Law slows Branson suit against online travel agencies

A law signed July 8 by Gov. Jay Nixon may slow lawsuits filed by the city of Branson and St. Louis County against online travel service and ticket sales companies.

Branson is among about 200 municipalities that have filed more than 30 lawsuits since Los Angeles filed the first in 2004 alleging online services have pocketed consumer paid hotel taxes that should be going to the cities.

Branson’s suit, filed in 2007 against 15 travel service companies including Expedia, Hotels.com, Travelocity, Hotwire and Orbitz, remains unresolved. Branson city attorney William Duston could not be reached by press time.

Expedia (Nasdaq: EXPE) operates a Springfield office, 4124 S. McCann Court, where roughly 250 employees process online bookings for flights, hotels, rental cars and other vacation packages.

Under the new law, online travel companies such as Expedia are exempt from local hotel taxes because they don’t provide actual rooms but instead buy and sell bookings and tickets.

Rep. Shane Schoeller, R-Willard, attached the provision to a broader local tax bill, House Bill 1442, to spare Expedia from double taxation and the expense of fighting the lawsuits.

Brent Thompson, Expedia’s vice president of government affairs, said the suits are trying to force online travel companies to pay local hotel taxes.

“The intent of the law and the champions and authors is to clarify current law and to eliminate the need for the courts to rule on this,” said Thompson, who is based in Washington, D.C. “Our expectation is with this clarification, the litigation would no longer be necessary and those cases would go away.”

Thompson said it makes Missouri a better business climate.

“It’s kind of tough to have localities suing the very business model that is trying to prosper in Missouri and hire more people,” Thompson said.

Elimination of the lawsuits and avoiding the tax payments make job creation possible, he added.

Expedia signed a five-year lease in February to occupy 59,000 square feet of the 150,000-square-foot former Springfield-Branson National Airport terminal beginning in the fall for $236,000 a year – plus a common-area maintenance charge of $3.64 per square foot annually, according to previous SBJ coverage.

Once the move is complete, Expedia will be in Schoeller’s district.
“Expedia brought it to our attention that some attorneys are going state to state and suing online travel companies, Schoeller said.

Schoeller said a corporate franchise tax already is collected but the lawsuit asks the companies to pay additional hotel-motel taxes.

The provision, Schoeller said, makes the suits unnecessary and eliminates the excess tax.

“If you’re an online travel company, as long as you don’t own the tickets that you purchase – whether it’s a room or a music show or anything like that – if you don’t actually take possession of it, you would not pay taxes on it,” said Schoeller.

Thompson said the cost of fighting the lawsuits that Expedia won’t incur makes the new law beneficial. He’s also hopeful that other states will take Missouri’s lead on what he called “smart tourism policies.”

The Interactive Travel Services Association lauded the signing.

“We are gratified by the strong action of Gov. Nixon and the legislature to protect travel and tourism in Missouri,” Art Sackler, ITSA executive director said in a news release.[[In-content Ad]]