FL TAX - Online Travel Companies Win at Florida Supreme Court

FL TAX – Online Travel Companies Win at Florida Supreme Court

The never-ending national battle between the various counties and the Online Travel Companies (OTC's) over the Tourist Development Tax came to an end in Florida last week. On June 11, 2015, the OTC's won at Florida's Supreme Court which finally put the issue to bed in Florida. Over the past few years this has been the in the spotlight from a Florida tax perspective and I have been blogging about this topic for a few years now. While it is does not come as a surprise, it still is certainly newsworthy that the issue is finally over unless there is some change in the legislature in the years to come.

By way of background, Florida counties are authorized to impose a local bed tax on hotel accommodations. Specifically, under section 125.0104, Florida Statutes ("F.S."), the Tourist Development Tax (a type of "bed tax") is due on the consideration paid for room occupancy within the county and a particular county may charge an additional amount in its discretion. The controversy at issue is whether the "consideration" the law speaks of is the total amount paid by the customer or the discounted amount charged to the OTC and passed through to the customer? The counties have successfully asserted in previous litigation that the "consideration" is the higher amount because that is what is charged to the customer for the room, whereas, the OTC's counters that they are mere "market facilitators" or "intermediaries" and the up-charge is for the OTC's services.

The issue can be more clearly explained using the following two examples:

Scenario 1: Suppose a customer books a room directly from a hotel for $100. At a typical 13% tax rate for various local taxes the customer pays $113. The hotel receives its $100 and the state collects $13 on the transaction. Of the $13 approximately half goes to the county under the Tourist Development Tax regime.

Scenario 2: Using the same example, an OTC purchases the same room from the hotel for $80. At a 13% rate, it pays tax of $10.40, for a total cost of $90.40. The OTC then charges the customer the same $100, which includes a reimbursement for the $10.40 in tax and a $9.60 profit. On virtually the same transaction the state and local government collects $10.40 instead of the $13

While the small difference on a per room basis seems insignificant, the issue has put millions of dollars in tax revenue in jeopardy for the counties. In this case, the Florida Supreme Court sought to decide the case once and for all.

Ultimately the court ruled in favor of the online travel companies. It ruled that the amount the hotel received from the room determined the tax, not the mark-up charged by the OTC. In so doing, the court relied heavily on the First DCA's ruling for the OTC's, which stated:

Orbitz never takes title to any rooms; does not buy rooms from hotels in advance of its transactions with its customers; never receives itself a leasehold interest in any rooms from the hotels that in turn Orbitz sublets or assigns to its customers; never obtains a present right to occupy any rooms for itself or its employees; is not penalized or financially harmed for failing to "rent, lease or let" any rooms; does not suffer any economic loss of any sort (other than the obvious lost income for failing to engage in a business transaction) if it does not "rent, lease, or let" a room; does not select or control in any fashion which precise rooms are rented by the hotels to Orbitz's customers; does not register guests or establish check-in and check-out times and procedures; does not set the rules and procedures otherwise governing stays on the hotel's property as to matters such as available amenities and their uses, children, pets, parking and the ilk; and has no power to dispossess a hotel customer in favor of an Orbitz-referred customer in the event the hotel accepts too many reservations and thereby overbooks.

The 5-2 opinion marks an important victory for the OTC's because the law is now settled here in Florida. This will hopefully provide guidance for this previously unanswered question of law. Particularly in such a heavy tourism state, the tax implications are enormous state wide. Until the Legislature acts, the only thing certain is that the counties will find a new way to aggressively pursue local taxes.

the Law Offices of Moffa, Sutton, & Donnini, P.A. is a law firm dedicated to Florida tax controversy. With offices in Fort Lauderdale, Tampa, & Tallahassee, we defend taxpayers against the overly aggressive tactics used by Florida tax authorities. We handle matters at all stages from audit and protests through litigation. We also handle collection issues, revocation hearings, as well as criminal investigations. If your company or your client's company is having a problem with Florida taxes, then please take advantage of our free initial consultation.


Alachua County v. Expedia, Inc., Fla. 1st DCA CASE NO. 1D12-2421 (Decided February 28, 2013).

Alachua County, et al., vs. Expedia, Inc., et al., Fla S. Ct. No. SC13-838 (Decided June 11, 2015).


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