City of Atlanta v. Hotels.Com Hotels.Com v. City of Atlanta.City of Atlanta v. Hotels.Com Hotels.Com v. City of Atlanta.

• Decision Date: 16 May 2011
• Docket Number: S11X0509,S11A0510,S11X0512.,Nos. S11A0508,s. S11A0508
• Citation: 289 Ga. 323,710 S.E.2d 766
• Parties: CITY OF ATLANTAv.HOTELS.COM et al.Hotels.com et al.v.City of Atlanta.City of Atlantav.Hotels.com et al.Hotels.com et al.v.City of Atlanta.
• Court: Georgia Supreme Court

289 Ga. 323

710 S.E.2d 766

11 FCDR 1498

CITY OF ATLANTA

v.HOTELS.COM et al.Hotels.com et al.

v.City of Atlanta.City of Atlanta

v.Hotels.com et al.Hotels.com et al.

v.City of Atlanta.

Nos. S11A0508

S11X0509

S11A0510

S11X0512.

Supreme Court of Georgia.

May 16, 2011.

Bryan, Cave, Powell & Goldstein, Robert M. Travis, Michael P. Carey, John R. Bielema, Jr., Atlanta, Pope, McGlamry, Kilpatrick, Morrison & Norwood, Neal K. Pope, Charles N. Pope, Michael L. McGlamry, R. Timothy Morrison, William U. Norwood III, Atlanta, Wade H. Tomlinson III, Columbus, for City of Atlanta.Bondurant, Mixson & Elmore, Emmet J. Bondurant, Frank M. Lowrey IV, Atlanta, Jones Day, Robin A. Schmahl, Edward K. Smith, Atlanta, Deborah S. Sloan, James P. Karen, Rogers & Hardin, Brett A. Rogers, Richard H. Sinkfield, McDermott, Will & Emery, Mark J. Altschul, Jeffrey Rossman, Elizabeth B. Herrington, Kelly, Hart & Hallman, Brian S. Stagner, Marcus G. Mungioli, Chad Arnette, for Hotels.com, L.P. et al.Archer & Lovell, David G. Archer, Cartersville, Brinson, Askew, Berry, Seigler, Richardson & Davis, Robert M. Brinson, J. Anderson Davis, Rome, Norman S. Fletcher, Samuel L. Lucas, Rome, John W. Crongeyer, Lamar, Archer & Cofrin, Robert C. Lamar, David W. Davenport, Keith A. Pittman, Atlanta, Elarbee, Thompson, Sapp & Wilson, Kenneth N. Winkler, Nelson, Mullins, Riley & Scarborough, Matthew J. Simmons, Jonesboro, Walter J. Gordon, Sr., Hartwell, Kevin A. Ross, amici curiae.BENHAM, Justice.

Hotels.com et al. are online travel companies (OTCs) which book hotel rooms and make other travel arrangements for customers who access their services over the internet. The OTCs' business model, known as the “ merchant model,” is fully detailed in Expedia v. City of Columbus, 285 Ga. 684, 681 S.E.2d 122 (2009). In sum, the consumer pays the OTC a retail “ room rate” and a line item for “taxes and fees” in order to reserve and later occupy one of the City's hotel rooms. The consumer pays nothing to the hotel for occupancy or taxes and only provides a credit card at check-in.

The City of Atlanta requires the payment of hotel occupancy taxes pursuant to OCGA § 48–13–50 et seq., (the “Enabling Statute”) which provides for municipalities to impose an excise tax “at the applicable rate on the lodging charges actually collected.” OCGA § 48–13–51(a)(1)(B)(i). Section 146–79 of the City's ordinance provides: “There is levied and assessed and there shall be paid a tax of seven percent of the rent for every occupancy of a guestroom in a hotel in the city.” Per the Enabling Statute, these taxes are imposed upon and collected from the hotel guest. OCGA § 48–13–51(a)(1)(B) (ii) (“Any tax levied ... in this Code section is also imposed upon every person or entity who is a hotel or motel guest and who receives a room ...”). Section 146–80 of the City's ordinance also states: “Every person occupying a guestroom in a hotel in this city is liable for the tax levied in this article.” Finally, “[t]he person or entity collecting the tax from the hotel or motel guest shall remit the tax to the governing authority imposing the tax....” OCGA § 48–13–51(a)(1)(B)(ii). The taxes must be remitted to the City by the twentieth day of the month following the month in which the occupancy occurred. OCGA § 48–13–53.2(a); City of Atlanta Code of Ordinances § 146–85.

Under the merchant model, the OTCs calculate the hotel occupancy tax amount based on the wholesale rate the OTC negotiates with hotels for the right to broker rooms and not on the retail room rate the OTC charges the customer for the right to occupy a room. The OTC retains whatever it has collected from the consumer over the amount of the remittance to the hotel. If the hotel fails to submit an invoice or charge to the OTC in the time period designated by contract, then the OTC retains all monies collected from the customer, including any money purportedly collected for the payment of hotel occupancy taxes.

