COLUMBUS, GEORGIA, Plaintiff, v. EXPEDIA, INC., Defendant.
Docket/Court: SU-06-CV-1794-7, Georgia Superior Court
Date Issued: 09/22/2008
Tax Type(s): Sales and Use Tax
ORDER AND DECREE ON PERMANENT INJUNCTION
Plaintiff Columbus, Georgia filed a motion for declaratory judgment and injunctive relief. Plaintiff proceeded on its request for permanent injunctive relief. The Court has considered the parties' submissions and has conducted an evidentiary hearing. During the hearing, Plaintiff cross- examined Defendant's corporate representative Mr. Hari Nair and elicited direct testimony from Mr. Peter Bowden of the Columbus Convention and Trade Bureau (“CCVB”) and Mr. Ted Cobbs, manager of a local hotel. Plaintiff also brought several witnesses by video deposition. In its case, Defendant Expedia elicited direct testimony from Mr. Nair, and Plaintiff further cross- examined him. Both parties submitted significant documentary evidence. The Court has reviewed the parties' proposed orders. For the reasons and to the extent set forth herein, Plaintiff's motion is GRANTED.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
1. Plaintiff Columbus initiated this action by filing its Complaint on May 30, 2006.
2. Defendant Expedia, Inc. answered on July 26, 2006.
3. Defendant Expedia twice has removed this action to the U.S. District Court for the Middle District of Georgia, on July 12, 2006, and November 6, 2007, and the federal court twice has remanded it as improvidently removed, first on May 24, 2007, and second on July 30, 2008. Of the 27 months this action was pending prior to the hearing on Plaintiff's motion in August of 2008, the case was “inactive” for a total of 18 months awaiting remand. 1
4. Plaintiff Columbus, Georgia is a consolidated city-county government organized under the laws of the State of Georgia. Complaint, ¶ 1.
5. Defendant Expedia, Inc. is a Washington corporation which is registered to do business in and which transacts business in the State of Georgia. Answer, ¶ 2.
6. In various paragraphs of its Complaint, Plaintiff Columbus alleged that Defendant Expedia was in the business of furnishing, renting, selling and/or reselling hotel rooms to the public (Complaint, ¶¶ 3, 32(f)); Defendant Expedia was an owner and/or operator of a business that furnishes, rents, sells, or resells hotel rooms through internet websites (Complaint, ¶¶ 12, 32(e) and 32(f)); Defendant Expedia was an agent of operators in the business of furnishing rooms to the public (Complaint, ¶¶ 3,41); and Defendant Expedia undertook to collect the hotel occupancy or excise taxes authorized by the state enabling statute and imposed under the Columbus Ordinances (Complaint, ¶¶ 3, 18, 19, 28, 42).
7. Plaintiff Columbus alleged that Defendant Expedia had the duty to remit hotel occupancy or excise taxes based on the charge to the public (Complaint, ¶ 28).
8. Plaintiff Columbus also alleged that Defendant Expedia had “... publicly admitted that it does not pay taxes on the full rental rate it charges occupants. In public filings made by the Defendant, it acknowledges that it only remits taxes back to the 'brick and mortar' hotels for the amount of the wholesale price of the room.” Complaint, ¶ 25. See also Complaint ¶26 (quoting from Defendant Expedia's March 31, 2003 Form 10-Q).
9. Plaintiff Columbus alleged in paragraph 31 of its Complaint that Defendant Expedia had denied and rejected the applicability to it of O.C.G.A. §§ 48-13-51 et seq., and of the Columbus Code of Ordinances enacted pursuant thereto, creating an actual justiciable controversy.
10. With respect to the allegations from Plaintiff Columbus' Complaint referenced above, in corresponding paragraphs in its Answer, Defendant Expedia denies it is an operator or innkeeper, admits it collects money from consumers for the eventual occupancy of a hotel room, admits it collects some money that may eventually be allocable as hotel occupancy or excise taxes but denies it collects taxes, and denies that either the state enabling statute or the Columbus Code of Ordinances has any applicability to or imposes any obligations on Defendant Expedia with respect to Columbus. See generally Answer. See also Answer, ¶¶ 10 and 11 (Expedia expressly denies it is an innkeeper or an operator). 2
11. Defendant Expedia denies it is required to: collect hotel occupancy or excise taxes; to remit hotel occupancy or excise taxes; register with Plaintiff Columbus; and report to Plaintiff Columbus. See generally, Answer.
12. Pursuant to the authority granted to it in the State Enabling Act, O.C.G.A. §§ 48-13-50 et seq., Plaintiff Columbus has “... imposed an excise tax in the amount of seven percent of the charge to the public upon the furnishing for value of any room or rooms or lodging or accommodations furnished by any person licensed by or required to pay business or occupation taxes to Columbus for operating a hotel within the meaning of this article.” Cols. Code § 19-111 (emphasis added). See generally Cols. Code §§ 19-110 et seq. See also O.C.G.A. § 48-13-5 l(a)(l)(B)(i) (persons and entities are liable for the tax at the applicable rate on the “... lodging charges actually collected or, if the amount of taxes collected from the hotel or motel guest is in excess of the total amount that should have been collected, the total amount actually collected must be remitted”) (emphasis added); O.C.G.A. § 48-13-51(a)(l)(B)(ii) (“Any tax levied as provided in this Code Section is also imposed upon every person or entity who is a hotel or motel guest... .”).
13. Mr. Peter Bowden, President and Chief Executive Officer of the Columbus Convention and Visitor Bureau (“CCVB”), submitted an Affidavit in this case. See App., Exhibit 16. He affirmed the truthfulness and accuracy of the statements made therein during the hearing. He stated therein that the CCVB solicits and: promotes tourism, conventions, trade shows and events in Columbus, and engages in visitor promotions, all of which enhances and develops the economic fabric of Columbus, id. at ¶3; the CCVB relies upon the money provided, it by Columbus that is collected pursuant to the hotel-motel occupancy tax by Columbus to fulfill its obligations in the promotion of tourism, id. at ¶¶ 5-7; “[w]ithout the proper allotment of hotel-motel excise tax, CCVB is hampered in its planning and implementation of promotional investment to increase tourism dollars in Columbus Georgia[,]” id. at ¶8; and any monies due to the CCVB that are withheld or not provided are not available for investing in tourism and create “... a loss of promotional opportunity that cannot be regained by obtaining the funds at a later date.” Id. at ¶9. 3 Mr. Bowden further discussed these lost opportunities during the hearing.
14. Ms. Yvonne Ivey, testifying by deposition as a Rule 30(b)(6) witness for the Plaintiff Columbus, explained that the Columbus Ordinance was enforced through the finance department and that the hotels in Columbus were required to base and historically have based the hotel occupancy or excise tax on the charge to the customer-occupant for the room. See Plaintiff's Supp. App., Exhibit 24, Y. Ivey Depo., October 30, 2007, generally and at 92, 95, 99-100, 102-105, 117-118, 151-153. See also Columbus Code §§ 19-114, 19-118(a). Ms. Ivey served as Plaintiff Columbus' representative during the hearing.
15. During the course of this litigation, on July 3, 2007, Plaintiff Columbus sent a letter to Defendant Expedia entitled “Notice of Assessment and Collection to Expedia.com.” See Smalheiser Depo., at 32- 33 and at Exhibit 61 thereto. Therein, based on the information contained in the United States District Court's first Remand Order, Plaintiff Columbus notified Defendant Expedia that $26,324.41 was owed in delinquent taxes. Notice at 1.
16. On July 13, 2007, Defendant Expedia responded to the Plaintiff's letter. See Smalheiser Depo., at 32-33 and at Exhibit 62, In its Response, Defendant Expedia did not allege any inaccuracy in the estimated amount, but rather, maintained its position that it was not subject to either the state enabling statute or the Columbus ordinances enacted pursuant thereto. Defendant Expedia said it was “... not an “Innkeeper' or hotel 'Operator' ... .” Response at p. 1. Defendant Expedia also stated that “Columbus's interpretation of its Ordinance violates the Commerce Clause of the United States Constitution as applied to Expedia.” Response at p. 1. 4
17. Defendant Expedia denies it sells hotel rooms. But, Expedia operates a website, www.expedia.com, which it refers to as a “point of sale.” See T. Jansen Depo., October 18, 2007, at 19-20. Expedia claims it is the number one seller of hotel moms online. See Plaintiff's Supp. App. Exhibit 45, August 9, 2002 Press Release;' Plaintiff's Supp. App. Exhibit 46, March 13, 2003 Press Release; Plaintiff's Supp. App. Exhibit 48, June 6, 2003 Press Release; Plaintiff's Supp. App. Exhibit 50, October 6, 2003 Press Release; Plaintiff's Supp. App. Exhibit 89, December 3, 2002 email.
