In re Transient Occupancy Tax Cases

The City of San Diego adopted an ordinance imposing a tax on visitors for occupancy in hotels located within the City. The tax, known as the transient occupancy tax, is calculated as a percentage of the “rent charged by the operator” of the hotel. The City of San Diego issued transient occupancy tax assessments against online travel companies (OTCs) on the basis that the OTCs were liable as the “operator” of every hotel. The OTCs appealed. A hearing officer found that the OTCs owed tax on the amount retained by the OTCs above the amount remitted to the hotels as the agreed wholesale cost of the room rental. The superior court vacated the decision, concluding that OTCs are not operators of the hotels and that the markup the OTCs charge for their services is not part of the rent subject to the tax. The court of appeal affirmed. The Supreme Court affirmed, holding (1) under the ordinance, the operator of a hotel is liable for tax on the wholesale cost plus any additional amount for room rental the operator requires the OTC to charge the visitor under the “rate party” provisions of hotel-OTC contracts; but (2) OTCs are not operators within the meaning of the ordinance. View "In re Transient Occupancy Tax Cases" on Justia Law