Litigation Ongoing against Online Travel Companies for Hotel Occupancy Taxes

Transcription

1 SPECIAL REPORT Feb No. 230 Litigation Ongoing against Online Travel Companies for Hotel Occupancy Taxes By Joseph Henchman Vice President, Legal & State Projects Key Findings: State and local officials in 34 states and the District of Columbia have filed lawsuits against online travel companies (OTCs), seeking to apply hotel occupancy taxes to OTC services. OTCs facilitate booking transactions between consumers and hotels, and is imposed on the amount received by the hotel from the consumer. The lawsuits seek to also apply on the amount kept by the OTC as a service fee. Courts in 23 states have concluded that OTC services are not subject to hotel occupancy taxes, including three federal courts of appeal, while courts in six states have ruled otherwise. Most states exempt services from their sales tax but seek to subject OTC services to the higher hotel occupancy tax. The OTC litigation trend also raises concerns about administrative re-casting of old tax statutes to new situations not meant to be included, about the role of private contingency-fee lawyers in pursuing government tax claims, and whether ambiguous tax statutes should be resolved in favor of government or taxpayers. Congressional pre-emption of a category of state taxation is justified if states are imposing a discriminatory and excessive burden on interstate commerce. The Tax Foundation is a 501(c)(3) non-partisan, non-profit research institution founded in 1937 to educate the public on tax policy. Based in Washington, DC, our economic and policy analysis is guided by the principles of sound tax policy: simplicity, neutrality, transparency, and stability Tax Foundation Distributed under Creative Commons CC-BY-NC 4.0 Editor, Melodie Bowler Designer, Dan Carvajal Tax Foundation 1325 G Street, NW, Suite 950 Washington, DC taxfoundation.org

2 2 Over the past decade, state and local governments in 34 states, the District of Columbia, and Puerto Rico have filed 92 lawsuits against online travel companies (OTCs) like Expedia, Hotels. com, Orbitz, Priceline, and Travelocity. Travelers use these OTC websites to search for, compare, and book hotel rooms (among other things). When booking, travelers pay one unified charge to the OTC, most of which is forwarded to the hotel as payment for the accommodation, but some of which is kept by the OTC as a facilitation or service charge. 1 Hotel taxes (sometimes called transient occupancy taxes or accommodation taxes) are remitted on the amount paid by the consumer and forwarded to the hotel by the OTC. The lawsuits generally center on whether should also be collected on the amount paid by the consumer and not forwarded to the hotel but instead retained by the OTC as a facilitation or service charge (sometimes called a commission, markup, or difference between retail and wholesale rates). For example, assume the hotel and the OTC agree to a contract whereby the hotel will receive $70 a night for any OTC-facilitated rentals of the normally $100-a-night room. Assume the rate is 15 percent. (Hotels agree to such contracts because they reach a market through the OTC that they would not otherwise reach. OTCs do not own rooms, operate hotels, or control inventory themselves.) If a traveler books the room at $90-a-night inclusive of taxes and fees, $70 is forwarded to the hotel, $10.50 (15 percent of $70) is forwarded to the hotel to pay es to the government, and the remaining $9.50 is retained by the OTC as its service fee on the transaction. A typical lawsuit argues that should also be paid on this amount. 2 Put another way, the question is whether hotel occupancy taxes should be calculated based on (1) just the amount received by the hotel from the consumer via the OTC, or (2) the amount the consumer pays when arranging the hotel stay, regardless of to whom it is paid. 1 This merchant model contrasts with the historical agent model, whereby the hotel separately pays compensation to its reservations agent or to a travel agent. 2 This is the amount at issue when some claim that OTCs are collecting taxes but not remitting them. The claim begs the argument over whether the amount kept by the OTCs is subject to or not. The vast majority of courts have rejected this claim as specious, although courts in Georgia and South Carolina found it persuasive. Some policymakers have focused their efforts on increasing consumer transparency regarding amounts paid in taxes.