18. Expedia contracts with hotels to develop “inventory,” i.e., hotel rooms, that it can sell and/or offer to the consuming public. 5 In Expedia's contracts, which are included in Plaintiff's Supp. Appendix as Exhibit 74, the hotels agree to provide this inventory of hotel rooms to Expedia at a discounted or wholesale rate, which discounted or wholesale rate by contract never is and cannot be disclosed to the online consumer. See Plaintiff's Supp. App., Exhibit 25, T. Jansen Depo., September 13, 2006, at 36. See also Plaintiff's Supp. App., Exhibit; .74, Tab 43 at COL-GA-ECOM00000463 (Contract between [Hotel] and Travelscape, a company owned by Expedia). 6
19. Pursuant to the contracts with the hotels, Expedia sets the price for the room on its website, and that price is increased over the wholesale rate. That increased price is disclosed to its customers, the online consumer, as.the room rate, and it is sometimes called the “gross rate” or the “rate price.” See Plaintiff's Supp. App., Exhibit 19, D, Andersen Depo., September 12, 2006, at 77, 92-93 (Expedia adds an amount to the discounted rate and “... that amount becomes the rate that is charged to the potential traveler, that is made available to the potential traveler, which is what I call the 'rate price'”). See also W. Booker Depo., September 27, 2006, at 22; D. Clark Depo., October 17, 2007, at 54 (“'Net rate' is the negotiated rate that we have with the hotels”); Plaintiff's Supp. App., Exhibit 32, T. Whelan Depo,, October 17, 2007, at 73 (“[T]he net rate is the amount that the hotel agrees to sell us the inventory. We then mark that up some percentage. The net rate, if everything, works as planned and there's no exceptions, would be the amount that would then be remitted to the hotel, plus the tax recovery fees.”)
20. In addition to the Room rate, Expedia separately discloses to its online customer an amount for “taxes and service fees.” See Plaintiff's Supp. App., Exhibit 26, T. Jansen Depo., October 18, 2007 at 36 (discussing Exhibit 24); Plaintiff's Supp. App., Exhibit 19, D. Andersen Depo., September 12, 2006 at 80-83; see Plaintiff's Supp. App. Exhibit 29, M. Reichartz Depo., November 7, 2007 at 70-76. See also K. Helms Affidavit, at ¶20, and Exhibit D to Affidavit. 7
21. With respect to the transactions at issue here, Defendant Expedia acts as the merchant of record in all of the arrangements involving the sale, booking and reservation of hotel rooms. See Plaintiff's Supp. App., Exhibit 18, D. Andersen Depo., August 23, 2006, at 41. The merchant of record is the entity that initiates the charges to the online consumer's credit card. See id.; T, Whelan Depo., October 17, 2007, at 83. When the online consumer accesses the website, indicates the intent to book a room, and provides his/her credit card information, a “Rate Details” screen appears. Thereon, Expedia shows and charges its customer's online credit card for the total room cost amount, which amount includes as one line, item the disclosed “Room rate” and as an additional separately disclosed line item the, amount for “Taxes and service fees.” See Plaintiff's Supp. App., Exhibit 29, M. Reichartz Depo., November 7, 2007, at 87-89; see Plaintiff's Supp. App., Exhibit 120, Expedia.com Rate Details. Expedia's customer receives a confirmation number, and upon check-in, the consumer (now an occupant) provides a credit card at the hotel only for incidentals. One of Expedia's witnesses described the process as follows:
When a consumer gets on our website to make a booking, they will choose a given reservation and attempt to make a booking. They will provide their credit card number .... [W]e will first check, make sure that there is availability at the hotel for the reservation being requested. The hotel will provide a confirmation number ... to pass along to the consumer. We will at that point charge the credit card for the rate price plus the tax recovery charge and service fees.
[S]ome time will pass. The consumer will get to the travel destination. The consumer will go to the front desk of the hotel, check in under their name using their confirmation number ... [The hotel will] stamp the card for incidentals. Hotel may request ID. The hotel will provide the consumer a key to the room, consumer will make their stay. Then sometime after the date of the stay, the hotel will send an invoice to us for the rate cost plus the tax plus the tax amount.
Plaintiff's Supp. App., Exhibit 19, D. Andersen Depo., September 12, 2006, at 77-78. See also Plaintiff's Supp. App., Exhibit 120, Expedia.com Rate Details; Plaintiff's Supp. App., Exhibit 21, W. Booker Depo., September 27, 2006, at 35 (customer's credit card is charged at point of sale when reservation is made). Mr. Nair testified that this transaction is the only one the online consumer enters into, and it is exclusively with Expedia. There is no consumer interaction with the hotel at the time the consumer is charged for the room. Expedia calculates, charges and collects all monies associated with this transaction.
22. The manner of doing business described above is called the “merchant model.” Through the merchant model, Expedia “charge[s] a customer for the reservation for the hotel room; and then we remit a wholesale rate, net rate/to the hotel as well as all applicable taxes and keep the margin or the markup.” See Plaintiff's Supp. App., Exhibit 25, T. Jansen Depo., September 13, 2006, at 36; Plaintiff's Supp. App., Exhibit 32, T. Whelan Depo., October 17, 2007, at 73.
Tax Rates. [Hotel] shall provide Companies with the tax rate applicable to the booking of Hotel Rooms. Companies agree that it shall collect all applicable taxes from its customers, and remit any taxes applicable to the Standard Room Charge for the booking of [Hotel] Hotel Rooms to the appropriate Participating Hotel.
See Plaintiff's Supp. App., Exhibit 74, Tab 22, [ ] Hotels Contract, at COL-GA-ECOM00G00306.
Tax Rates. [Hotel] shall provide Company [Expedia] with tax rate applicable to the booking of Hotel Rooms. Company [Expedia] agrees that it shall collect all applicable taxes from its customers, and remit any taxes applicable to the Standard Room Charge for the booking of [ ] Hotel Rooms to the appropriate Participating Hotel.
See Plaintiff's Supp. App., Exhibit 74, Tab 12, [ ] Hotels Contract, at COL-GA-ECOM00000193. 8
24. Upon receipt of an invoice from the hotels, Defendant Expedia states that it remits to the hotels monies for taxes based on the wholesale rate previously negotiated by Expedia and the hotels, an amount not disclosed to its customer. Expedia admits it does not remit taxes based on the “Room rate” that is disclosed to its customer. See Plaintiff's Supp. App., Exhibit 19, D. Andersen Depo., September 12, 2006, at 75; see Plaintiff's Supp. App., Exhibit 29, M. Reichartz Depo., November 7, 2007, at 71-76. If a hotel does not invoice Expedia for a room within a certain time period, usually 180 days, or if the hotel underbills Expedia, Defendant Expedia retains all of the monies paid by the guest (or that, portion for which it was not billed), including any monies Expedia collected for taxes. That amount is called “breakage” and is recognized by Expedia as revenue. See Plaintiff's Supp. App., Exhibit 32, T. Whelan Depo., October 17, 2007, at 85-92, 97-98; D. dark Depo., October 17, 2007, at 86-88, 123-124. 9
25. As set forth supra, there are two components of Defendant's “total room cost”: “Room rate” and “taxes and service fees.” The “Room rate” is a number presented to the public as a single line item, for example, $100, which is the sum of the undisclosed price negotiated and paid by Expedia with and to the hotel supplier plus Expedia's undisclosed markup. The “taxes and service fees” component is a single line item, for example, $17.58, which is the sum of all applicable taxes applied against the wholesale room cost, and Defendant's service fee, which is derived as a percentage of “Room rate.” The sum of the two components — “Room rate” plus “Taxes and service fees” — equals the “total room cost”, $117.58 in this example, which is immediately charged to the guest's credit card by Defendant. 10
26. The taxes charged to and collected from consumers and remitted to the hotels by Expedia for remittance to municipalities are based on the wholesale price and not the Room rate. See Plaintiff's Supp. App., Exhibit 29, M. Reichartz Depo., November 7, 2007, at 70-71; Plaintiff's Supp. App. Exhibit 106, City of Atlanta Deposition Ex. E-23; Plaintiff's Supp. App., Exhibit 18, D. Andersen Depo., August 23, 20.06, at. 25-26; Plaintiff's Supp. App., Exhibit 25, T.Jansen Depo.,. September 13, 2006, at 36. See also Plaintiff's Supp. App,, Exhibit 120, expedia.com Rate Details. In the above example (paragraph 25), in that the hotel occupancy tax and the state sales tax both are 7% of the lodging charge actually collected and/or the charge to the public, the taxes a hotel would collect and remit to Plaintiff Columbus and/or the state on a $100 room rate equals $14.00. Under Expedia's theory of the law and the facts, the taxes calculated, collected and charged by Expedia for the same $100 room rate booked and charged online would be less, as it would be based on the discounted or wholesale rate Expedia negotiates with the hotel.
27. Expedia denies that it collects taxes, arguing that it only collects money as “tax recovery charges” from the guest. Some time beginning in early 2003, Expedia began using the phrase “tax recovery charges” or “tax recovery fees” instead of “taxes.” However, Expedia continues to use the word “taxes” online in its receipt/notification to the guest. There was and still is no change with respect to the manner in which Expedia does business. See Plaintiff's Supp. App., Exhibit 25, T. Jansen Depo., September 13, 2006, at 18-21. Mr. Jansen testified:
A. “Recovery” is, in the case of tax recovery, specifically, that we collect a tax on behalf of the hotel; in the words, recover that tax for them. That's how it's a — that's what “recovery” means.
Q. Who do you collect that tax from?
A. For the hotel.
Q. For the hotel? From who?
A. From the customer.
Q. How about “remit” in the context of the Terms, Conditions, and Notices?
A. Send to or pay.
Id. at 18-19,
28. Many of Expedia's witnesses, including Mr. Nair, testified that, for every merchant model transaction in Columbus, Expedia charges and collects money for taxes and fees in addition to the room rate. 11
29. Expedia's Director of State and Local Tax, Douglas Andersen, acknowledged that Expedia collects from the consumer an amount of money to remit to the hotel for occupancy tax on behalf of the consumer.
