Nevada sues travel booking companies for dodging hotel room taxes
Posted on: Dec 2, 2020, 7:55 a.m.
Last update on: December 2, 2020, 8:41 a.m.
The state of Nevada is suing some of the biggest names in the online travel booking industry for consumer fraud, alleging that for years they have avoided paying the full tax on hotel rooms in the state.
The lawsuit was filed on behalf of Nevada by Las Vegas communications consultants Sig Rogich and Mark Fierro in April. But it remained under seal until Tuesday, when it was reviewed by the Nevada AG office. He is seeking damages of up to hundreds of millions of dollars under the Deceptive Trade Practices Act from Travelocity, Expedia, Priceline and Hotels.com.
The lawsuit claims that reservation companies have bulk bought rooms in Nevada hotels and casinos for years at discounted prices before selling them online to customers at higher rates. But according to the lawsuit, they charged guests room taxes based on the highest rates while paying the cheapest room taxes to the state.
Rogich told the Las Vegas Review late Tuesday, that the money “rightly should be returned to the people of Nevada, especially in these difficult times that we live in as a community,” said.
“It is impossible that online travel agencies have done this by mistake”, he added. “They intentionally withheld this money which rightfully belongs to the Nevada taxpayers.”
How does the Nevada room tax work?
The State Chamber Tax has been an efficient and reliable source of revenue for Nevada for over 50 years. In addition to supporting general state and local funds and other public bodies, a large portion goes to fund the Las Vegas Convention and Visitors Authority (LVCVA) and its development projects, thereby promoting more tourism in the State – a self-propelled tax generation system.
The tax rate varies depending on the type of room and its location. For example, a motel guest may pay 10%, while a resort guest may pay up to 13%.
Room rates in Las Vegas vary depending on the time of year, day of the week, and the general health of the economy. The same goes for the taxes they generate.
With occupancy rates plummeting due to the coronavirus pandemic, operators are lowering room rates – some by 40% or more, hitting the state’s room tax hard.
LVCVA said it expects room tax revenue to drop from $ 300 million to $ 100 million this year and has cut its budget accordingly.
It’s hard to say how much Nevada could be awarded if the case is found in its favor, although the lawsuit seeks punitive damages in excess of three times the amount of the potential loss of public funding.
Fierro said LVRJ that translates into a lot of money.
âThe bad news is that this money should have gone to Nevada schools, law enforcement agencies, infrastructure and a wide range of other needs of Nevada citizens,â Fierro said. “The good news is that when we win this case, and we are confident we win, it will be one of the biggest deals Nevadans have seen since the landmark 1998 deal with the tobacco industry.”