LITTLE ROCK — The courts are not the proper venue for a claim that online travel companies like Hotels.com are paying their fare share of taxes to cities and counties, a lawyer for the companies argued Thursday before the state Supreme Court.
A lawyer for the plaintiffs in the lawsuit argued that the case was properly filed in Jefferson County Circuit Court and was properly certified as a class-action lawsuit by a Jefferson County circuit judge.
The Supreme Court heard oral arguments but did not immediately issue a ruling in the lawsuit filed by the Pine Bluff Advertising and Promotion Commission and the city of North Little Rock on behalf of all similarly situated commissions, cities and counties.
The lawsuit alleges that Hotels.com, Expedia, Orbitz, Travelocity and other similar companies typically acquire rooms from hotels at discounted rates, then charge higher rates to customers who book rooms through those companies’ websites. Customers pay a tax on the higher rate, but the companies pay cities and counties taxes on the lower discounted rate and pocket the difference, the plaintiffs claim.
The companies appealed to the Supreme Court after the case was granted class-action status. Chad Pekron, attorney for the companies, told the justices Thursday that the plaintiffs should have to seek an administrative remedy.
Pekron said that when an individual taxpayer disputes a tax collection, the taxpayer is required to seek an administrative remedy, and that the same principle should apply to cities and counties. The administrative body that is in charge of tax collections in Arkansas is the state Department of Finance and Administration, so the plaintiffs should have to take their claim to that agency, he said.
If every tax dispute could be taken directly to to court, “that would be chaos, both for the taxpayers and for DF&A,” Pekron said.
Chief Justice Jim Hannah asked Pekron what he believed the plaintiffs’ remedy should be if DF&A does not act. Pekron answered that they could ask the General Assembly to change the law.
Tom Thrash, attorney for the plaintiffs, argued that it made more sense for a court to decide in a class-action lawsuit whether online travel companies are correctly paying taxes than to require every community in the state to make its case separately.
The companies’ appeal “is not about efficiency. This is a delay,” he said.
Thrash said the case is about companies failing to remit taxes that they owe to cities and counties. He said online travel companies used to advertise that they sold rooms, but now, because they want to get out of paying taxes, they claim that they are merely “facilitating the reservations.”
“But of course their business activities haven’t changed. They haven’t changed at all,” he said.
The justices did not indicate when they would rule.