Q. Is the hotel tax recovery charge the amount that Expedia or Hotels.com collects from the consumer to pay occupancy taxes to the hotel supplier on the customer's behalf?
A. That's right.
Plaintiff's Supp. App., Exhibit 19, D. Andersen Depo., September 12, 2006, at 100. See also id. at 82.
30. Expedia witness Ms. Clark testified:
Q. What are the tax recovery charges?
A. My understanding is that the tax recovery charge, at the time that a booking is made, that there is an estimate that the hotel is looking for so that they can remit their specific taxes to whatever taxing authority they have to, so I believe that's built in or baked in to the charge that we charge the customer.
D. Clark Depo., October 17, 2007, at 55. Similarly, Mr. Whelan testified:
A. I would say that total price is the net rate that we have negotiated with the hotel, plus a markup — sorry, and the net rate is, I believe, controlled by the hotel, plus a markup that we would contractually agree upon with a hotel, plus any fees that we might add, plus a tax-recovery fee, would equal the total price.
Q. And what's the tax recovery fee to recovery?
A. It's an estimate of what taxes that we think the hotelier will owe .the appropriate jurisdiction.
Q. And that includes hotel occupancy tax?
Plaintiff's Supp. App., Exhibit 32, T. Whelan Depo., October 17, 2007, at 70,
31. Expedia also books hotel rooms through what is known as the “agency model.” Under this model, which is not the subject of this action, Expedia does not have a pre-negotiated rate with the hotel suppliers. Expedia accesses the hotel room inventory through a global distribution system, similar to other travel agents, without acting as “merchant of record.” Under the agency model, Expedia does not receive any money from the guest. Instead, Expedia is compensated through payment of a commission by the hotel based on a percentage of the “Room rate” similar to the traditional travel agent business. See Plaintiff's Supp. App., Exhibit; 18, Andersen Depo., August 23, 2006, at 26; Plaintiff's Supp. App., Exhibit 25, T. Jansen Depo., September 13, 2006, at 35-36. Under the agency model, and as contrasted with the merchant model, the occupancy tax charged the guest by the hotel is based on the Room rate presented by Expedia and charged the guest by the hotel. See Plaintiff's Supp. App., Exhibit 19, D. Andersen Depo., September 12, 2006, at 74, 76; Plaintiff's Supp. App., Exhibit 29, M. Reichartz Depo., November 7, 2007, at 85-86. See also Plaintiff's Supp. App., Exhibit 19, D. Andersen Depo., September 12,2006, at 73-79.
32. Mr. Jansen likewise testified on this subject:
Q. What is the difference between the “agency hotel model” and the “Expedia special rate” or “merchant model”?
A. There's a few differences. The primary ones are the source by which we get the information to be able to provide the reservation services.
In an agency model, we source that information from our “global distribution system,” or “GDS,” and we typically arrange for the guarantee of the reservation through capturing the credit card.
But we don't take payment for it through the website. The payment is made directly from the customer to the hotel at the time of travel and we are paid a commission post travel.
Q. And who pays Expedia the commission?
A. The hotel.
Plaintiff's Supp. App., Exhibit 26, T. Jansen Depo., October 18, 2007, at 30-31.
33. In the merchant model, Expedia does not reveal to the hotel the amount it charges the consumer-occupant for the room. Expedia does not provide information, reports or data to the hotels that discloses, among other things: the dollar amount Expedia charges and collects from the consumer for a room, i.e., the “Room rate”; the dollar amount Expedia charges and collects from the consumer for taxes and/or fees; the occupancy tax rate; the sales or use tax rate; Expedia's calculations of the occupancy excise tax rate charged and collected from the consumer; or the percentage/amount of the taxes in relation to fees Expedia charges and collects from the consumer. See Web Services Agreement dated 12/1/03, between [Hotel] and Travelscape, Inc., Atlanta Deposition Exhibit E-15, at” 19. See also Plaintiff's Supp. App., Exhibit 74, at Tabs 16 and 22.
34. Similarly, Expedia never discloses to the consumer the exact amount of taxes Expedia has collected. Rather, the taxes are bundled with a service fee charge. Mr. Whelan testified:
Q. And on Exhibit No. 24, as displayed on this blow-up, the taxes and service fees are not segregated out, are they?
A. Sorry, repeat the question.
Q. Yes, sir. Can you tell from the taxes and service fee charges of $17.58 how much of that charge is taxes and how much of that is service fees?
Plaintiff's Supp. App., Exhibit 32, T. Whelan Depo., October 17, 2007, at 76-77. See also id. at 72-73.
Similarly, Mr. Jansen testified:
Q. So, looking back at plaintiff's Exhibit No. 24, where it says, “Taxes and Service Fees - $17.58,” is there anywhere on Expedia.com's website that informs the customer exactly what tax recovery charges that customer is paying?
A. The exact amount?
Plaintiff's Supp. App., Exhibit 26, T. Jansen Depo., October 18, 2007, at 36-37.
Again, similarly, Mr. Andersen testified:
Q. When a customer receives his bill, do you separate out the tax recovery charge, what you call a tax recovery charge, from the service fee charge, or do they just get one number?
A. They don't get a bill. They get a screen display of the total price of the reservation.
Q. And what does it show in terms of total price? Does it show the room rate?
A. It shows the rate, and then tax recovery charges and service fees is a bundled line item.
Q. One number?
A. That's right.
Q. So the consumer cannot determine how much his credit card is being charged for tax recovery and how much is being charged for service fee separately; is that correct?
A. That's correct.
Plaintiff's Supp. App., Exhibit 19, D. Andersen Depo., September 12, 2006, at 81, and id. at 121-22. See also Plaintiff's Supp. App., Exhibit 21, W. Booker Depo., September 27, 2006, at 20. Booker acknowledged that the tax recovery fees and the service, charges, are not segregated anywhere on the web page and that there is no place, on the website where the customers can find out exactly how much they were charged for occupancy taxes. Id. at 20. Mr. Nair testified consistently, and he acknowledged that, if asked by a consumer, Expedia would not disclose the wholesale rate, the actual amount of taxes calculated, charged or collected, or the actual, amount of Expedia's fees.
35. As the evidence referenced supra shows, with respect to the merchant model transactions at issue in this case, Defendant Expedia does not base its recovery of and/or remittance of any and all applicable taxes, including hotel occupancy taxes, on the amount charged the public, that is, on the amount charged the customer who books the room online and pays Expedia for that room. Rather, Expedia bases its recovery and/or remittance on the undisclosed wholesale amount it had previously negotiated with the hotel for the room.
36. In this action, Defendant Expedia has stated that it would continue to base any hotel occupancy tax recovery and remittance efforts on the previously negotiated, undisclosed amount Expedia paid the hotel for the room and that it would not base the collection and remittance of any tax monies on the room rate or room charge disclosed to the online consumer, absent a court order. See Plaintiff's Supp. App., Exhibit 31, H. Smalheiser Depo., October 24, 2007, at 54.
37. Defendant Expedia contends it is not subject to the state enabling statutes or, local ordinances that require the collection and remittance of hotel occupancy taxes and that require those collecting such taxes to register with and report to the governing municipality.
38. Defendant Expedia urges the amount represented by the “Room rate” includes, both the wholesale rate and a “mark-up” or “facilitation fee,” That is not the way it is disclosed to the public. The “Room rate” is presented as a single value line item amount, and Expedia separately includes another line item for “taxes and service fees.” Moreover, due to what Expedia calls “rate parity,” Expedia is by contract now prevented from charging the online consumer less for the room than the hotel can charge a walk-in or other consumer for the same room. Plaintiff's Supp. App., Exhibit 21, W. Booker Depo., September 27, 2006, at 18-21; Plaintiff's Supp. App., Exhibit 74, Tab 43 at COL-GA-ECOM00000463 (Contract between [Hotel] and Travelscape, a company owned by Expedia).
39. Expedia says it does not segregate its “taxes and service fees” line item into two line items — one for taxes and one for service fees — because it would make it possible for hotels and/or Expedia's competitors to “reverse engineer” the numbers and determine what wholesale rate Expedia had negotiated for the room. However, in response to questions during the hearing, Expedia's representative Mr. Hari Nair agreed that, if the tax was based on the disclosed single line item “Room rate” and disclosed as such, it would not be possible to do the reverse engineering about which Expedia was concerned. 12
40. In its responsive brief and during the hearing, Expedia argued that it has de-listed Columbus hotels from its website and no longer books rooms in Columbus, thus rendering this matter moot. The legal merit of this argument is discussed infra. The Court notes that Columbus presented evidence that Expedia's decision to de-list Columbus hotels was prompted by the hearing on the instant Motion and is not intended to be permanent. Mr. Ted Cobbs, manager of a local hotel, testified that he had been contacted by Ms. Christina Hooker, a market representative for Expedia responsible for Columbus, Georgia, and that she had informed him that the “de-listing” of Columbus hotels from Expedia's website was temporary and until the dispute generated by Plaintiff's lawsuit “blows over.” Mr. Nair said it was his opinion Columbus hotels could not be re-listed, but he also testified it was not his decision to make.
41. O.C.G.A. § 9-5-1 provides that equity, by a writ of injunction, may restrain the acts of a corporation which are illegal or contrary to equity and good conscience for which there is no adequate remedy at law. The issuance of an injunction rests in the sound discretion of the Court. O.C.G.A. § 9-5-8. . “A perpetual injunction shall be granted only after a hearing and upon a final decree.” O.C.G.A. § 9-5-10. . Equity may enjoin a party involving certain transactions beyond the limits of the state. O.C.G.A. § 9-5-11. .
