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Illinois judge rules against online travel companies, says they're underpaying city taxes

By Jessica M. Karmasek | Jun 24, 2013

CHICAGO (Legal Newsline) -- A Cook County judge said in a ruling Friday that online travel companies are not paying the city of Chicago enough in taxes.

According to the Chicago Tribune, Judge Robert Lopez Cepero said the city's hotel-tax ordinance applies to the transaction between the companies -- like Hotels.com, Orbitz.com and Expedia.com -- and the customer.

Because they can be defined as hotel "operators," Cepero said the companies are in violation of the ordinance, which levies a 4.5 percent tax on room rates.

Lawyers for the city told the Tribune the ruling was a "major win" for taxpayers.

An association representing online travel companies contends the ruling is "incorrect."

"Judge Robert Lopez Cepero found that online travel companies (OTCs) are hotel operators under the plain meaning of the word," Travel Tech spokeswoman Robin Reck said in an emailed statement late Friday.

"OTCs do not greet the guests. OTCs do not change the sheets or towels. OTCs do not maintain the building or any other task that remotely resembles a hotel operator. This is a basic misunderstanding of fact.

"Every other court decision nationwide that has addressed this issue has concluded differently. That's like calling a bailiff a judge because he happens to work at the courthouse."

The association argues that Cepero's ruling will have a "significant" impact on the city's tourism.

"Because demand for travel to Chicago is sensitive to price changes, this change in tax treatment will harm consumers and significantly reduce demand for Chicago vacations, conventions and meetings," Reck said, adding that the association intends to challenge the ruling.

The Travel Technology Association, or Travel Tech, is the association for online travel companies and global distribution systems.

Its members include Amadeus, Expedia, Orbitz Worldwide, Priceline, Travelocity, Travelport and Vegas.com.

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.

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