The City brought an action alleging that the retail room rate was the appropriate amount upon which to base the hotel occupancy tax and seeking injunctive relief, as well as back taxes from the OTCs. In its order granting in part and denying in part both parties' motions for summary judgment, the trial court made the following findings and conclusions:

a. Found that the OTCs were neither “innkeepers” nor “operators” as defined by the Enabling Act or by the City's ordinance.

b. Found that the OTCs were, as a matter of fact, collecting taxes as part of their bargain with the City's hotels, regardless of whether their various contracts with the hotels contained express verbiage requiring the OTCs to collect taxes.

c. Concluded that the OTCs were third-party tax collectors who were required to remit collected taxes to the City based on the room rate and not based on the negotiated wholesale rate.

d. Voided those portions of the OTC contracts which called for collecting and remitting taxes based on the negotiated wholesale rate.

e. Issued an injunction, ordering the OTCs, so long as they continued to collect taxes from customers seeking to occupy the City's hotel rooms, to collect taxes based on the room rate, to remit or cause to be remitted the collected taxes to the City, and ordering the OTCs to maintain data on: the City hotels booked, the customers who actually occupied the City's hotel rooms, the room rates charged to the customers, and the amount of taxes collected and remitted.

f. Rejected all of the OTCs' constitutional claims pursuant to Expedia v. City of Columbus, supra, 285 Ga. at 691

[681 S.E.2d 122]

.

g. Found that the City did not have any remedy under the Enabling Statute or the City's Ordinance for back taxes because the OTCs are not innkeepers or operators.

h. Found that the City failed to establish the essential elements of its unjust enrichment claim (as well as the collateral claim of a constructive trust), namely that it had conferred a benefit on the OTCs.

i. Found that the City had no claim for money had and received because the City failed to provide sufficient evidence that it demanded payment from the OTCs.

j. Found that the City had no equitable remedy based on the claims raised.

Both parties have appealed and cross-appealed the trial court's order. For reasons set forth below, we affirm the judgment of the trial court.

Enumerations of Error Raised by the OTCs

1. The OTCs assert that the trial court erred when it determined that the “rent” for occupying a City hotel room is the room rate paid by the consumer rather than the negotiated wholesale rate between the OTC and the hotel. The interpretation of statutes and ordinances is a question of law, which we review de novo on appeal. Expedia v. City of Columbus, supra, 285 Ga. 684(4), 681 S.E.2d 122. The Enabling Statute provides for municipalities to impose an excise tax “at the applicable rate on the lodging charges actually collected.” OCGA § 48–13–51(a)(1)(B)(i). Section 146–79 of the City's ordinance provides: “There is levied and assessed and there shall be paid a tax of seven percent of the rent for every occupancy of a guestroom in a hotel in the city,” (emphasis supplied), and section 146–76 defines “rent” as “the consideration received for occupancy valued in money....” (Emphasis supplied.) Additionally, section 146–80 states: “Every person occupying a guestroom in a hotel in this city is liable for the tax levied in this article.” (Emphasis supplied.) Under the statute and ordinance, the tax is on the consumer. The statute and ordinance do not tax any transaction between a non-occupant such as an OTC and the hotel.¹ Thus, reading the ordinance in toto and in pari materia to the Enabling Statute, the amount that is taxable is the retail amount paid for occupancy by someone who will occupy the room. Since the consumer cannot obtain the right to occupy the room without paying the retail room rate charged by the OTC, it is the retail room rate that is the taxable amount or “rent” under the City's ordinance.² See also City of Fairview Heights v. Orbitz, Inc., 2006 WL 6319817 at *5–6, 2006 U.S. Dist. LEXIS 47085 at * 19–20 (S.D.Ill. July 12, 2006) (“rent charged” was amount hotel room occupant paid to the OTC and not the negotiated wholesale rate). Accordingly, the trial court's conclusion on this issue must be sustained.

2. The OTCs allege the trial court erred in issuing the injunctive relief described herein at paragraph (e), supra. We disagree. As we explained in Expedia v. City of Columbus, supra, 285 Ga. at 688(2), 681 S.E.2d 122, there is no governmental authority in the City, or in this State, that requires any OTC to collect hotel occupancy taxes. Rather the OTCs are following their business model when they collect money for the payment of hotel occupancy taxes from consumers who wish to occupy the City's hotel rooms.³ Inasmuch as the OTC is the merchant of record and the consumer pays the line item “taxes and fees” to the OTC and makes no tax payment to any other entity, then the OTC is collecting taxes as a matter of fact during each and every such transaction with the consumer who is the end user of the hotel room.

Each provision of the trial court's injunction is qualified with the phrase “so long as the OTCs collect hotel occupancy taxes and/or all applicable taxes from their customers,” recognizing for “so long as” the OTCs voluntarily collect taxes from consumers seeking to occupy rooms in the City's hotels, taxes...