42. This matter presents an actual and justiciable controversy between Plaintiff Columbus, Georgia and Defendant Expedia, Inc. Plaintiff Columbus claims that, under the facts here presented, the “Room rate” (and other comparable terms) disclosed to, charged to and paid by the consumer to Expedia is the “lodging charges actually collected” and the “charge to the public.” O.C.G.A. § 48-13-51(a)(1)(b) , and Columbus Ordinance § 19-111. Said another way, Plaintiff Columbus contends that hotel occupancy taxes must be collected, and then remitted to Plaintiff Columbus, based on the amount Defendant Expedia discloses to the consuming public as the charge for the room. Defendant Expedia rejects the Plaintiff's contention, urging that the “lodging charges actually collected” and the “charge to the public” should be construed under the facts here to mean the lesser amount Expedia has privately negotiated with hotels in Columbus and never disclosed to the public.
43. Plaintiff Columbus has no adequate remedy at law and has shown irreparable harm in the absence of the injunctive relief sought. The purpose of the taxes here at issue is to make funds available “... for the purposes of promoting, attracting, stimulating, and developing conventions and tourism in the counties and municipalities ... .” O.C.G.A. § 48-13-50(2). . '“Promoting, tourism, conventions, and trade shows' means planning, conducting, or participating in programs of information and publicity designed to attract or advertise tourism, conventions or trade shows.” O.C.G.A. § 48-13-50.2(2). .
Hotel occupancy taxes are collected every day, and they are remitted to Plaintiff Columbus on a monthly basis. Pursuant to O.C.G.A. § 48-13-51 and the decisions of public officials, portions of those funds are provided to the CCVB, the Convention Center and to the Sports Council to promote tourism, conventions and trade shows. To the extent hotel occupancy taxes are not collected and/or remitted in the proper amounts, and/or are not collected and remitted in a timely manner, Plaintiff Columbus has fewer dollars to provide the CCVB, Convention Center and Sports Council. The promotional efforts and the opportunities (conventions, trade shows, softball tournaments, etc.) to which those efforts are directed cannot go forward or are limited and lost forever. Money damages cannot put “heads in hotel beds”; it cannot replace the lost exposure and revenue that Plaintiff Columbus and its restaurants and other businesses might have received had the CCVB and the Sports Council been able to travel to and meet with and provide incentives for potential, tourism, conventions and trade show opportunities. A convention or a trade show or a softball tournament that is lost because it could not be pursued or because the funds to incentivize the event were not available cannot be recovered.
44. The Court has ruled contemporaneously herewith that the pre-suit estimate and assessment process directed by the Georgia Court of Appeals in City of Atlanta v. Hotels.com, L.P., 288 Ga.App. 391 (2007) , is a futile exercise, that such process is inadequate in any event to declare the law and provide Columbus with the remedy it seeks, and that Columbus has complied with any notice and assessment process in a timely manner. In light of those rulings, the Court concludes it has subject matter jurisdiction over this action.
45. The cardinal rule of statutory interpretation is to ascertain the legislative intent. Kemp v. City of Claxton, 269 Ga. 173, 175 (1998) . A statute must be read as a whole, and the spirit and intent of the legislation prevails over a literal meaning of the language. Id. at 175. A statute must be viewed so as to make all parts harmonize and to give a sensible and intelligent effect to each part. Vollrath v. Collins, 272 Ga. 601, 603 (2000) . The courts shall avoid ascribing to the General Assembly an intention to adopt a statute containing inconsistent provisions. Id. See also Footstar, Inc. v. Liberty Mutual Ins. Co., 281 Ga, 448, 450 (2006) (same as above). In one case, the Supreme Court of Georgia wrote:
In the construction of a statute the legislative intent must be determined from a consideration of it as a whole. City of Macon v. Georgia Power Co., 171 Ga. 40 (3), 155 S.E. 34 . The construction of language and words used in one part of the statute must be in the light of the legislative intent as found in the statute as a whole. In re Kilby Bank, 23 Pick. 93, 40 Mass. 93 . Where there is an apparent conflict between different sections of the same statute, the duty of a court is to reconcile them, if possible so as to make them consistent and harmonious with one another. Cason v. Harn, 161 Ga. 366 , 131 S.E. 88 . If they cannot be so reconciled the one which best conforms to the legislative intent must stand. State ex rel. Mitman v. Board of Commissioners, 94 Ohio St. 296 , 113 N.E. 831 . Where a particular expression in one part of a statute is not so extensive or large in its import as other expressions in the same statute, it must yield to the larger and more extensive expression, where the latter embodies the real intent of the legislature. Torrance v. McDougald, 12 Ga. 526 . See 2 Sutherland, Statutory Construction, 3 rd Ed. Sec. 4703, 04.
Williams v. Bear's Den, Inc., 214 Ga. 240, 242 (1958) .
46. The issue here is whether “lodging charges actually collected” and the “charge to the public” is the Room rate disclosed to, charged to and paid by Expedia's customer, that is, the eventual room occupant, or whether those phrases refer to the lesser privately negotiated and undisclosed amount the hotels charge Expedia pursuant to separate contracts. That issue is unsettled and of manifest importance to the parties; it is a question of law and therefore can only be decided by a court of law. See State Farm Mutual Automobile Ins. Co. v. Mabry, 274 Ga. 498, 501 (2001) , quoting and citing Allstate Ins. Co. v. Shuman, 163 Ga.App. 313 (1982) .
47. Defendant Expedia has unequivocally denied the application of both O.C.G.A. §§ 48-13-50 et seq., and Columbus Code §§ 19- 110 et seq., to it. Defendant Expedia denies it is an innkeeper or an operator, or an agent of either. It denies it has any obligation to register with Columbus, to report to Columbus, to collect any taxes, or to remit any taxes. Expedia denies.it is a collecting agent. It rejects Columbus' position that the hotel occupancy tax should be collected and remitted based on the amount charged the consumer-occupant for the room. Plaintiff Columbus seeks to enjoin Defendant Expedia to collect and remit the hotel occupancy tax based on the amount charged the guest as the “Room rate.”
48. O.C.G.A. § 24-4-24 codifies the doctrine of estoppel. A party is estopped from denying, among other things, judgments un-reversed, solemn admissions made in judicio, admissions upon which other parties have acted either to their own injury or to the benefit of the persons making the admissions, and circumstances where it would be more unjust to hear the truth than to forbear investigation. There also is the doctrine of judicial estoppel, which prevents a party from assuming a contrary position from one successfully taken in the same or a previous legal proceeding. See New Hampshire v. Maine, 532 U.S. 742 (2001) . The circumstances in which judicial estoppel may be invoked are not reducible to any general formulation of principle, but factors informing the decision include: whether a party's later position is clearly inconsistent with its earlier position; whether the party succeeded in persuading a court to accept the earlier position; whether the taking of the inconsistent position provides the party with an unfair advantage; whether the prior position was based on inadvertence or mistake; and whether the change in position is the result of a change in public policy or the facts. See id. See also Birmingham Steel Corp. v. Tennessee Valley Authority, 353 F.3d 1331 , 1341 n.6 (11 th Cir. 2003) (judicial estoppel is an equitable doctrine that protects the integrity of the judicial process by prohibiting parties from deliberately changing positions according to the exigencies of the moment; the inconsistent positions must have been made under oath and calculated to make a mockery of the judicial system); American National Bank of Jacksonville v. FDIC, 710 F.2d 1528, 1536 (11th Cir. 1983) (judicial estoppel applies to the calculated assertion of divergent sworn positions and is designed to prevent parties from making a mockery of justice by inconsistent pleadings).
49. The separation of powers doctrine fixes upon this Court — not the executive branch and not the parties — the duty, responsibility and power to construe and apply the law. Based in part on the separation of powers doctrine, and on the judiciary's responsibility to say what the law is, the administrative procedure Defendant Expedia urges is inadequate to resolve, as a legal matter, Expedia's status under the statutes and ordinances at issue, the meaning of “charge to the public” and “lodging charges actually collected” as used therein, and Defendant Expedia's constitutional challenges to the application of the statutes and ordinances to it. Only this Court — a Superior Court — can enter any injunction. See Marbury v. Madison, 1 Cranch 137, 2 L.Ed. 60 (1803) ; City of Rome v. Pilgrim, 246 Ga. 281 (1980) (administrative remedy inadequate because administrative zoning agencies and officials do not have jurisdiction or authority to determine constitutionality of an ordinance); Ga. Const, Art. VI, § 1 , ¶ 4 and Art. VI, § 4, ¶ 1. O.C.G.A. § 9-5-1 , et seq. The parties in this case are at odds over certain fundamental legal issues, i.e., the “charge to the public” and “lodging charges actually collected” upon which any excise tax should be based and calculated; the status of Expedia as an innkeeper or operator or agent of an innkeeper or operator; Expedia's status as a collecting agent; and Expedia's obligations, if any, to collect taxes and to register with and report and remit to Columbus and/or to provide information sufficient to allow Columbus to ensure the accuracy of the information it receives and the correctness of the amount of taxes remitted from Expedia or from the hotels with which it does business. These issues are in dispute and establish a real case or controversy between the parties. Whatever administrative procedure might be applicable to a determination of delinquent taxes, such procedure cannot interpret the statutes and ordinances here at issue, cannot bind any party, and cannot result in any injunction.