3 3 Of the 92 lawsuits, 49 have reached a decision on the merits: Thirty-nine cases in 23 states have concluded that OTC services are not taxable under hotel occupancy taxes. 3 Appeals are pending in five of these cases in three states (the Phoenix, consolidated California, and Denver cases). The courts have widely rejected claims that OTCs take title to hotel rooms, that OTCs act as wholesalers, that OTCs collect taxes but refuse to remit them, or that hotel occupancy statutes should be administratively or judicially expanded to include OTC services to prevent revenue losses. Key recent cases include rulings by three federal circuit courts of appeals (the Fourth, Sixth, and Eleventh) (finding that OTC services are exempt from es), the Florida Supreme Court in 2015 (same), the Hawaii Supreme Court in 2015 (finding OTC services are exempt from hotel taxes but subject to the state s general tax on services), and the Montana Supreme Court in 2015 (same). Additionally, the North Carolina Court of Appeals reached a similar decision in the Wake County case that the state supreme court declined to review. Ten cases in six states and the District of Columbia have concluded that OTC services are taxable under hotel occupancy taxes. 4 In all but three of these cases, the dispositive factor was that the statute clearly imposed on amounts paid by the consumer, whether to the hotel or to others. The remaining three cases turned on the court s conclusion that OTCs control hotels; in one of these cases (San Antonio), an appeal is likely. 3 See, e.g., Alachua County v. Expedia, 175 So.3d 730 (Fla. 2015); Leon County v. Expedia, 128 So.3d 81 (Fla. Dist. Ct. App. 2013), rev. denied 2015 WL (Fla. Dec. 3, 2015); Expedia v. Broward County, 135 So.3d. 415 (Fla. Dist. Ct. App. 2014), rev. denied 2015 WL (Fla. Dec. 9, 2015); In the Matter of Travelocity v. Dir. of Taxation, 346 P.3d 157 (Haw. 2015); Montana Dept. of Revenue v. Priceline, 354 P.3d 631 (Mont. 2015); Expedia v. City and County of Denver, 2014 WL (Colo. App. Jul. 3, 2014), appeal granted 2015 WL (Colo. Sep. 8, 2015); City of Fargo v. Expedia, No CV (N.D. Cass Co. Cir. Ct. Aug. 8, 2015); In re Transient Occupancy Tax Cases (City of San Diego v. Hotels.com), 225 Cal.App.4th 56 (2014), review granted 329 P.3d 192 (Cal. 2014); Wake County v. Hotels.com, 762 S.E.2d 477 (N.C. App. 2014), appeal denied 762 S.E.2d 608 (N.C. 2014); Dare County (NC) v. Hotels.com, Dare County Superior Court No. 07 CVS 56 (consolidated into Wake County); Buncombe County v. Hotels.com, Buncombe County Superior Court No. 07 CVS 585 (consolidated into Wake County); Mecklenburg County v. Hotels.com, General Ct. of Justice Superior Division No. 08 CVS 741 (consolidated into Wake County); City of Phoenix v. Expedia, No. TX (Ariz. Tax Ct. May 28, 2014) (appeal pending); Orbitz v. Wisconsin Dept. of Revenue, 2014 WL (Wis. Tax. App. May 14, 2014); City of Rome (GA) v. Hotels.com, 549 Fed. Appx. 896 (11th Cir. 2013); City of Branson (MO) v. Hotels.com, 396 S.W.3d 378 (Mo. Ct. App. 2013); City of Los Angeles v. Hotels.com, No. BC (Cal. Super. Ct. Apr. 18, 2013) (appeal pending); Expedia v. City and County of San Francisco, No. CGC (Cal. Sup. Ct. Feb. 6, 2013) (appeal pending); City of Birmingham v. Orbitz, 93 So.3d 932 (Ala. 2012); City of Bowling Green (KY) v. Hotels.com, 357 S.W.3d 531 (Ky. App. 2011), review denied (Ky. Feb. 17, 2012); City of Duluth v. Expedia, Minnesota District Court No. 69DU-CV ; City of Columbus (OH) v. Hotels.com, 693 F.3d 642 (6th Cir. 2012); City of Philadelphia v. City of Philadelphia Tax Review Board, 37 A.3d 15 (Pa. Cmmw. Ct. 2012); City of Goodlettesville (TN) v. Priceline, No. 3:05-cv (M.D. Tenn. Feb. 21, 2012); City of Santa Monica v. Expedia, 2012 WL (Cal. App. 2nd Nov. 1, 2012), rev. denied Jan. 23, 2013; Expedia v. City of Anaheim, 2012 WL (Cal. App. 2nd Nov. 1, 2012), rev. denied Jan. 23, 2013; Orange County (FL) v. Expedia, 2011 WL (Fla. Cir. Ct. Jan. 20, 2011); County of Genesee v. Hotels.com, Circuit Court for the County of Ingham No CZ (settled 2011; all parties stipulated OTCs not subject to es); St. Louis County v. Prestige Travel, 