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Vegas execs sue online travel firms, allege unpaid hotel tax

December 4, 2020 GMT
FILE - In this Nov. 19, 2020, file photo, people dressed as showgirls stand along the Las Vegas Strip in Las Vegas. Two prominent Las Vegas communications executives are suing more than 20 online travel companies for back taxes they say should have been paid to Nevada based on hotel room rates. (AP Photo/John Locher, File)
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FILE - In this Nov. 19, 2020, file photo, people dressed as showgirls stand along the Las Vegas Strip in Las Vegas. Two prominent Las Vegas communications executives are suing more than 20 online travel companies for back taxes they say should have been paid to Nevada based on hotel room rates. (AP Photo/John Locher, File)
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FILE - In this Nov. 19, 2020, file photo, people dressed as showgirls stand along the Las Vegas Strip in Las Vegas. Two prominent Las Vegas communications executives are suing more than 20 online travel companies for back taxes they say should have been paid to Nevada based on hotel room rates. (AP Photo/John Locher, File)

LAS VEGAS (AP) — Two prominent Las Vegas communications executives have sued more than 20 online travel companies for back taxes that they say should have been paid to Nevada based on hotel room rates.

On behalf of the state, Mark Fierro and Sig Rogich accuse hotel room booking services including Orbitz, Hotwire, Expedia, Travelocity, Priceline and Hotels.com of intentionally underpaying hotel taxes going back at least several years.

“There’s no way the online travel companies did this mistakenly,” Rogich said in a statement.

Their lawsuit was filed in state court in April but sealed while state Attorney General Aaron Ford reviewed the allegations. He declined Sept. 29 to intervene in the case, clearing the way for the filing of the unusual “qui tam” lawsuit by private parties seeking to recover money on behalf of a government entity.

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Fierro said the money “should have been going to Nevada’s schools, law enforcement organizations, infrastructure and a broad array of other needs of Nevada citizens.”

The amount in dispute in the false claims and consumer fraud action includes more than $100 million in unpaid taxes, said Michael Cristalli, an attorney representing Fierro and Rogich. Added damages and penalties under state Deceptive Trade Practices law could bring the amount to nearly $200 million, Cristalli said.

Representatives of most of the 22 named defendants did not immediately respond to email messages about the lawsuit.

Fierro, head of Fierro Communications, and Rogich, chief of The Rogich Communications Group, would get up to 30% of money won in the case, according to the court filing.

Tripadvisor and HotelTonight declined to comment. Brian Harvey, an executive at named defendant Remark Holdings, said his company may have been sued in error due to its former ownership of vegas.com, which it sold in 2019.

The lawsuit alleges online booking companies, dubbed OTCs, underpay the tax by contracting with Nevada hotels at discounted wholesale prices and then renting rooms to consumers at higher retail rates.

It said an online travel company might obtain a room from a hotel for $150 and sell it to a customer for $200, then pay the state tax based on the lower wholesale price of $150. It said the tax, calculated as a percentage of gross rental receipts, ranges from 10.5% to 13.38%.

Tax cases aimed at similar practices in other states involving online travel companies, or OTCs, have met with mixed success.

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Orbitz, Expedia and other travel services reportedly paid Denver almost $19 million in 2017 after the Colorado Supreme Court ruled in the city’s favor.

Supreme courts in Hawaii and Florida ruled in 2015 in favor of online travel agencies, and tax battles have been fought in other tourist destinations including Phoenix, San Francisco and San Antonio, Texas.

The Tax Foundation in 2016 surveyed similar lawsuits in 34 states and the District of Columbia. It found that courts in 23 states, including three federal courts of appeal, concluded that online travel services weren’t subject to hotel occupancy taxes, while courts in six states ruled they were.

A foundation spokeswoman declined this week to provide updated data.

Amid a tourism slump prompted by coronavirus closures and restrictions, a panel of state economic experts sent forecasts to the governor and legislators on Thursday projecting less tax revenue in 2022 and 2023 than in 2020 and 2021.

Rogich said the unpaid money “rightfully should be returned to the people of Nevada, especially during these challenging times.”