50. In the July 3, 2007 letter from Plaintiff Columbus to Defendant Expedia, which was based on the information contained in Judge Lawson's first Order remanding the action, Columbus has estimated that the amount of delinquent taxes in controversy is $26,342.41. The exact amount of any such taxes has not yet been established through any accounting, motion, or trial. However, this Court finds that the evidence in this record supports the determination that the amount in controversy, does not exceed $75,000.00. See also Defendant Expedia's Brief in Opposition at 41 (pointing out that the aggregate amount in controversy in two actions — against Expedia and against Hotels.com — is $48,000.00). Further, as will be evident herein, this Court's injunction will be directed to Expedia's future conduct in Columbus, Georgia, and Columbus, Georgia only, as alleged in Plaintiff's Complaint.
51. Defendant Expedia asserts that the legal analysis Plaintiff Columbus seeks, and any injunctive requirements based thereon, violate the Commerce Clause. See U.S. Const., Art. I, § 8, cl. 3. See also Quill Corp. v. North Dakota, 504 U.S. 298 (1992) . Quill involved the application of the dormant commerce clause on and the propriety of imposing sales taxes on goods shipped to North Dakota from an out of state supplier with no physical presence in North Dakota. Expedia's argument that Quill applies here extends Quill beyond its holding, misconstrues what Plaintiff Columbus seeks, and ignores the facts concerning what Defendant Expedia has contracted to do, and indeed does, i.e., collect all applicable taxes including hotel occupancy taxes.
Most importantly, Plaintiff Columbus does not seek to impose any new tax on Defendant Expedia. Indeed, as currently postured, Columbus is not seeking to tax anything Expedia does. Rather, Plaintiff Columbus asks that this Court construe state statutes and local ordinances to determine the basis (“charge to the public” and “lodging charges actually collected”) for the hotel occupancy taxes that Expedia has contracted to collect, and does collect, from consumers for hotels situated in Columbus, Georgia, for eventual remittance to Plaintiff Columbus. Columbus is merely seeking to enjoin Defendant Expedia to collect and remit the correct amount of taxes Expedia already collects. Columbus is not seeking to tax any service that Expedia separately discloses as such or any amount separately disclosed as being for any service. The hotel occupancy tax is imposed on the consumer. The hotels and Expedia merely collect it. To the extent Expedia argues there is some mark-up or service charge embedded in the Room rate it discloses to and charges the consumer, there is no disclosure of such service and there is no disclosed charge for such service, even though the ability to do that is entirely within the control of Defendant Expedia. Defendant's Commerce Clause argument, and its' argument about Expedia's “nexus” or lack thereof with Columbus, Georgia, simply miss the mark. 13
52. Even if the Commerce Clause was implicated, and the Court concludes it is not, the Court finds that Defendant Expedia does have a sufficient nexus with Columbus, Georgia. See Arco Building Systems, Inc. v. Chumley, 209 S.W.3d 63, 73 (Tenn.Ct.App. 2006) . “[A] substantial nexus may be established by activities carried on within the state by affiliates and independent contractors,' and the fact that the out of state-seller owns no real or personal property in the state and has no in- state employees or place of business is therefore not dispositive.” Id. (quoting America Online, Inc. v. Johnson, 2002 WL 1751434, *3 (Tenn.Ct.App. 2002)). See also Tyler Pipe Indus., Inc. v. Washington State Dept. of Revenue, 483 U.S. 232, 250 (1987) (“[T]he crucial factor governing nexus is whether the activities performed in this state on behalf of the taxpayer are significantly associated with the taxpayer's ability to establish and maintain a market in this state for its sales.”)(citations omitted).
Here, Expedia contracts with the national hotel chains and local hotels for the right to book, sell and/or market the rights to occupy hotel rooms in Columbus. Expedia advertises the booking and sale of hotel rooms in Columbus, and it in fact books and sells those rooms, or the right to them. Expedia collects money that is contractually described to be money for, and is represented to consumers as being for, hotel occupancy taxes in Columbus, money which is forwarded to local hotels for remittance to Plaintiff Columbus. Columbus' efforts to have the Court enjoin Defendant Expedia to collect and remit the hotel occupancy tax based upon the Room rate Expedia discloses to the consumer occupant is limited to Expedia's merchant model — not its agency model — and therefore is completely consistent with the taxable basis it applies to the occupancy of hotel rooms booked and/or sold-in Columbus other than through Expedia. Columbus does not discriminate against Expedia. Rather, it seeks to have Expedia's collection of taxes be based upon the same “charge to the public” as is done in every other transaction. 14
53. Plaintiff Columbus' efforts here do not run afoul of the “uniformity” clause of the Georgia Constitution, Ga. Const., art. 7, § 1 , ¶ 3, which is distinct from Georgia's equal protection clause. Georgia cases interpreting the uniformity clause hold that “all kinds of property of the same class not absolutely exempt must be taxed alike, using the same standard of valuation, equally with other taxable property of the same class, and co-extensively with the territory to which it applies...” Buckler v. DeKalb County Bd. of Tax Assessors, 263 Ga. App. 305, 307 (2003) . “The constitutional provision respecting uniformity of taxation refers to subjects of taxation other than property and means only that if one kind of business, privilege, franchise or right is taxed, the tax shall be uniform upon all of those who engage in that business.” Lake Lanier Theatres v. Hall County, 229 Ga. 54, 55 (1972) . Here, Expedia makes no colorable claim that Columbus is seeking to use one measure of taxes for its transactions and a different measure for everyone else. In fact, that is the opposite of what Columbus is seeking to do here. As Columbus has previously set forth in great detail, the “merchant model” is the only method of selling hotel rooms in which taxes are currently being collected based on a measure other than the full room rate paid by the customer. Moreover, Columbus has brought suit against two other online travel companies.
54. Plaintiff Columbus seeks the entry of a permanent injunction requiring Expedia to do certain things. Such an order would be a mandatory injunction. See Glynn County v. Waters, 268 Ga. 500 (1997) . In State Farm Mutual Ins. Co. v. Mabry, 274 Ga. 498 (2001) , quoting Prime Bank v. Galler, 263 Ga. 286 (1993) , the Supreme Court wrote:
“Equitable relief is generally a matter within the sound discretion of the trial court. The action of the trial court should be sustained on review where such discretion has not been abused. However, in determining whether there has been an abuse of discretion, the conveniences of the parties cannot be ignored. ...A mandatory injunction is an extraordinary remedy, one of the most powerful a court can issue. It is for that reason called the “strong arm of equity.” “'There is no power the exercise of which is more delicate, which requires a greater caution, deliberation, and sound discretion, or is more dangerous in a doubtful case, than the issuing of an injunction.'” It should be crafted in a manner that is the least oppressive to the defendant while still protecting the valuable rights of the plaintiff.
Mabry, 274 Ga. at 509-510.
55. There is evidence supporting Plaintiff's position that Expedia will at some point resume the practice of providing hotel rooms in Columbus, Georgia to the public on its website. First, one manager of a hotel testified that he was told by an Expedia employee that the measure was temporary. Second, by removing all Columbus hotels from its website, Expedia has acted in a manner inconsistent with its contracts with the hotels. See generally Plaintiff's Supp. App., Exhibit 74. Those hotels contracted for the right to be listed on and available for sale through the Expedia website, and the unilateral actions taken by Expedia do not seem to be in accord with the termination provisions of the contracts.
Third, Expedia's corporate representative conceded that Expedia may have already booked rooms in Columbus for periods in the future, and thus there may be consumers who have not yet stayed in such rooms. Pursuant to the Columbus Code, the tax is not due until the month following the actual occupancy of the room. Therefore, the action is obviously not moot with respect to taxes that will be owed in the future in connection with bookings that have already been made. Moreover, given that Expedia waits for hotels to bill it for the taxes it has already collected, it also stands to reason that Expedia currently possesses tax dollars due to Columbus where no billing from a hotel has yet been received. When questioned, Expedia's corporate representative could not say definitely whether or not Expedia currently held money for hotel rooms due to be occupied in Columbus in the future.
Fourth, as displayed during the hearing, when a consumer searches Expedia's website for a hotel room in Columbus, Georgia, though Expedia does not list hotels in Columbus, Georgia, and instead lists hotels across the Chattahoochee River in Phenix City, Alabama, Expedia does provide a link to one of its sister companies, Hotwire, that does list Columbus hotels. Thus, Expedia continues to market and enable consumers to book and occupy hotel rooms in Columbus, Georgia.
Expedia has been engaging in an ongoing day to day practice for years, abruptly stopping a week before; the hearing. Based on the testimony, it is a fair inference that Expedia took such action so as to create a basis for its mootness argument. Further based on the testimony, it is not unlikely that Expedia will list Columbus hotels in its website in the future. Where activities are capable of repetition, a request for injunctive relief is not mooted. A case is not subject to the doctrine of mootness when the conduct giving rise to the injunction being sought is capable of repetition yet evading review. See Collins v. Lombard Corp., 270 Ga. 120 (1998) . See also city of Mesquite v. Aladdin's Castle, Inc., 455 U.S. 283, 289 (1981) (“It is well settled that a defendant's voluntary cessation of a challenged practice does not deprive a federal court of its power to determine the legality of the practice.”); United States v. W.T. Grant Co., 345 U.S. 629, 632 (1953) (Mere voluntary, cessation of allegedly illegal conduct does not moot a case; if it did, the courts would be compelled to leave “[t]he defendant [ ] free to return to his old ways.”). See also Harris v. Gilmore, 265 Ga.App. 841 (2004) ; Hirsh v. City of Atlanta, 261 Ga. 22, 25 (1991) (holding that injunctive relief is appropriate against persons “who have persistently and repeatedly engaged in unlawful conduct [in the jurisdiction imposing the injunction]”).