344 S.W.3d 708 (Mo. 2011); Expedia v. City of New York Dept of Finance, No /09 (N.Y. Ct. App. Nov. 29, 2011); State (of Oklahoma) v. Priceline, No. CJ (Dist. Okla. Cty. Mar. 22, 2011); City of Houston v. Hotels.com, 357 S.W.3d 706 (Tex. App. 14th Dist. 2011); Marshall v. Priceline, 2010 WL (De. Sup. Ct. New Castle Co. Mar. 8, 2010); City of Gallup v. Hotels.com, No. CV JC/RLP (D.N.M. Mar. 1, 2010); Louisville/Jefferson County Metro Gov t v. Hotels.com, 590 F.3d 381 (6th Cir. 2009); Pitt County (NC) v. Hotels.com, 553 F.3d 308 (4th Cir. 2009); City of Madison v. Expedia, No cv-4488 (Wis. Dane Co. Cir. Ct. Jul. 24, 2008); City of Orange (TX) v. Hotels.com, 2007 WL (E.D. Tex. Sep. 21, 2007); City of Findlay v. Hotels.com, 441 F.Supp.2d 855 (N.D. Ohio 2006). 4 See, e.g., City of San Antonio v. Hotels.com, 2011 WL (W.D. Tex. Apr. 4, 2013); Expedia v. District of Columbia, 120 A.3d 623 (D.C. 2015); Travelocity v. Wyoming Dept. of Revenue, 329 P.3d 131 (Wyo. 2014); City of Chicago v. Hotels.com, 2013 WL (Il. Cir. Ct. Cook Cnty. No L , Jun. 21, 2013); City of Atlanta v. Hotels.com, 710 S.E.2d 766 (Ga. 2011); Village of Rosemont (IL) v. Priceline, 2011 WL , No. 09-C-4438 (E.D. Ill. Oct. 14, 2011); Mayor & City Council of Baltimore v. Priceline, 2011 WL (D. Md. Aug. 2, 2011); Travelscape v. South Carolina Dept. of Revenue, 705 S.E.2d 28 (S.C. 2011); Expedia v. City of Columbus (GA), 681 S.E.2d 122 (Ga. 2009); City of Charleston v. Hotels.com, 520 F.Supp.2d 757 (D.S.C. Nov. 5, 2007), reconsideration denied, 586 F.Supp.2d 538 (D.S.C. 2008).

4 4 These cases include decisions by the highest courts of Georgia, South Carolina, Wyoming, and the District of Columbia, although no federal circuit court has concluded that OTC services are subject to es. No merits decision has yet occurred in 14 cases in 12 states. 5 The remaining cases were voluntarily dismissed, dismissed for procedural errors, or settled. Aside from the question of whether es should apply (1) only to amounts received by the hotel from the consumer or (2) apply also to other travel-related services, other questions have been raised in the litigation: Should hotel occupancy statutes be updated to expand their scope to OTC activity by legislative action, or by administrative re-interpretation? Generally courts have not looked kindly on administrative re-interpretation, concluding that any revision to expand the scope of hotel occupancy taxes to OTC services should be done legislatively. Is it wise for local governments turn over litigation efforts to private contingency-fee lawyers, who promise to pursue the lawsuits at no cost to the city? Most of these lawsuits have been undertaken by private contingency-fee lawyers, promising huge windfalls to the city by collecting years of retroactive taxes with no down-side risk. This is not necessarily true: Palm Beach County ended up paying $1.66 million in attorneys fees to OTCs after their case was determined to be meritless. Is it fair for services produced by residents to be exempt from sales tax, but services produced by (generally out-of-state) OTCs to be taxed, often at a rate several times higher than the general sales tax? Hotel occupancy taxes in the United States average 14 percent, over twice the sales tax on other goods and services. While states like Hawaii, New Mexico, South Dakota, and Wyoming generally tax all consumer services, most other states exempt them. If state or city tax policy targets out-of-state actors like OTCs for a discriminatory and excessive tax, this may run afoul of the federal Commerce Clause guaranteeing free flow of interstate commerce. Additionally, if online travel services are to be taxed, why should the jurisdiction with the hotel get the revenue, as opposed to the jurisdiction of the traveler? 