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AG says online travel sites shirk taxes owed to NH

State House Bureau

October 25. 2013 9:48PM

CONCORD — The state is suing the major online travel companies for failing to pay their full share of the state’s rooms and meals tax.

The suit, filed in Merrimack County Superior Court earlier this month, contends Priceline, Orbitz, Expedia, Travelocity and other online travel companies failed to pay the full amount of rooms and meals tax revenues due the state for hotel and car rentals.

The levy imposes a 9 percent tax on the retail price paid by consumers for rooms, meals and vehicle rentals.

New Hampshire and a number of other states claim the companies pay rooms and meals taxes based on the lower wholesales rates they pay hotels and car rental companies, but charge consumers “taxes and fees” based on the higher retail rates their customers pay for the rooms and vehicles.

The online companies retain the difference and dodge a significant tax liability owed to states and local governments.

Given the growing number of hotel rooms and rental cars that consumers rent from online travel companies, the state is losing an increasing amount of revenue, according to the Attorney General’s Office.

The rooms and meals tax is the second biggest revenue source for New Hampshire, second only to business taxes. In preliminarily audited figures, the levy produced $247.5 million for the state in fiscal 2013.

Budget writers estimate rooms and meals taxes will produce $243 million in the current 2014 fiscal year. For the first quarter of the fiscal year the tax has produced $83 million.

Assistant Attorney General Philip Bradley said dozens of others lawsuit have been filed by other states, counties and local governments, most of which are still in litigation.

The New Hampshire suit asks for current, future and back taxes, which Bradley said the state believes amount to hundreds of thousands of dollars a year.

He noted Hawaii was awarded $250 million by a court, but that state has a great deal more tourism than New Hampshire.

In New Hampshire, rooms and meals tax revenue is split among the state, the education trust fund and cities and towns.

In its suit, the state also claims the online travel companies’ practice is unfair and misleading for consumers who are charged “taxes and fees” without a breakdown in the charges. The state also claims the practice cheats local businesses renting rooms and cars that have to pay the state the 9 percent tax on the full retail rate.

“That is unfair to local business doing the transactions directly with consumers and paying full tax as the law requires,” Bradley said.

The online travel companies have 30 days to file a response after they have been served with the complaint.

Bradley said his office expects the companies to deny the allegations and ask the court to dismiss the suit, as they have done in other suits filed against them.

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