In Harris vs. Gilmore, the Georgia Court of Appeals expressly upheld the right of a trial court to issue a permanent injunction even where a defendant professed to have voluntarily ceased the illegal conduct at issue. The Harris case concerned allegations of illegal use of city funds for charitable purposes. Despite the defendant's contention that he had voluntarily ceased the illegal practice, the Court of Appeals upheld the award of a permanent injunction against the practice:
Because Harris “willingly volunteered” to discontinue the practice, and injunctive relief was not specifically requested by Gilmore, Harris argues that the trial court's issuance of a permanent injunction was “unnecessary.” However, he does not argue, nor do we find, that the Court's prohibition against an improper practice, based on Harris's admission regarding the same, was “contrary to the law” or that it constituted a manifest abuse of discretion by the trial court. Accordingly, the trial court did not err in granting the injunction.
Harris, 265 Ga. App. at 843 .
56. Finally, Expedia relies on Sears, Roebuck & Co. v. Parsons, 260 Ga. 824 (1991) , for the proposition that governmental bodies cannot employ counsel on a contingent fee basis in any case that relates to tax. In Sears, Roebuck, the Georgia Supreme Court held that a taxing authority could not enter into a contract with an appraiser whereby the appraiser would be paid a percentage of the taxes paid based on its appraisals. See Sears, Roebuck, 260 Ga. at 687 . The Court specifically recognized the conflict of interest that arose as a result of the contractual relationship; namely, that the appraiser as fact finder would have an incentive to overvalue property. See id.
The Court said nothing in its four paragraph opinion about the legality of contingent-fee agreements with attorneys. Attorneys serve not as fact finders, but as advocates. In this case, Columbus has hired counsel to represent it in litigation, and public policy favors a litigant's right to the counsel of its choice.
Sears, Roebuck is explicitly based on public policy grounds with a disclaimer that the legislature, not the courts, has the ultimate authority to declare public policy. See Sears, Roebuck, 260 Ga. at 824 n.2 (“Of course, the legislature is empowered to declare public policy contrary to what we have expressed here.”); Here, the Georgia General Assembly has enacted O.C.G.A. § 48-13-53 , which gives the cities broad discretion to determine how to administer and enforce hotel taxes, and Columbus has hired counsel to assist it in enforcing its hotel tax laws. That routine action cannot be violative of public policy.
As the findings and conclusions set forth above show, the parties here have a fundamental disagreement as to the meaning of certain state statutes and local Columbus, Georgia ordinances and the applicability of those statutes and ordinances to Defendant Expedia and its business practices. The volume of materials submitted and the vehemence with which the parties disagree cannot obscure the relative simplicity of the issues: (1) is Expedia collecting taxes or collecting money earmarked for taxes; (2) if Expedia is collecting taxes or money, pursuant to what authority is it doing so, and is it doing so lawfully; (3) if Expedia is collecting taxes or money pursuant to lawful authority, is Expedia basing that collection on the amount required by statute and ordinance, i.e., the “lodging charges actually collected” and the “charge to the public”; and (4) if Expedia is collecting taxes or money pursuant to lawful authority, but not basing it on the amount required by statute and ordinance, what must Expedia do in the future. 15
Pursuant to the statutes and ordinances here at issue, persons who occupy hotel rooms are liable for hotel occupancy taxes to Plaintiff Columbus. See Q.C.G.A, § 48-13-51(a) (1)(B) (ii) (any tax levied pursuant to this Code Section is imposed upon every person who is a hotel guest). See also Columbus Code § 19-111 (imposing a 7% hotel occupancy tax pursuant to O.C.G.A. § 48-13-51). . Pursuant to these and the adjoining statutes and ordinances that relate to the same subject matter, hotels, innkeepers and/or operators must collect the appropriate hotel occupancy taxes and, no later than 20 days after of the end of the month within which the occupation occurred, remit those taxes to Plaintiff Columbus along with, certain documentary information. See O.C.G.A. § 48-13-53.2(a) ; Columbus Code § 19-115. According to the statutes and ordinances, if the hotel collected a greater amount of hotel occupancy taxes than was due to be collected, the hotel is required to remit that greater amount to Plaintiff Columbus. See O.C.G.A. § 48-13- 51(a) (1)(B) (i) (if the amount collected from the hotel guest is in excess of the total amount that should have been collected, the total amount collected must be remitted).
The hotels are, in practical effect and in accordance with the governing statutes and ordinances, collecting agents for the purposes of collecting and remitting hotel occupancy taxes. See O.C.G.A. § 48-13-52 (authorizing not just “hotels”, “innkeepers” or “operators”, but “person[s]”, a term broader than the others, to collect taxes and to retain a percentage of the tax due and accounted for so long as the amount due is not delinquent at the time of payment); O.C.G.A. § 48-13-59(a) (recognizing the use of agents to collect taxes and recognizing penalties for failure or refusal to collect taxes); Columbus Code § 19-115(c) (operators collecting taxes shall be allowed a percentage of the tax due and paid if not delinquent). See also Teachers' Retirement System of Georgia, et. al v. City of Atlanta, 249 Ga. 196 (1982) (it is the intent of the ordinance to collect taxes from persons occupying the room; the owner or operator acts only as a collecting agent); Independent Publishing Co. v. Hawes, 119 Ga. App. 858, 865 (1969) (in the sales or use tax situation, the ultimate liability is laid upon the purchaser, not the seller, “... whose role is merely that of collecting agent for the state. ... 'To make the distributor the tax collector for the State is a familiar and sanctioned device. Monamotor Oil Co. v. Johnson, 292 U.S. 86, 93-94 , .' General Trading Co, v. Tax Commission, 322 U.S. 335, 338 ” ). The Court concludes that the statutes and ordinances do not intend to create, nor do they create, the typical “principal and agent” relationship. Rather, the term “collecting agent” describes the actor who is engaged in achieving a task, in this case, the collecting and remitting of hotel occupancy taxes.
When rooms are booked through Expedia, however, the hotels do not interact with the eventual occupant of the room for the purpose of collecting the amount due for the room or the amount due in hotel occupancy taxes, Instead, pursuant to its business model and its contracts with hotels, Expedia charges the online consumer for the room and for all applicable taxes arid fees.
Because Expedia contends it does not sell hotel rooms, does not furnish hotel rooms for value, and is not an innkeeper or operator, and because Expedia has not registered with and has not applied for or received a business license from Plaintiff Columbus, Expedia contends that it is not subject to the authority of Plaintiff and contends that, in any event, no portion of the money it charges to and receives from online consumers and hotel room occupants is “taxes,” Expedia contends some of the money it charges and receives is a “tax recovery charge,” but not “taxes.” Expedia concedes, however, that it sends money to the hotels and that some of that money “becomes” money that is remitted to Plaintiff Columbus for hotel occupancy taxes.
Expedia has stepped into the shoes of the hotels as the collecting agent for hotel occupancy taxes, and it is doing so pursuant to the terms of its contracts. Expedia points to nothing in the statues or ordinances that prevents such activities. That Expedia's contracts conclusorily recite it is an “independent contractor” does not mean Expedia has not stepped into the shoes of the hotels for the purpose of collecting taxes. See Independent Publishing Co. v. Hawes, supra. Expedia's contracts expressly place that responsibility solely and exclusively on Expedia, Indeed, in that the Court concludes Expedia is “collecting taxes,” to be acting lawfully at all, Expedia must be collecting taxes in lieu of the hotels as the collecting agent. Expedia sets the price for the room and sets the amount for taxes and fees, Expedia charges the online consumer's credit card-for the “room rate” and for “taxes and service fees.” Expedia provides the online consumer with the information that relieves the consumer from further liability for the hotel occupancy taxes. Expedia forwards money to the hotels that is earmarked for and is remitted to Plaintiff Columbus as hotel occupancy tax money. By any other name, some of the money Expedia is charging to the online consumer's credit card and eventually forwarding on to the hotels for eventual remittance to Plaintiff Columbus is money for taxes. Under the facts and circumstances here, to hold that the money Expedia is collecting is not in some portion “taxes” but rather is a “tax recovery charge” ignores the reality of the situation, ignores the actual facts, and undermines the intent of the statutes and ordinances at issue.
In that Expedia undertakes, by contract, to collect all applicable taxes, the question becomes, upon what amount should the applicable taxes be based? O.C.G.A. § 48-13-51(a)(1)(B)(i) provides that it shall be based on the “lodging charges actually collected.” O.C.G.A. § 48-13-51(a)(1)(A) provides that the ordinances of any municipality imposing hotel occupancy taxes pursuant to the state enabling act must be read consistently with the enabling act. Thus, “charge to the public,” as contained in Columbus Code § 19-111, must mean the same thing as “'lodging charges actually collected.” Applying the canons of statutory construction to these phrases, including but not limited to giving the words and phrases their plain meaning, reading the provisions of the state enabling statute in pari materia and the Columbus Code in pari materia, and reading the state enabling statute and the Columbus Code consistently, it is plain that both of these phrases intend that any hotel occupancy tax be based upon the amount the consumer or occupant pays for the room. That amount is the Room rate the Consumer pays Expedia for the room, not the wholesale amount Expedia negotiates with a hotel. That Room rate amount is the charge to the public. That Room rate amount is the lodging charge actually collected. See City of Buchanan v. Pope, 222 Ga. App. 716, 717 (1996) (the words in a plain, unambiguous statute should be given; their plain and ordinary meaning; each part of a statute should be given meanings and any constructions which render a portion of a statute mere surplusage should be avoided; and statutes in a given scheme and all statutes related to the same subject matter should be construed in relation to one another, that is, in pari materia). The above-enunciated principles apply in the interpretation of city or county ordinances as well as statutes. Id. at 717 (citing Hogan v. DeKalb County, 196 Ga.App. 728 (1990) ).