5 See, e.g., Pine Bluff v. Hotels.com, Supreme Court of Arkansas No. CV ; Town of Breckenridge v. Colorado Travel Co., District Court, Summit County, No. 2011CV420; City of Bedford Park v. Expedia, No. 1:13-CV (D.N.D.Ill.); Orbitz v. Indiana Dept. of Revenue, Indiana Tax Court No. 49T TA-10; Kentucky Dept. of Revenue v. Expedia, Franklin Circuit Court, No. 13-CI-912; Travelocity v. Controller (MD), Maryland Tax Court; State of Mississippi v. Priceline, Chancery Court, Hinds County No. G ; State of New Hampshire v. Priceline, Merrimack Superior Court No CV-00613; Nassau County v. Hotels.com, 971 N.Y.S.2d 664 (2013), class action denied 120 N.Y.A.D. 2 Dept. (2014); Expedia v. City of Portland (Oregon), Cir. Ct. Multnomah County No ; Volusia County v. Expedia, Circuit Court, 7th Judicial Dist. No CIDL; Expedia v. Miami-Dade County, 2nd Jud. Cir. Nos. 09CA4977, 09CA4978, 09CA4979; Expedia v. Osceola, Florida, 2nd Jud. Cir. Nos CA , , ; County of Lawrence (PA) v. Hotels.com, No (Pa. Cmwlth. Ct. Jun. 6, 2011).

5 5 If should be applied to all amounts spent by the consumer on the transaction, does that apply to just online travel companies or also include amounts paid to travel agents, personal assistants, tour guides, or conference booking coordinators? Does it include room service charges, valet charges, and resort fees, which are usually exempt from hotel occupancy tax? One proposed statute revision from the Multistate Tax Commission would apply es to any person or entity... that facilitates the sale of an accommodation, arguably expanding es to every dollar spent in the travel industry. Stretching old statutes to new situations not originally meant to be covered can lead to unintended consequences. If a tax statute is ambiguous as to its application, should that ambiguity be resolved in favor of the taxing government or in favor of the taxpayer? While a few courts have resolved ambiguity in favor of the government due to the importance of maintaining tax revenue, the vast majority of courts have ruled that taxpayers should get the benefit of the doubt of an ambiguous statute. In four out of five cases brought by cities against OTCs, the only people that win are the lawyers. Cities get no additional revenue and send a signal that they seek aggressive and unjustified taxation of one set of businesses that happens to be primarily non-resident. The costs imposed in filing and defending these lawsuits are also passed along to taxpayers and travelers. 6 While it is important that state and local governments collect revenue to provide services for their constituents, that need cannot justify discriminatorily taxing non-residents, or taxing only services primarily used by nonresidents while everything else is exempt. When cities and states act in such a way, investment and economic growth can be chilled as other businesses take note. Such a burden in one municipality is at best a bother. But when multiplied across the country, it can quickly become death by a thousand cuts. One option for addressing this problem is a federal bill or amendment that is designed to narrowly bar discriminatory taxation of online travel company services. If enacted, the proposal should neither provide online travel companies with preferential tax treatment nor would it be a blanket tax exemption of online travel companies or their services. Instead, the proposal should maintain settled practices in hotel occupancy taxation: hotel occupancy taxes will be calculated by the amounts hotels receive in payment from the hotel occupant. If written in such a way, that tax revenue will still be collected, so it calm fears since it would not endanger billions of dollars currently collected in es by state and local governments. Further, states should retain the option of taxing online travel booking services, so long as they tax services generally or at least do not discriminate by only taxing online travel booking services. 6 As one example, San Francisco officials demanded that OTCs prepay $73 million of disputed taxes before permitting them to protest the assessment. Such pay-to-play practices are a deterrent to judicial resolution of disputed issues. OTCs have tens of millions of dollars tied up in reserve funds to pay litigation costs and any potential judgments. See, e.g., Neil Weinberg and Patrick G. Lee, Expedia Faces Claims for At Least $800 Million in Hotel Taxes, Seattle Times (Feb. 5, 2015), business/expedia-faces-claims-for-at-least-800-million-in-hotel-taxes/.

