ATLANTA — A federal judge has ruled that Georgia cities and counties may proceed with a class-action lawsuit that claims major online hotel booking Web sites owe “tens of millions” of dollars in unpaid hotel taxes.

U.S. District Court Judge Harold Murphy on Tuesday rejected a request by the 18 travel booking sites — including well-known sites such as Expedia, Priceline and Travelocity — to dismiss the case. Murphy threw out a parallel claim, saying local governments seeking sales and use taxes from the online companies must instead seek redress from the from the state Revenue Commissioner.

In November, the lawsuit was filed on behalf of more than 500 Georgia cities and counties. Plaintiffs included metro Atlanta counties such as Cobb, DeKalb, Fulton and Gwinnett and cities such as Rome, Dalton and Warner Robins. The local governments claim the Web sites were not paying the proper amount of hotel taxes when customers purchase hotel rooms through the sites.

“We’re very pleased with the ruling — it’s a very big win for Georgia’s local governments,” said John Crongeyer, an attorney for the local governments. He said “tens of millions” of dollars in unpaid tax money is at stake.

Atlanta also is seeking millions of dollars in hotel tax money from the travel booking sites, through a separate lawsuit filed in March. Both lawsuits claim the travel sites buy room rentals from hotels at a discounted rate and then mark them up for resale to customers.

The lawsuits allege that although customers pay the Web sites tax based on the full rental price, the online travel sites remit taxes based on the discount rate paid to the local hotel — and keep the difference.

But Art Sackler, executive director of the Interactive Travel Services Association said what’s being kept is just a service fee for acting as the intermediary between hotels and customers. He said the travel sites don’t purchase rooms.

Instead, he said hotels negotiate with online companies, which market hotel rooms on their Web sites for the hotel’s charge plus a service fee. Taxes based on the negotiated rate are collected. But the service fees shouldn’t be subject to hotel taxes, he said.

“What these online guys do is enable these transactions. They are not by any definition a hotel operator because the service they provide” is the travel Web site that allows customers to book hotel rooms, Sackler said. “For the hotelier, ... they get instant access to millions and millions of consumers who otherwise don’t know they exist.”

The association previously said the service fees are not kept separate from the total online bill for a hotel room because competitors would then know the exact price negotiated between the online company and a hotelier.

Similar lawsuits have been filed in other states, including California, North Carolina and Ohio.


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