It is undisputed that Expedia's position in this case is that it does not and need not collect taxes on the amount disclosed to the public as the Room rate. Expedia argues instead that it collects taxes (as the Court has found) on an amount undisclosed to the public but negotiated with the hotel, an amount that is lesser than the amount disclosed to the public as the Room rate. In short, Expedia contends hotel occupancy taxes are based upon the amount the hotel receives through the wholesale transaction, not the amount the customer pays on the retail transaction. Expedia's position is inconsistent with the statutes and ordinances here at issue.
Expedia urges that there is a “mark-up” or “facilitation fee” incorporated in the “Room rate,” and Expedia further urges that such mark-up cannot be taxed. But, Expedia does not disclose, and in fact absolutely forbids, the disclosure of the amount of any such “mark-up.” First, any “mark up” over the wholesale price cannot and does not change the price disclosed to the consumer for the room, and that price is the amount on which hotel occupancy taxes must be based by” statute and ordinance. Second, even if this “mark up” is for some service, there is no evidence as to what that service is and how, if at all, it is different from the service for which Expedia charges the consumer a fee in its “taxes and service fees.” Where an out-of-state vendor furnishes services to a taxpayer incidental to the sale of a product, here a hotel room, and no additional charge is made for the services as to constitute a separate sale of services, the services are included in the sales price or cost price or, in this instance, the charge to the public and the lodging charge actually collected for the purpose of the hotel occupancy tax. Cf Colonial Pipeline Go. v. Undercofler, 115 Ga.App. 58 (1967) . Colonial Pipeline involved the application of Georgia's use tax. “To the extent that the steel companies assumed the expense of transportation of the property without charging the taxpayer an additional amount for delivery, the service of delivery was merely a part of the sale of the property and an element of cost price.” Id. at 61 (emphasis added).
Expedia charges the taxpayer — the online consumer — an amount for the “Room rate”, and a separate amount for “Taxes and service fees.” See O.C.G.A. § 48-13-51(a)(1)(B)(ii) (the tax shall be a debt of the person obtaining the room). The amount for “Room rate” is not differentiated in any way as “$X for the room” and “$Y: for facilitation fee.” Indeed, by contract, such differentiation to the online consumer — the taxpayer — is expressly forbidden. By building into the amount for the room an amount for a facilitation fee, if any, Defendant Expedia foregoes any right or basis upon which to urge any lesser amount than the fully disclosed “Room rate” as the amount upon which the hotel occupancy can be calculated. 16
Consistently, in S&R Hotels, LLC v. Calcasiey Parish School Board Sales & Use Tax Department et al., 945 So.2 s 875 (La. App. 3d Cir. 2006), the court found that a $7.50 charge for in-room coffee service, breakfast and club room beverages was taxable under the 3% occupancy tax statute. The Hotel generally charged between $69 and $99 per room. The room charge included in-room coffee service, club room beverages and a continental breakfast. The hotel determined that these amenities made up $7.50 of the room charge and did not collect the 3% occupancy tax on the $7.50. The court noted that a guest could not opt out of me $7/50 Charge and that all guests are charged for these amenities. As the occupancy taxis levied against the gross price of the hotel room, the tax is to be collected on the entire amount charged by the hotel for occupying the room.
In Helmsley Enterprises, Inc. v. Tax Appeals Tribunal of the State of New York, 187 A.D,2d 64 (3d App. Div. N.Y. 1993) , the Court of Appeals in New York examined a hotel sales tax issue. Under New York law, a hotel is required to pay sales tax on all items of purchase except for a limited exception occurring when they are purchased for “resale” to the public. The hotel contended that it did not owe sales taxes for hotel guest room furniture, towels, sheets, soap, and other items, claiming that these items were purchased for resale. The hotel contended that, in, effect, the charge to consumers for a room could he split such that there was a charge for the room and separate charges for the amenities which were resold to consumers. The local taxing authority disagreed.
On appeal, the New York Appellate Court concluded that a hotel room cannot be split between the room and the amenities that are provided as part of the room. In doing so, the Court found that “the provision of furniture, furnishings, and consumables in guest rooms is inseparably connected to petitioner's essential business of serving the comfort and convenience of guests and, therefore, furnishing those items cannot be considered separate transactions for sales tax purposes.” Id. (internal quotations omitted).
The findings of the Helmsley Court are in accord with a number of other cases throughout the country which have all concluded in varying contexts that services provided by a hotel cannot be separated from the room cost charged to the consumer. See, e.g., Greensburg Motel Assoc, LP v. Indiana Depart. of State Revenue, 629 N.E.2d 1302 (1994) (utility service); Sine v. State Tax Commission, 390 P.2d 130 (Utah 1964)(blankets, washrags, soap, etc.); Telerent-Leasing Corp. v. High, 174 S.E.2d 11 (N.C.App. 1970) (television sets); Kentucky Board of Tax Appeals v. Brown Hotel Co., 528 S.W.2d 715 (Ky. 1975) (glassware, linens, etc.); Florida Hotel and Motel Assoc, Inc. v. State of Florida, 635 So.2d 1044 (Fla.App.1994) (towels, sheets, stationary, etc.); Adamar of New Jersey v. Division of Taxation, 17 NJ. Tax 80 (1997) (soap, shampoo, shower caps, etc.).
Significant policy considerations support the wisdom of such a rule. If collecting agents are able covertly to dissemble the transaction for purposes of taxation, what is to prevent them from asserting that the “Room rate” is made up of a, token payment for the use of the room and a greater amount for the use of elevators and cleaning services and parking lot security, all so as to collect, hotel occupancy taxes on only the “use of the room” but not on the elevators and other services.
In a case similar to the one before this Court, another potential abuse was discussed:
What makes far more sense is that the drafters intended the room occupant to pay tax on the amount she actually paid. A contrary holding, after all, would open up a potentially gaping loophole: a hotel operator could simply incorporate a shell entity or make some other similar arrangement, rent the hotel rooms to that entity for a nominal amount, and then re-rent the rooms to consumers, who would be taxed only on the nominal sum paid by the side entity to the operator. This tactic — permissible under the continuation of Defendants' logic — would place the hotel operator at a competitive advantage, because it would either increase her profit margins or lower the;cost of her rooms relative to her competitors. However, it would at the same time almost entirely eviscerate the Ordinance, and it cannot be what the drafters had in mind. See Environmental Protection Agency v. Pollution Control Bd., 426 N.E.2d 1264, 1267, 100 111. App. 3d 735, 740 (111. App. Ct. 1981).
City of Fairview Heights v. Orbitz, Inc., et. al, Slip Op., No. 05- CV-840-DRH (SIX 111, July 12,2006) .
Based on all of the above, and based on the record in this case, the motion and responses of the parties, and the hearing thereon, this Court finds and decrees that Expedia is a collecting agent for the purposes of the hotel occupancy tax and that the Room rate disclosed to the consumer and eventual occupant of the hotel room is and should be the “lodging charge actually collected” and the “charge to the public” upon which the hotel occupancy tax must be based. 17
Therefore, the Court GRANTS Plaintiff's Motion for Injunctive Relief. The Court has decided the merits, that is, that collecting agents must base hotel occupancy taxes for hotel rooms in Columbus, Georgia, on the charge to the public as described as Room rate or any other comparable term, in Plaintiff Columbus' favor, It clearly is in the public's interest that Plaintiff Columbus obtain the use of the tax monies here at issue. The Georgia Legislature has expressed that the “[f]unds be made available for the purposes of promoting, attracting, stimulating, and developing conventions and tourism and for the provision of other local government services.” O.C.G.A. § 48-13-50(2). . Absent appropriate funding, Plaintiff Columbus, and its CCVB, Sports Council, and Convention and Trade Center have lost and will continue to lose opportunities to accomplish these stated purposes, and those opportunities cannot be remedied by money damages, at least in part because there is.no way to establish which “conventions,'trade shows or other events would have chosen to come to Columbus or to establish the total revenues such events would have generated for local businesses. As to this future stream of revenue, if this injunction is not issued, Columbus will be deprived of funds which it otherwise is required by statute to use to promote tourism, which deprivation will result in lost future events.