6 6 Such a federal proposal is in line with other federal actions that prevent parochial state government actions from damaging interstate commerce. The people of the United States adopted the Constitution in large part because their existing national government had no power to stop states from imposing trade barriers with each other, to the detriment of the national economy. Congressional actions under the Commerce Clause to remove or prevent discriminatory state and local burdens on interstate activity are common and have previously been upheld. 7 It is in the nation s interest and the interest of each state and municipality to have a vibrant and dynamic travel industry. Unpredictable and unaccountable taxes are a hindrance to that. 7 Examples include Public L , 73 Stat. 555 (codified at 15 U.S.C. 381 et seq.) (preempting state and local income taxes on a business if the business s in-state activity is limited to soliciting sales of tangible personal property, with orders accepted outside the state and goods shipped into the state); 4 U.S.C. 111 (preempting discriminatory state taxation of federal employees); 4 U.S.C. 113 (preempting state taxation of nonresident members of Congress); 4 U.S.C. 114 (preempting discriminatory state taxation of nonresident pensions); 7 U.S.C (preempting state taxation of food stamps); 12 U.S.C. 531 (preempting state taxation of Federal Reserve banks, other than real estate taxes); 15 U.S.C. 391 (preempting discriminatory state taxes on electricity generation or transmission);31 U.S.C (preempting state taxation of federal debt obligations); 43 U.S.C (2)(A) (preempting state taxation of the outer continental shelf); 45 U.S.C. 101 (preempting state income taxation of nonresident water carrier employees); 45 U.S.C. 501 (preempting state income taxation of nonresident employees of interstate railroads and motor carriers and Amtrak ticket sales); 45 U.S.C. 801 et seq. (preempting discriminatory state taxation of interstate railroads); 47 U.S.C. 151 (preempting state taxation of Internet access, aside from grandfathered taxes); 47 U.S.C. 152 (preempting local but not state taxation of satellite telecommunications services); 49 U.S.C. 101 (preempting state taxation of interstate bus and motor carrier transportation tickets); 49 U.S.C et seq. (preempting state taxation of interstate air carriers and air transportation tickets); 49 U.S.C (b) (preempting state taxation of air passengers); 49 U.S.C (c) (preempting state taxation of flights unless they take off or land in the state); 49 U.S.C (preempting state income taxation of nonresident airline employees); 50 U.S.C. 574 (preempting state taxation of nonresident members of the military stationed temporarily in the state).

7 7State Result Year Decided Case Alabama 2012 City of Birmingham v. Orbitz, 93 So.3d 932 (Ala. 2012) Arizona OTC services not subject to by Municipal Active City of Phoenix v. Expedia, No. TX (Ariz. Tax Ct. May 28, 2014) (appeal pending) Hearing Officer; appeal pending in Arizona Tax Court Arkansas Pending; class certified (2013) Active Pine Bluff v. Hotels.com, Supreme Court of Arkansas No. CV Dismissed due to plaintiffs lack of standing 2014 McAllister v. Hotels.com, No. CV (Ark. Cir. Ct. Saline Co. May 22, 2013), appeal dismissed No. CV (Ark. Jan. 9, 2014) Dismissed for failure to exhaust administrative 2008 City of Fayetteville v. Hotels.com, No. CV (Ark. Cir. Ct. Jul. 25, 2008) remedies California by trial court; appeal Active City of Los Angeles v. Hotels.com, No. BC (Cal. Super. Ct. Apr. 18, 2013) (appeal pending) pending, stayed for San Diego decision OTC services not subject to by trial and appellate court; appeal Active In re Transient Occupancy Tax Cases (City of San Diego v. Hotels.com), 225 Cal.App.4th 56 (2014), review granted 329 P.3d 192 (Cal. 2014) pending by trial court; appeal pending, stayed for San Active Expedia v. City and County of San Francisco, No. CGC (Cal. Sup. Ct. Feb. 6, 2013) (appeal pending) Diego decision 2011 City of Santa Monica v. Expedia, 2012 WL (Cal. App. 2nd Nov. 1, 2012), rev. denied Jan. 23, Expedia v. City of Anaheim, 2012 WL (Cal. App. 2nd Nov. 1, 2012), rev. denied Jan. 23, 2013 Dismissed for failure to exhaust administrative remedies 2007 City of Oakland v. Hotels.com, 2007 WL (N.D. Cal. Nov. 6, 2007), aff d in part 572 F.3d 958 (9th Cir. 2009) Colorado Pending Active Town of Breckenridge v. Colorado Travel Co., District Court, Summit County, No. 2011CV420 OTC services not subject to by trial and appellate court; appeal Active Expedia v. City and County of Denver, 2014 WL (Colo. App. Jul. 3, 2014), appeal granted 2015 WL (Colo. Sep. 8, 2015) pending Delaware 2010 Marshall v. Priceline, 2010 WL (De. Sup. Ct. New Castle Co. Mar. 8, 2010)

8 State Result Year Decided Case 8District of OTC services taxable; 2015 Expedia v. District of Columbia, 120 A.3d 623 (D.C. Columbia apportioned services are part 2015) of the sale under the statute Florida 2015 Alachua County v. Expedia, 175 So.3d 730 (Fla. 2015) 2015 Leon County v. Expedia, 128 So.3d 81 (Fla. Dist. Ct. App. 2013), rev. denied 2015 WL (Fla. Dec. 3, 2015) Stayed pending Alachua County decision; likely to be 2015 Volusia County v. Expedia, Circuit Court, 7th Judicial Dist. No CIDL dismissed OTC services not taxable by trial and appeals court; appeal denied after Alachua decision 2015 Expedia v. Broward County, 135 So.3d. 415 (Fla. Dist. Ct. App. 2014), rev. denied 2015 WL (Fla. Dec. 9, 2015) Stayed pending Alachua County decision; likely to be 2015 Expedia v. Miami-Dade County, 2nd Jud. Cir. Nos. 09CA4977, 09CA4978, 09CA4979 dismissed Stayed pending Alachua County decision; likely to be 2015 Expedia v. Osceola, Florida, 2nd Jud. Cir. Nos CA , , dismissed 2011 Orange County (FL) v. Expedia, 2011 WL (Fla. Cir. Ct. Jan. 20, 2011) Settled 2011 Brevard County v. Priceline, Middle District of Florida No. 6:09-cv-1695 (Mar. 23, 2011) Settled; Palm Beach County paid OTCs $1.66 million in compensation 2011 Gannon v. Hotels.com, Fifteenth Jud. Cir. for Palm Beach County No CA (Nov. 14, 2011) Settled after defendants motion to dismiss denied 2010 County of Monroe (FL) v. Priceline, No. 4:09-cv- I0044-KMM (S.D.Fla. Sep. 3, 2010) Dismissed for failure to exhaust administrative 2008 Orange County (FL) v. Expedia, 985 So.2d 622 (Fla. App. Jun. 13, 2008) remedies Dismissed for failure to exhaust administrative 2007 City of Jacksonville v. Hotels.com, Circuit Court of Duval County No CA Aug. 21, 2007 remedies Voluntarily dismissed 2007 Miami-Dade County v. Internetwork Publishing Corp., Circuit Court of Dade County No CA 5 Jan. 18, 2007 Voluntarily dismissed 2007 Miami-Dade County v. Internetwork Publishing Corp., Circuit Court of Dade County No CA 5 Jan. 18, City of Rome (GA) v. Hotels.com, 549 Fed. Appx. 896 (11th Cir. 2013)

