Wyoming wins state Supreme Court battle against online travel companies over lodging tax

CHEYENNE, Wyo. – The Wyoming Supreme Court has ruled the state can collect the full tax amount on retail lodging sales made by online travel companies, even if they have no physical presence in the state.

The ruling comes during a national debate between states and online retailers over whether the online retailers should pay local and state taxes like brick-and-mortar stores.

The Wyoming case presented a different facet of the debate in that the issue wasn’t whether the online companies needed to pay the sales tax on the hotel rooms they rented in Wyoming, but how much tax they needed to pay.

Expedia, Travelocity, Priceline, Hotwire, Orbitz, Cheaptickets and had been collecting and remitting sales taxes to the state based on the lower rates that they negotiate with the hotels instead of the higher prices that they offered to consumers.

For example, a company could reserve a block of rooms for $80 apiece but list them at $100 each. According to the companies, the state should collect sales taxes on the rooms based on the $80 instead of the $100.

Taxing the higher amount means more sales tax for the state where tourism is the second-leading industry at about $3 billion a year.

The state Department of Revenue and the State Board of Equalization held that the tax should be imposed on the higher amount.

The Wyoming Supreme Court agreed on Thursday.

Larry Wolfe Jr., one of the attorneys for the online companies, declined to comment Friday, referring questions to his co-counsellors with a Chicago law firm. Those attorneys could not be reached immediately for comment.

In court filings, Wolfe had argued that the companies should not be seen as “vendors” because they do not actually grant reservations or sell rooms, the Wyoming Tribune Eagle reported ( Friday.

“Such a right is conferred only by the hotel, and only when the guest checks in and is given the key,” Wolfe wrote.

None of the online travel companies have offices or personnel in Wyoming.

In its ruling, the state Supreme Court said the travel companies have been successful in challenging tax structures in some states and unsuccessful in others. The key determiner often was the precise language of the states’ taxing ordinance or statute, the justices said.

“The Wyoming sales tax statute applied to ‘the sales price paid’ for lodging services,” the ruling read. “The contracts between the (travel companies) and hotels also support the argument that the (companies) are vendors under Wyoming tax law.”

The ruling also says the court has held previously that “when interpreting tax statutes, there is a presumption against granting exceptions and in favour of taxation.”

The court also rejected the companies’ argument that applying sales tax to the full amount violates the Internet Tax Freedom Act.

The state lodging tax is imposed equally on any consumer transaction involving a room “regardless of whether it is booked by the Internet, telephone, fax machine, travel agent, or by simply showing up at the hotel’s front desk,” the ruling says.

Joseph Henchman, vice-president of legal projects at the Washington, D.C.-based Tax Foundation, said states, cities and counties across the nation are challenging online travel companies on lodging taxes.

“It’s a trend we see across the country, and it really turns on how the law is structured,” Henchman said. “Wyoming is one of four states only that taxes a lot of services under their sales tax. In most states they don’t.”

Gov. Matt Mead welcomed the decision, saying in a statement that “no company in the industry should have an unfair advantage.”

Chris Brown, executive director of the Wyoming Lodging and Restaurant Association, said the decision should have no impact on the state’s tourism industry because it shouldn’t change the price for a hotel room.


Information from: Wyoming Tribune Eagle,