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FL TAX LITIGATION ALERT - FL LEGISLATURE SUES ONLINE TRAVEL COMPANIES

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FL tax controversy ALERT – FL Legislature Sues ONLINE TRAVEL COMPANIES

In early December 2011, I blogged about controversy involving Online Travel Companies (OTC's) such as Expedia, Travelocity, and Orbitz. Who could have ever guessed that the counties going after tourist development tax and sales tax would have led to a case in which President Nixon's impeachment cases would be cited? In an interesting turn events that is exactly what happened early today, March 29, 2012, in The Florida House of Representatives v. Expedia, Inc et. al., a 1st DCA opinion. The issue in the case is whether members of the Florida House of Representatives are entitled to a legislative privilege claim as a ground for refusing to testify.

For purposes of very general background information, the principle of legislative privilege dates back to the English common law that existed long before our country was founded. Upon our country's creation, our founding fathers incorporated this principle into our Constitution. Legislative immunity is a legal concept that prevents a member of the legislature from having to appear in court for a civil case to testify about anything he or she said during his duties as a legislator. Specifically, the "Speech and Debate Clause" of the Constitution states that "in all cases, except Treason, Felony, or Breach of the Peace, [Legislators shall] be privileged from Arrest during their Attendance at the Session of their respective Houses, and in going to and returning from the same; and for any Speech or Debate in either Houses, they shall not be questioned in any other Place." The purpose of the immunity is fairly obvious and exists to allow the government to carry out its duties and speak freely without fear of having to answer for their thoughts in court.

With that thought in mind, this specific case was borne from tax cases that were filed by Broward and Osceola County against Expedia, Orbitz, Travelocity, Priceline, Hotwire, and other OTCs. Those cases were settled and blogged about on our website which can be found [OTC blogs here and settlements if you want]. As I previously wrote, the crux of the issue is whether sales tax, bed tax, and/or other occupancy type taxes are due on the OTC's reduced purchase price for the rental of hotel rooms or if the tax base is the increased price charged to the end-user.

Also, as previously discussed, the type of controversy has been a hot-topic throughout the county. In a related Georgia case, Expedia was forced to produce several confidential documents to the opposing side. At some later point, a lawyer representing Broward County received the "confidential" documents and unsuccessfully attempted to use the documents against Expedia in a case for underpaid tourist development taxes in Broward County.

Amidst the controversy, the Florida Legislature has been attempting to enact a law to settle the dilemma as to what amount the tax was actually due on. As it turns out, the potential law reportedly would be in favor for the OTC's including Expedia, Orbitz, and Travelocity. As the law was being considered, Rick Kriseman, a House Representative, opposed the law and was provided a copy of the "confidential" document from Broward County. The "confidential" document (hopefully you sense my sarcasm by this point) was of course passed along to the entire House and members of the press. Just to reiterate, the documents were given to an attorney in Georgia under a protective order, mysteriously received by an attorney for Broward County, passed along to the Florida Legislature, shared with the entire legislature, and coincidentally made available to the press.

Expedia, who was obviously ecstatic by the news, attempted to haul Rep. Kriseman into court to determine how the Representative obtained the documents because such information was pertinent to Expedia's controversy in Broward County. The trial court ruled that hauling the Representative into court for this limited purpose was permissible, however, the House of Representatives jumped in to prevent the trial from moving forward by asserting legislative privilege.

The first DCA went through a lengthy but thorough history of the legislative privilege in its opinion and interestingly pointed out that Florida has never ruled on whether a member of the state legislature is afforded such a privilege. The court ultimately reasoned that based on a long history of case law and section 2.01, Florida Statutes, which states that the common laws of England, which are general in nature, are declared to be applicable in Florida. Further, the Florida Constitution provides the separation of powers, meaning that the judicial branch cannot encroach on the powers of the legislature and the Supreme Court stated that this idea is "the cornerstone of American democracy." Bush v. Schiavo, 885 So. 2d 321, 329 (Fla. 2001).

Applying the law to this case, the 1st DCA ruled that the Representative did not have to testify because the "confidential" documents were part of the course of debate within the House in connection with a pending law. The court also stated that this idea is not absolute and could not be asserted to withhold evidence of a crime. Citing U.S. v. Nixon, the court reminded us that such an absolute privilege is not available to the President of the United States, so it certainly doesn't apply to a Florida legislator.

While Expedia and the other OTC's were unsuccessful in this particular case, it was successful on shedding some light on some morally questionable behavior by state officials of both Florida and Georgia. It was also successful in providing more attention to a tax provision that most were previously uninterested in following. Hopefully, this case marks the beginning of what is needed by our Legislature here in Florida—guidance for taxpayers in an ever evolving complex internet marketplace.

THE FLORIDA HOUSE OF REPRESENTATIVES and DAVID FLINTON vs EXPEDIA, INC.; ORBITZ, LLC; INTERNETWORK PUBLISHING CORP., DBA LOGING.COM; TRAVELOCITY.COM, LLP, PRICELINE.COM, INC.; TRAVEL WEB, LLC; HOTWIRE, INC.; HOTELS.COM, L.P.; BROAWARD COUNTY, FLORIDA; AND FLORIDA DEPARTMENT OF REVENUE, Case No. 1D11-6545 (FL 1st DCA, March 29, 2012)