9 State Result Year Decided Case 9Georgia OTC services taxable; statute 2011 City of Atlanta v. Hotels.com, 710 S.E.2d 766 (Ga. levies tax on every person 2011) occupying room OTCs are not obligated to collect taxes, but present 2009 Expedia v. City of Columbus (GA), 681 S.E.2d 122 (Ga. 2009) themselves as doing so and must remit them to cities Hawaii but apportioned 2015 In the Matter of Travelocity v. Dir. of Taxation, 346 P.3d 157 (Haw. 2015) revenue subject to General Excise Tax (Hawaii has broadbased sales tax imposed on services) Illinois Removed to federal court; class certification denied Active City of Bedford Park v. Expedia, No. 1:13-CV (D.N.D.Ill.) twice OTC services taxable; statute imposes tax on room rate paid by consumer 2013 City of Chicago v. Hotels.com, 2013 WL (Il. Cir. Ct. Cook Cnty. No L , Jun. 21, 2013) Voluntary dismissed; refiled as Bedford Park litigation 2013 Warrenville v. Priceline.com, No. 1:13-cv (N.D. Ill. Jul. 10, 2013) OTC services taxable; statute defines owner as anyone 2011 Village of Rosemont (IL) v. Priceline, 2011 WL , No. 09-C-4438 (E.D. Ill. Oct. 14, 2011) receiving consideration Voluntarily dismissed 2009 City of Fairview Heights v. Orbitz, No. 05-cv-0840 (S.D.Ill. Mar. 30, 2009) Indiana Pending Active Orbitz v. Indiana Dept. of Revenue, Indiana Tax Court No. 49T TA-10 Dismissed for failure to exhaust administrative remedies 2010 Lake County Convention & Visitors Bureau v. Hotels. com, No. 2:06-cv JVBAPR (N.D.Ind. Mar. 30, 2010) Voluntarily dismissed 2006 Marshall County v. Hotels.com, No. 06-cv-0357 (N.D.Ind. Jun. 20, 2006) Kentucky Pending Active Kentucky Dept. of Revenue v. Expedia, Franklin Circuit Court, No. 13-CI City of Bowling Green (KY) v. Hotels.com, 357 S.W.3d 531 (Ky. App. 2011), review denied (Ky. Feb. 17, 2012) 2009 Louisville/Jefferson County Metro Gov t v. Hotels.com, 590 F.3d 381 (6th Cir. 2009)

10 10State Result Year Decided Case Maryland Pending Active Travelocity v. Controller (MD), Maryland Tax Court OTC services taxable; statute includes services related to 2011 Mayor & City Council of Baltimore v. Priceline, 2011 WL (D. Md. Aug. 2, 2011) hotel booking Settled 2010 County Commissioners of Worcester County v. Priceline, No. 1:09-cv00013-MJG (D.Md. Jun. 25, 2010) Michigan Settled 2014 County of Kalamazoo v. Hotels.com, Circuit Court for the County of Kalamazoo No CZ Settled; OTC services are not subject to 2011 County of Genesee v. Hotels.com, Circuit Court for the County of Ingham No CZ Minnesota Settled; OTC services are not subject to 2012 City of Duluth v. Expedia, Minnesota District Court No. 69DU-CV Mississippi Pending Active State of Mississippi v. Priceline, Chancery Court, Hinds County No. G City of Branson (MO) v. Hotels.com, 396 S.W.3d 378 (Mo. Ct. App. 2013) Missouri 2011 St. Louis County v. Prestige Travel, 344 S.W.3d 708 (Mo. 2011) Dismissed 2009 City of Jefferson v. Hotels.com, No. 07 AC- CC (Mo. Cir. Ct. Cole Co. Dec. 29, 2009) Montana OTC services not subject to but subject to 2015 Montana Dept. of Revenue v. Priceline, 354 P.3d 631 (Mont. 2015) accommodation service provider tax New Hampshire Pending Active State of New Hampshire v. Priceline, Merrimack Superior Court No CV New Jersey Dismissed for failure to exhaust administrative 2011 Township of Lyndhurst v. Priceline, 657 F.3d 148 (3d Cir. 2011) remedies New Mexico 2010 City of Gallup v. Hotels.com, No. CV JC/RLP (D.N.M. Mar. 1, 2010) New York Pending Active Nassau County v. Hotels.com, 971 N.Y.S.2d 664 (2013), class action denied 120 N.Y.A.D. 2 Dept. (2014) 2011 Expedia v. City of New York Dept of Finance, No /09 (N.Y. Ct. App. Nov. 29, 2011) Dismissed voluntarily 2009 Nassau County v. Hotels.com, 594 F.Supp.2d (E.D.N.Y. 2007), judgment vacated, 577 F.3d 89 (2d Cir. 2009).

