354 P.3d 631
Mont.2015Background
- Montana Department of Revenue sued multiple Online Travel Companies (OTCs) — e.g., Priceline, Expedia, Orbitz — seeking collection/remittance of taxes on the OTCs’ service/booking fees (the markup above the wholesale rate).
- OTCs operate under a merchant model: they pay hotels/rental agencies a wholesale price, charge consumers a higher retail price, remit tax on the wholesale amount to the supplier, but do not collect tax on the OTC fee or remit tax directly to Montana.
- Department asserted OTC fees are taxable under (1) the Lodging Facility Use Tax (owner/operator collects 4% accommodation charge) and (2) the Sales Tax (3% on accommodations; 4% on rental-vehicle base charge; sellers must collect tax on sales price).
- District Court granted summary judgment for OTCs, holding neither statute taxed OTC fees. Department appealed.
- Montana Supreme Court affirmed in part and reversed in part: (1) Lodging Facility Use Tax does not apply to OTC fees because OTCs are not “owners or operators”; (2) Sales Tax does apply and OTCs (as sellers of services) must collect/remit sales tax on OTC fees dating back to the filing of suit (Nov. 8, 2010).
Issues
| Issue | Department's Argument | OTCs' Argument | Held |
|---|---|---|---|
| Whether OTC fees are taxable under the Lodging Facility Use Tax | OTCs are effectively collecting accommodation charges and thus must collect the owner/operator tax | OTCs are not owners/operators of facilities and do not control hotels’ finances | Held: No — OTCs are not "owner or operator"; statute’s plain language precludes taxing OTC fees |
| Whether OTC fees are taxable under the Sales Tax for accommodations/campgrounds | Sales Tax’s "sales price" includes OTC fees; OTCs are "sellers" of services and must collect tax | OTC fees are distinct wholesale/retail components and not subject to sales tax; statutes coextensive with lodging tax | Held: Yes — Sales Tax covers services; OTCs are sellers and must collect/remit tax on OTC fees |
| Whether Sales Tax on rental vehicles applies to OTC fees (base rental charge) | "Base rental charge" synonymous with "sales price," so OTC fees included | Enumerated "base rental charge" components exclude OTC fees (expressio unius) | Held: Yes — interpret "base rental charge" as synonymous with "sales price," so OTC fees taxable |
| Whether the Court’s decision should be retroactive | Department seeks back taxes from earliest applicable date | OTCs request prospective-only relief due to reliance on Dept. guidance | Held: Sales Tax liability dates to Department’s filing of suit (Nov. 8, 2010); OTCs liable for back taxes from that date |
Key Cases Cited
- Pitt County v. Hotels.com, LP, 553 F.3d 308 (4th Cir.) (definition/analysis of “operator” and intermediary role)
- City of Branson v. Hotels.com, LP, 396 S.W.3d 378 (Mo. Ct. App.) (use of dictionary/operator analysis)
- Travelocity.com, LP v. Wyoming Dep’t of Revenue, 329 P.3d 131 (Wyo.) (OTCs held vendors controlling financial aspects of transactions)
- City of Atlanta v. Hotels.com, 710 S.E.2d 766 (Ga.) (retail OTC room rate is taxable rent)
- Expedia, Inc. v. City of Columbus, 681 S.E.2d 122 (Ga.) (tax imposed on consumer price charged by OTC, not hotel wholesale rate)