Online Hotel Booking Class Action:
Federal Judge Issues Final Judgment

On April 4, U.S. District Judge Orlando Garcia issued a final judgment requiring online hotel booking companies to pay 173 Texas cities more than $55 million in back taxes, plus penalties and interest.  The final judgment represents yet another victory for Texas cities in a case that has been ongoing for more than four years.   

In 2009, a federal jury ruled in favor of the cities in their class action lawsuit against the online hotel booking companies.  The jury awarded $20.6 million to the cities based on their argument that the online companies failed to remit city hotel occupancy tax on the “markup” difference between the amount the companies paid for the rooms and the price at which they sold the rooms to consumers. 

In 2011, Judge Garcia entered his post-trial findings of fact and conclusions of law.  Reinforcing the jury’s determination that the online travel companies are obligated to pay more in hotel taxes to cities, the judge found that cities were entitled to additional actual damages that accrued since the jury verdict in 2009, ordering the online companies to adjust their business practices to ensure the proper payment of taxes on post-judgment transactions. 

Although the recent final judgment by Judge Garcia is promising, the dispute is probably still not over.  An appeal by the online travel companies to the Fifth Circuit Court of Appeals is likely.

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No other person or entity may reproduce, duplicate, or distribute any part of this document without the written authorization of the
Texas Municipal League.

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