11 11State Result Year Decided Case North Carolina ; NC Supreme Court declined to review 2014 Wake County v. Hotels.com, 762 S.E.2d 477 (N.C. App. 2014), appeal denied 762 S.E.2d 608 (N.C. 2014) Consolidated into Wake County case 2014 Dare County (NC) v. Hotels.com, Dare County Superior Court No. 07 CVS 56 Consolidated into Wake County case 2014 Buncombe County v. Hotels.com, Buncombe County Superior Court No. 07 CVS 585 Consolidated into Wake County case 2014 Mecklenburg County v. Hotels.com, General Ct. of Justice Superior Division No. 08 CVS Pitt County (NC) v. Hotels.com, 553 F.3d 308 (4th Cir. 2009) North Dakota 2015 City of Fargo v. Expedia, No CV (N.D. Cass Co. Cir. Ct. Aug. 8, 2015) and did not collect 2012 City of Columbus (OH) v. Hotels.com, 693 F.3d 642 (6th Cir. 2012) and retain tax Ohio 2006 City of Findlay v. Hotels.com, 441 F.Supp.2d 855 (N.D. Ohio 2006) Oklahoma 2011 State (of Oklahoma) v. Priceline, No. CJ (Dist. Okla. Cty. Mar. 22, 2011) Trial pending; Expedia paid $2.3m under protest to Active Expedia v. City of Portland (Oregon), Cir. Ct. Multnomah County No challenge ordinance Oregon Voluntarily dismissed 2015 Expedia v. Oregon Dept. of Revenue, No. TC 5196 (Or. Tax Ct. Sep. 29, 2015) 2012 City of Philadelphia v. City of Philadelphia Tax Review Board, 37 A.3d 15 (Pa. Cmmw. Ct. 2012) Pennsylvania Remanded for question of whether OTCs take title to 2011 County of Lawrence (PA) v. Hotels.com, No (Pa. Cmwlth. Ct. Jun. 6, 2011) hotel rooms Voluntarily dismissed 2009 County of Lawrence (PA) v. Hotels.com, No. 2:09-cv01219-GLL (W.D.Pa. Nov. 17, 2009) Dismissed 2007 Cumberland County v. Hotels.com, No. 06-CV (Pa. Cumberland Co. Gen. Ct. Justice Nov. 19, 2007) Puerto Rico Settled 2015 Puerto Rico Tourism Co. v. Priceline, U.S. District Court for the District of Puerto Rico, No. 3:14-cv JAF

12 12State Result Year Decided Case South Carolina Settled 2015 City of Columbia v. Hotelguides, No CP (S.C. Ct. Common Pleas 9th Jud. Cir. Apr. 3, 2015) OTC services taxable as OTC furnishes accommodations; 2011 Travelscape v. South Carolina Dept. of Revenue, 705 S.E.2d 28 (S.C. 2011) one dissent Voluntarily dismissed 2011 Horry County v. Hotels.com, South Carolina Court of Common Pleas No CP (May 16, 2011) Voluntarily dismissed 2010 City of Myrtle Beach v. Hotels.com, No. 4:06-cv RBH (D.S.C. Nov. 30, 2010) Voluntarily dismissed 2010 City of North Myrtle Beach v. Hotels.com, No. 2:06-cv PMD (D.S.C. Nov. 30, 2010) Voluntarily dismissed 2010 Town of Mount Pleasant v. Hotels.com, No. 2:06-cv PMD (D.S.C. Nov. 30, 2010) Motion to dismiss denied but court concludes conversion occurred 2008 City of Charleston v. Hotels.com, 520 F.Supp.2d 757 (D.S.C. Nov. 5, 2007), reconsideration denied, 586 F.Supp.2d 538 (D.S.C. 2008) Tennessee 2012 City of Goodlettesville (TN) v. Priceline, No. 3:05-cv (M.D. Tenn. Feb. 21, 2012) Texas Trial court concluded OTC services taxable because they Active City of San Antonio v. Hotels.com, 2011 WL (W.D. Tex. Apr. 4, 2013) control hotels (2013), appeal pending 2011 City of Houston v. Hotels.com, 357 S.W.3d 706 (Tex. App. 14th Dist. 2011) 2007 City of Orange (TX) v. Hotels.com, 2007 WL (E.D. Tex. Sep. 21, 2007) Washington Voluntarily dismissed 2006 City of Bellingham v. Hotels.com, No. 05-cv (W.D. Was. Feb. 17, 2006) Wisconsin 2014 Orbitz v. Wisconsin Dept. of Revenue, 2014 WL (Wis. Tax. App. May 14, 2014) 2008 City of Madison v. Expedia, No cv-4488 (Wis. Dane Co. Cir. Ct. Jul. 24, 2008) Wyoming OTC services taxable; state has broad-based sales tax imposed on services 2014 Travelocity v. Wyoming Dept. of Revenue, 329 P.3d 131 (Wyo. 2014)