus with the state of Wyoming, despite having no physical presence in the state. The court cited other decisions and found that the on-line companies, “stepped into the shoes of the hotels as the collecting agent for hotel occupancy taxes.” Id, citing Columbus, Ga v. Expedia, Inc., No. SU-06-CV-1794-7, 2008 WL 4448801 (Ga. Super. Ct. Sept. 22, 2008). The Court also found that the law did not violate the Dormant Commerce Clause, the Equal Protection Clause, or the Due Process clauses of the United States Constitution.

As a result, the state of Wyoming can expect an increase in the receipts from hotel and motel stays booked via on-line travel companies…that is until and unless the United States Supreme Court says otherwise.