www.baltimoresun.com/news/maryland/bs-md-orbitz-case-dismissed-20131119,0,3412591.story

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Orbitz settles tax dispute with counties

Travelocity last booking company to remain in litigation

By Kevin Rector, The Baltimore Sun

9:05 PM EST, November 19, 2013

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Hotel-booking website Orbitz has reached a confidential settlement with Baltimore and Montgomery counties over claims it improperly avoided paying some taxes, according to court records and the company's attorney.

The deal dismisses Orbitz from a sprawling tax case in which the two counties and Baltimore City targeted a long list of online booking companies for more tax revenue in U.S. District Court.

Orbitz reached a confidential settlement with Baltimore in October 2012.

Previous settlements with other companies in the case have resulted in more tax revenue for Baltimore, though the details of the new agreement were not disclosed.

While jurisdictions collect taxes on bulk sales of discounted rooms from hotels to such booking companies, some officials have argued that the booking companies should pay occupancy taxes instead on the larger prices they charge customers for rooms.

The companies, represented by the Travel Technology Association, have argued they do not own the rooms and should not pay occupancy taxes or taxes on service fees associated with their sales.

In suing, the Maryland jurisdictions were following a nationwide trend of revenue-hungry governments with tight budgets eyeing online businesses as a new source of revenue.

U.S. District Judge Marvin Garbis ordered the counties' case against Orbitz dismissed with prejudice on Monday.

According to the order, the dismissal was "with respect to any claims relating to conduct occurring up to and through June 30, 2014, with each party to bear its own respective costs and attorney's fees."

Attorney J. Stephen Simms, who represented Orbitz, said Tuesday he could not comment on the details of the Orbitz agreement but that jurisdictions seeking additional taxes from online hotel-booking companies is an example "of how municipalities have to go look for revenue wherever they can find it."

"Whether that's right, " he added, "is another question."

The Orbitz settlement follows Baltimore settlements with Priceline and Expedia in past years, resulting in millions of dollars in new tax revenue for the city, and leaves Travelocity as the only defendant remaining in the case, said Simms, who represents all of the companies.

Travelocity still faces litigation from both Baltimore and Montgomery counties and Baltimore City, Simms said.

The court linked the cases filed by the city and the counties against the travel companies in 2011.

Michael Field, an attorney for Baltimore County, declined to comment on the Orbitz settlement, saying the county is "still in the middle of the litigation."

Montgomery County officials directed questions to their private counsel in the case, Atlanta-based attorney John Crongeyer, who did not respond to a request for comment on Tuesday.

Crongeyer, whose firm approaches jurisdictions and offers to work on contingency in hopes it can secure big settlements, has in the past estimated that the booking companies were withholding tens of millions in taxes from Maryland municipalities.

Similar cases have netted some cities big tax payments but left others mired in long legal disputes.

Robin Reck, with the Travel Technology Association, said judges have sided with the companies in dozens of cases around the country.

The companies "facilitate the booking of hotel rooms, ultimately increasing the volume of hotel bookings and boosting a locale's tourism and travel industry," and they shouldn't be targeted under steeper tax levies, Reck said in a statement.

krector@baltsun.com

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