Tuesday, July 5, 2011

Online Travel Companies Are Not Required to Collect Missouri Hotel and Tourism Taxes

The Missouri Supreme Court held that online travel companies that facilitated the booking of hotel and motel rooms over the Internet were not required to collect and to pay the county hotel and state tourism taxes on the marked up room rates charged customers. The county hotel tax and state tourism tax were imposed on hotel and motel operators. The online travel companies merely facilitated the room reservations between the hotels and motels and transient guests. (St. Louis County v. Prestige Travel, Inc., Mo. S. Ct., Dkt. No. SC91228, 06/28/2011.)

Online travel companies transactions. The online travel companies that facilitated the booking of hotel and motel rooms over the Internet. They contracted with hotel and motel operators for hotel rooms at negotiated discount rates and then sold or resold the rooms to transient guests at a marked up price. They remitted only the discount price to the hotel operators and kept the difference. St. Louis County and the St. Louis Convention and Visitors Commission, collectively referred to here as the county, sued the travel companies alleging that the online travel companies are required to collect and remit hotel and tourism taxes on the marked up hotel charges. The online travel companies moved to dismiss arguing that they are not required to collect the hotel and tourism taxes, which the circuit court overruled. While the case was pending, the legislature enacted H1442 specifically exempting online travel companies from the taxes. The companies filed a reconsideration of their motion to dismiss, which the circuit court granted. The county appealed arguing that H1442 violates article III, §39(5) of the Missouri Constitution in that it attempts to extinguish without consideration the companies' indebtedness for the accrued taxes. The county also argued that H1442 violates the original purpose and clear title or single subject requirements of Missouri Constitution, article III, §21.

No tax obligation. The Missouri Supreme Court upheld the dismissal because the online travel companies did not owe hotel and tourism taxes on the hotel rooms. The county failed to proved that the hotel tax and the tourism tax clearly imposed a liability on the online travel companies. To find a violation of Art. III, §39(5) of the Missouri Constitution, it is essential to determine whether the statutes as they existed prior to enactment of H1442 imposed a tax on the online travel companies. When read in context, it is clear the obligation to make and file a return of the hotel tax was placed solely on those engaged in the business of operating a hotel or motel. Similarly, the tourism tax is a tax on the charges for all sleeping rooms paid by transient guests to hotels and motels doing business within St Louis County. The online travel companies were not liable because they did not provide sleeping rooms. They facilitated reservations of hotel and motel rooms between the hotels and motels and transient guests. The difference between the marked up price collected from the transient guests and the discounted price remitted to hotel and motel operators was compensation for facilitating a reservation, not providing a sleeping room. Furthermore, because taxing statutes must be construed strictly, and taxes are not to be assessed unless they are expressly authorized by law, the court will not read a tax obligation into the law where one was not clearly expressed.

The Missouri Supreme Court held that H1442 did not violate the original purpose and clear title or single subject requirements of the Missouri Constitution. The original purpose is measured at the time the bill is introduced. The court found that the original purpose of H1442 is regulating taxes. The challenged sections that were argued to be in violation of the clear title and single subject requirements of the Missouri Constitution are not at issue in this case.

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