The Supreme Court of Florida recently clarified whether the taxable amount charged to a hotel patron is based on the hotel rate established by an online travel company (OTC) such as Expedia, Inc. or the amount actually paid to the hotel from the patron. Alachua County v. Expedia, Inc., No. SC13-838 (Fla. June 11, 2015), on appeal from Alachua County v. Expedia, Inc., 110 So. 3d 941 (Fla. 1st DCA 2013).
In the published opinion, Justice James E. C. Perry explained that the legislative intent of the Tourist Development Tax (the “TDT”), Section 125.0104, Fla. Stat. (2014), makes clear that the taxable amount under the TDT is limited to “the monetary amount a hotel actually sets and receives for the transient rental of hotel rooms in Florida.” Any “markup charges and services fees” paid by the consumer to the OTC are not subject to the TDT. The “markup charges” are typically the amounts retained by the OTC by either “merchant model” or “agency model” transactions. Merchant model transactions are described as those instances where the consumer pays the OTC a fixed amount and the OTC remits an agreed upon amount of that payment to the hotel. Under the agency model, the consumer pays the hotel the agreed upon rate and the hotel remits a portion of that consumer payment to the OTC as a commission. Under either model, the Court determined that “the tax required by the TDT will be based solely upon the transient rental rate of a room, that is, the price of possession established by the hotel for which it is in the business of selling.” It is irrelevant which business receives the consumer’s payment for the hotel room reservation.
In her concurring opinion, Justice Barbara J. Pariente explained the rationale for the dispute:
Undoubtedly, the counties would like to receive the tax income resulting from this untapped stream of revenue, and apparently the hotels would prefer for the OTCs to pay a higher tax to help level any competitive disadvantage. After all, the markup amounts received by the OTCs are, in general, a significant percentage of the total amount paid by hotel patrons who book hotel rooms through the OTCs—ranging between twenty-five and forty-five percent, according to the DOR’s 2009 estimates. On the other hand, these markups are the result of business arrangements willingly entered into by the hotels.
As she noted, “[t]hese types of policy concerns are quintessentially within the legislative domain and could and should be addressed by the Legislature.” And, given the number of amicus curiae briefs filed in the case by interested parties on both sides of the dispute, it won’t be long before the issue is brought before the Florida Legislature for consideration.