Friday, January 30-County Wants To Piggyback With Baltimore On Tax Suit

BERLIN – In the interest of judicial efficiency, attorneys for Worcester County this week filed a motion to consolidate its lawsuit against a bevy of Internet-based travel booking companies seeking what could be millions of dollars in unpaid hotel room taxes with a similar suit filed late last year by Baltimore City.

On Jan. 6, attorneys for the Worcester County Commissioners filed suit in U.S. District Court naming 14 individual defendants, all Internet-based travel booking companies under the umbrella of four major companies including Expedia, Orbitz, Travelocity and Priceline. The complaint alleges the companies have not been paying the entire amount of hotel room taxes owed on rental transactions booked in the county, largely from Ocean City.

According to the complaint, the defendants purchase hotel rooms in the area at deeply discounted wholesale prices and pay the required room tax only on the discounted rate. The Internet companies then turn around and sell the hotel rooms to consumers at normal retail rates and collect the required room tax during the transaction, but do not remit the taxes collected to the county, instead keeping the money as part of their profit.

By filing the suit, Worcester County joined a growing number of jurisdictions in Maryland and across the country taking similar action against the ubiquitous Internet travel booking companies, including Baltimore City, which filed its own suit in early December. Because of the similarity of the cases and the relatively comparable filing dates, the defendants in the case this week filed a motion to consolidate the two actions, at least in terms of pre-trial discovery.

In a letter to U.S. District Court Judge Marvin Garbis this week, attorney for the Internet travel companies, J. Stephen Simms, said his clients and Worcester County are generally in agreement about the motion to consolidate the cases, while Baltimore City remains resistant to the idea.

“Worcester County and defendants agree that the court should consolidate before you for pre-trial issues,” Simms’ letter reads. “Worcester County expressly asked us to inform the court that Worcester County objects to defendants submitting this letter. Worcester County intends to file a separate request to consolidate, objects to the proposed orders and has informed us that it has not had sufficient opportunity to review defendants’ proposed orders in order to fully present its objections to them now. Baltimore City objects to defendants’ consolidation request.”

On Tuesday, four days after the defendants filed their request to consolidate the two cases, attorneys for Worcester County filed their own letter to the judge calling for combining its case with Baltimore City’s case in the interest of avoiding a duplication of effort.

“Both cases involve the defendants’ failure to remit certain hotel occupancy taxes to the appropriate taxing authority,” the letter reads. “Because there are so many common issues of fact and law, it will be more efficient if the two cases are coordinated to the extent practicable.”

According to the letter, Worcester County and Baltimore both claim the defendants are required to collect and remit hotel taxes to the local taxing entities. The complaints allege similar facts, advance similar claims and request substantially similar relief, all from overlapping defendants.

“Under law, counsel for a party is to indicate that the case being filed is related to another case if a separate assignment would entail substantial duplication of labor if heard by different judges,” the letter reads. “If the Worcester County and Baltimore actions were heard by different judges, there would certainly be substantial, although not complete, duplication of labor, because there are many overlapping legal issues and facts.”

According to Worcester County’s letter, the two cases revolve around a single fundamental question, which is reason enough to consolidate them, at least in terms of pre-trial activity.

“The fundamental question- whether the defendants improperly failed to pay hotel occupancy taxes to the particular local taxing authority under that taxing authority’s tax law- is the same, even though the tax law for Worcester County and Baltimore is different in certain material respects,” the letter reads. “It is likely that, in answering this fundamental question, the parties will have similar discovery issues and file similar motions.”

With more and more travelers booking their vacations online through Internet companies, the potential room tax allegedly lost in the transactions could total millions of dollars. Although the difference in most cases is a couple of dollars per room, per night, the amount of room tax revenue lost in Worcester, should the county prevail in its suit, could be staggering when considering thousands of hotel rooms in the resort area and hundreds of nights. The suit filed on Tuesday does not specify an amount sought, stating only “the precise amount of all recoverable damages, penalties and/or interest will be determined at the time of trial.”