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Reservation companies win Houston challenge
- Jeff Bounds
- Staff writer
A group of online hotel-reservation companies, including Dallas-based hotels.com and Southlake’s Travelocity, has won a battle with Houston after a judge threw out a lawsuit by the city seeking to collect millions of dollars of back hotel-occupancy taxes.
In a Jan. 19 ruling, Harris County Civil District Judge Brent Gamble granted a request by the companies for a summary judgment. Gamble ruled that all relevant facts had been determined and, as a matter of law, the online-reservation companies should win the case.
He did not cite a reason in his ruling.
The city will likely fight the ruling, though no decision has been made on whether Houston would seek a new trial or appeal the decision, according to one of the city’s attorneys, J.C. Nickens, a partner in the Houston office of Nickens Keeton Lawless Farrell & Flack LLP.
Nickens said it’s unclear how much money the city might reap from the suit, but that $7 million is a “reasonable guess.”
“I regard this as being an unfortunate fluke,” he said. “There have been a number of cases decided around the country, (mostly) in favor of governmental entities.”
Houston alleged that the companies should shell out taxes based on what customers pay for rooms, while the businesses maintained that they owed taxes only on the wholesale cost of those rooms.
In addition to Houston’s action, there are dozens of municipalities nationwide pushing to retrieve back taxes from the online reservation companies. A group of roughly 170 Texas cities, including Dallas and Fort Worth, last fall won a $20 million jury verdict in a federal class-action suit against a group of reservation companies over back taxes. A breakdown of how much each city might receive wasn’t available. The companies have vowed to appeal, and the case is currently immersed in post-trial motions.
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