Pursuant to O.C.G.A. § 9-5-10 , the Court enters the following final decree and injunction. Henceforth, for hotel rooms booked for occupancy in Columbus, Georgia, using its merchant model, Defendant Expedia IS ENJOINED to collect the hotel occupancy tax based on the total amount it discloses to the consumer as the room rate, room charge or other comparable term. The taxes so collected shall be remitted to Plaintiff Columbus either directly by Expedia or through the hotels as currently is done, on or before the twentieth day of the month following each monthly period. With respect to such bookings, Expedia shall separately disclose to the consumer both the Room rate and all hotel occupancy taxes such that the consumer will have the information contemplated by law that serves as a credit against the tax imposed. That information shall be made available to the consumer either on-line at the time of the booking or at the hotel upon occupation of the room, or both. Further, Defendant Expedia shall maintain information as to the number of hotel rooms booked through Expedia and eventually occupied in Columbus, the. charge to the public (the Room rate) for each such room, and the hotel occupancy taxes collected and remitted, and Expedia shall provide that information to Plaintiff Columbus either through the hotels as it currently does or by reporting such information directly to Columbus, in a timely fashion. This Court retains jurisdiction over this matter for purposes of enforcing, modifying or vacating this INJUNCTION upon proper application.
It is SO ORDERED, this 22 day of September, 2008.
Superior Court Judge
In its second Notice of Removal, and in support of its argument that federal jurisdiction existed, Defendant Expedia argued to the federal court that Plaintiff Columbus sought a “... permanent injunction ... [,]” and submitted evidence as to the value of an injunction over the next 5 years.
Plaintiff did not move or urge at the hearing that Expedia was an innkeeper or operator. Defendant Expedia did not move on summary judgment or otherwise for a determination that it was not. The Court need not decide that issue for the purposes of this injunction, and the Court has no current motion before it on that subject.
Testimony, documents and other materials will be identified by reference to any Appendices and Exhibit Numbers, where applicable, and/or to the Transcript or other source when not included in any Appendix.
In its responsive letter, Expedia proposed that Columbus travel to Washington state for an “... on-site inspection of its books and records as they are maintained in the ordinary course of business.” Response at 9. That proposal was conditioned upon Plaintiff's agreement that the request was subject to Columbus Code § 19-118(d) and was toward the view of convincing Columbus “... that Expedia is not a hotel Operator, cannot be required to register to collect the Tax, is not liable for paying or accounting for the Tax and is not liable for the amount listed in the proposed assessment.” Response at 9. Notwithstanding its proposal for an on-site inspection of books and records, the Court notes that in its Answer to the Complaint at paragraph 52, Expedia stated: “Because Expedia is not required to register, maintain records or file returns, Expedia admits it does not do so.” In this case, Expedia's proposal is by its terms not to determine the accuracy of any assessment done by the Plaintiff Columbus, or to narrow in any sense the issue in dispute, but, rather, is directed toward convincing Plaintiff Columbus that Defendant Expedia is beyond the reach of the municipality's ordinances.
See Plaintiff's App., Exhibit 3, Plaintiff's Supp. App., Exhibit 78 (Expedia, Inc. Form 10-K dated December 31, 2002); Plaintiff's Supp. App., Exhibit 76 (Expedia,. Inc. Form 10-K dated December 31, 2001); Plaintiff's Supp. App., Exhibit 80 (Expedia, Inc. Form 10-Q dated March 31, 2003); Plaintiff's Supp. App., Exhibit 82 (Expedia, Inc. Form 10-Q dated September 30, 2005); Plaintiff's Supp. App., Exhibit 83 (Expedia, Inc. Form 10-K dated December 31, 2006); Plaintiff's Supp. App., Exhibit 84 (Expedia, Inc. Form 10-Q dated June 30, 2007); Plaintiff's Supp. App., Exhibit 85 (Expedia, Inc. Form 10-K dated December 31, 2007). See also Plaintiff's Supp. App., Exhibit 32, T. Whelan Depo., October 17, 2007, at 75-76; Plaintiff's Supp. App., Exhibit 20, B. Beardon Depo., September 27, 2006, at 19; Plaintiff's Supp. App., Exhibit 30, D. Schiaffino Depo., September 29, 2006, at 22; Plaintiff's Supp. App., Exhibit 19, D. Andersen Depo., September 12, 2006, at 86-87.
The Court omits or substitutes the word “hotel” for the names of the hotels for confidentiality reasons. The discounted or wholesale rate' referenced in this paragraph also has been referred to as the “net rate,” “negotiated fate,” and “rate cost.” See Plaintiff's Supp. App., Exhibit 29, M. Reichartz Depo., November 7, 2007, at 47; see Plaintiff's Supp. App., Exhibit 22, D. Clark Depo., October 17, 2007, at 53-54; see Plaintiff's Supp. App., Exhibit 21, W. Booker Depo., October 27, 2007, at 65; see Plaintiff's Supp. App., Exhibit 18, D.Andersen Depo., August 23, 2006, at 38-39. The Court will use herein the term “discounted rate” or “wholesale rate.”
Notwithstanding these disclosures to the consumer and eventual occupant of the room, Defendant Expedia denies it collects taxes, stating that it collects monies as tax recovery charges. The Court will address that issue infra.
Some of these contracts between Defendant Expedia and the hotels also reveal the narrow scope of the issue that is at the heart of this case between Plaintiff Columbus and Defendant Expedia, in that they set out the conflicting views of Defendant Expedia and the hotels concerning the amount on which applicable hotel occupancy or excise taxes should be based. Plaintiff Columbus' position is similar to that expressed by some of the hotels. One such contract provides:
Taxes. ... Web Service Provider acknowledges that [Hotel] and Participating Hotels believe that Occupancy Tax may be due and payable on the Gross margin portion of the Gross Rate in some or all jurisdictions, and [Hotel] and each Participating Hotel acknowledge that Web Service Provider believes that Occupancy Taxes will not be due or payable on the Gross Margin portion of the Gross Rate in some or all jurisdictions.
See Plaintiff's Supp. App., Exhibit 74, Tab 43, [ ] Hotels Contract, at COL-GA-ECOM00000467.
Plaintiff Columbus also avers that Defendant Expedia is in reality collecting taxes on the Room rate that it is not remitting. That issue is not before the Court today, as it concerns the recovery of past taxes. However, the Court notes, that Expedia's representative testified that the bundled “taxes and fees” charged the customer are virtually always sufficient to cover all applicable taxes on the quoted room rate.
See Plaintiff's Supp. App., Exhibit 120; K. Helms Depo., August 12, 2008, at 52-53, and exhibits thereto. See also Plaintiff's Supp. App., Exhibit 120, Expedia.com Rate Details; Plaintiff's Supp. App., Exhibit 25, T. Jansen Depo., September 13, 2006, at 36; Plaintiff's Supp. App., Exhibit 19, D. Andersen Depo., September 12, 2006, at 77-78, 80-83; Exhibit 28, B.Regan Depo., October 4, 2006, at 40; Plaintiff's Supp. App. Exhibit 29, M. Reichartz Depo., November 7, 2007, at 70-71 (the tax component relates to hotel occupancy tax and is calculated by applying the tax rate to the “net rate” which is the amount the hotel charges Expedia for the room); Plaintiff's Supp. App. Exhibit 32, T. Whelan Depo., October 17, 2007, at 70-72. See also id. at 77 (“I would say that the amount we charge the customer is composed of a net rate that the hotel supplies, times a markup percentage that is contractually agreed, plus the tax recovery fee, plus any other fees that We might assess, equals the total price.”)
Plaintiff's Supp. App., Exhibit 27, C. Mandarino Depo., October 4, 2006, at 33-34; Plaintiff's Supp. App. Exhibit 33, M. Wung Depo., September 13, 2006, at 67; Plaintiff's Supp. App. Exhibit 23, B. Ferguson Depo., October 5, 2006, at 18-19; Plaintiff's Supp. App. Exhibit 34, P. Zucotti Depo., October 6, 2006, at 17; Plaintiff's Supp. App. Exhibit 32, T. Whelan Depo., October 17, 2007, at 40-41; Plaintiff's Supp. App. Exhibit 25, T. Jansen Depo., September 13, 2006, at 30.
The transcript from the hearing is not yet available. Mr. Nair's testimony was consistent with the deposition and documentary evidence the Court relies on for this Order, and this Court has relied on that testimony in issuing this Order and the Injunction contained herein.
Additionally, many courts have limited Quill to sales and use taxes, which the hotel occupancy tax here at issue is not, and others have declined to extend Quill. See, e.g., Lanco, Inc. v. Director, Division of Taxation, 908 A.2d 176 , 138 NJ. 380 (N.J. 2006); A&F Trademark, Inc. v. Tolson, 605 S.E.2d 187 , 167 N.C. App. 150 (2004) .
For those reasons, and again because Plaintiff Columbus is not seeking to “take” Defendant's property, but only collect and have remitted the tax imposed on the occupancy of the room, the Court concludes that Defendant Expedia's equal protection and due process arguments are without merit. See, e.g., Rouse v. Dept. of Natural Resources, 271 Ga. 726, 730 (1999) (to violate the Constitution, any selective enforcement must be intentional and purposeful and based on some unjustifiable standard such as race, religion or other arbitrary classification).
As noted supra, other issues raised by the parties, such as whether Expedia is an innkeeper or operator, or whether Expedia sells hotel rooms, need not be resolved to interpret the statutes and to enter the injunction sought.
Nor does Expedia segregate “taxes” from “fees” in its line item disclosure of “taxes and service fees.” Expedia seems to want to reduce the taxable amount of the room by a facilitation fee built into but not disclosed in the Room rate, while at the same time disclosing some fee and charging for some service neither described, identified nor taxed in the “taxes and service fees.”
Consistently, if Expedia separately discloses a facilitation fee or other service fee in addition to and distinct from the room rate, that other separately disclosed fee is not subject to the hotel occupancy tax.