206 A.3d 333
N.H.2019Background
- Defendants are online travel companies (OTCs) using the "merchant" model: OTCs collect payment from consumers, pay hotels a negotiated wholesale (net) rate plus tax on that net rate, and retain the difference (retail minus net).
- OTCs display a separate "Taxes and Fees" line that includes an estimated meals and rooms tax and a service/transaction fee, but do not itemize the tax amount or remit tax on the retail price.
- The State sued, alleging violations of New Hampshire's Meals and Rooms Tax Law (RSA ch. 78-A) for failing to remit tax on the retail amount and for bundling tax with other charges; it also alleged a Consumer Protection Act (CPA), RSA ch. 358-A, violation for bundling/undisclosed markups.
- At bench trial, the superior court found OTCs do not "operate" hotels (no possession, staffing, or day-to-day management) and that their merchant-model practices do not constitute buying/selling hotel rooms.
- Trial court rejected the State's reliance on DRA regulation Rev 701.15 and held the OTCs did not violate the CPA by bundling taxes; State appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether OTCs are "operators" under RSA 78-A:3, IV (thus liable to collect/remit meals and rooms tax) | OTCs collect payment and thereby fall within the statute's broad definitions of "person" and "operator;" statute should cover anyone collecting consideration for occupancy | OTCs do not manage, control, possess, staff, or otherwise operate hotels; "operator" in context means someone who runs or manages the hotel business | OTCs are not "operators": plain meaning of "operate" requires managing/controlling the hotel, which OTCs do not do; affirmed for reasons of statutory text and factual findings |
| Whether DRA regulation (Rev 701.15) or administrative gloss converts OTCs into "operators" | DRA longstanding interpretation includes OTCs; Rev 701.15 covers agents and those offering accommodations to public | A regulation cannot expand the statute; even under the rule, the OTCs' actual practices do not meet the rule's conditions | Court declined to apply rule to expand statutory meaning; no ambiguity in statute warranting deference, so regulation did not make OTCs operators |
| Whether bundling estimated tax and fees (not itemizing tax) violates the CPA as deceptive/unfair | Bundling may mislead consumers into believing tax was paid on retail amount; violates public policy/statute and is deceptive | OTCs disclose taxes and fees are bundled; no evidence of fraudulent intent or consumer injury; bundling alone is not rascality-level misconduct | Trial court did not err: bundling, with disclosure, does not meet CPA "rascality" test absent fraud or demonstrable consumer harm |
| Whether courts should defer to DRA's interpretation (administrative gloss) | Deference is owed to DRA's longstanding practice taxing total consideration regardless of payor | Deference applies only if statute is ambiguous; statute is plain here | No deference: court found statute unambiguous about "operator," so administrative gloss doctrine did not apply |
Key Cases Cited
- Village of Bedford Park v. Expedia, Inc., 876 F.3d 296 (7th Cir. 2017) (interpreting "operator" and concluding OTC functions do not transform them into hotel operators)
- Pitt County v. Hotels.com, L.P., 553 F.3d 308 (4th Cir. 2009) (OTCs not hotel operators under similar tax statutes)
- Montana Dept. of Revenue v. Priceline.com, 354 P.3d 631 (Mont. 2015) (state tax dispute concluding OTCs were not subject to hotel-operator tax obligations)
- Fat Bullies Farm, LLC v. Devenport, 170 N.H. 17 (N.H. 2017) (explaining New Hampshire CPA "rascality" test for unfair or deceptive practices)
- O’Malley v. Little, 170 N.H. 272 (N.H. 2017) (standard of review for trial-court factual findings)