Mont. Dep't of Revenue v. Priceline.com, Inc.

Decision Date12 August 2015
Docket NumberNo. DA 14–0260.,DA 14–0260.
Citation2015 MT 241,354 P.3d 631,380 Mont. 352
PartiesMONTANA DEPARTMENT OF REVENUE, Plaintiff and Appellant, v. PRICELINE.COM, INC.; Travelweb, LLC; Trip Network, Inc. ; Orbitz, LLC; Expedia, Inc.; Hotels.Com, L.P.; Hotwire, Inc.; Travelocity.Com, L.P.; Suite59.Com, LLC; and Does 1 Through 1000, Inclusive, Defendants and Appellees.
CourtMontana Supreme Court

For Appellant: John W. Crongeyer (argued), Crongeyer Law Firm, P.C.; Atlanta, Georgia, Teresa G. Whitney, Special Assistant Attorney General, Montana Department of Revenue; Helena, Montana, David R. Paoli, Paoli Law Firm; Missoula, Montana, William Q. Bird, Kristen L. Beightol, Bird Law Group, P.C.; Atlanta, Georgia, Robert Finnell, The Finnell Firm; Rome, Georgia.

For Appellees: Michael Green (argued), D. Wiley Barker, Crowley Fleck PLLP; Helena, Montana, Elizabeth B. Harrington, Michael W. Weaver, McDermott Will & Emery, LLP; Chicago, Illinois, Deborah Sloan, Emmanuel Ubinas, Jones Day ; Dallas, Texas, Brian Stagner, Scott Wiehle, Kelly Hart & Hallman; Fort Worth, Texas, Darrel J. Hieber, Skadden, Arps, Slate, Meagher & Flom LLP; Los Angeles, California.

For Amicus Multistate Tax Commission: Lawrence A. Anderson, Attorney at Law, P.C.; Great Falls, Montana. Bruce Fort, Multistate Tax Commission; Washington, D.C.

For Amicus Montana Chamber of Commerce and Montana Taxpayers Association: Stanley T. Kaleczyc, Jessie L. Luther, Browning, Kaleczyc, Berry & Hoven, P.C.; Helena, Montana.

Opinion

Justice JAMES JEREMIAH SHEA delivered the Opinion of the Court.

¶ 1 The Montana Department of Revenue (Department) appeals a First Judicial District Court, Lewis and Clark County, ruling that Online Travel Companies (OTCs) are not taxable under Montana's Lodging Facility Use Tax, §§ 15–65–101 through 136, MCA, or Sales Tax, §§ 15–68–101 through 820, MCA. We affirm in part and reverse in part.

¶ 2 We restate the issues on appeal as follows:

1. Whether the District Court erred in determining that the OTCs are not required to collect and remit taxes on OTC fees under the Lodging Facility Use Tax.
2. Whether the District Court erred in determining that the OTCs are not required to collect and remit taxes on OTC fees under the Sales Tax on accommodations and campgrounds.
3. Whether the District Court erred in determining that the OTCs are not required to collect and remit taxes on OTC fees under the Sales Tax on rental vehicles.
4. Whether this Court's decision should be applied retroactively.
PROCEDURAL AND FACTUAL BACKGROUND

¶ 3 Appellees Priceline.com, Inc.; Travelweb, LLC; Trip Network, Inc.; Orbitz, LLC; Expedia, Inc.; Hotels.com, LP; Hotwire, Inc.; Travelocity.com, LP; Site59.com, LLC; and other unnamed entities (“Does 1 through 1000”) are OTCs that provide online travel information and secure reservations for travelers for lodging and car rental services in Montana. The OTCs use a “Merchant Model,” whereby they negotiate with suppliers for a wholesale rate on rooms or rental vehicles, then charge customers a higher amount. The difference between the cost to the customer and the wholesale rate paid by the OTC includes taxes on the wholesale rate and an amount retained by the OTC as compensation for its services (“OTC fees”).1 The OTCs collect tax on the wholesale rate and pass the collected tax on to the hotel or rental agency, which in turn remits it to the Department. Currently, the OTCs do not directly remit taxes to the Department, and they do not collect tax on OTC fees.

¶ 4 In June and July 2010, the Department sent letters to several OTCs, stating, “It has come to our attention that you may not be registered with the Montana Department of Revenue and/or collecting the 4% Lodging Facility Use Tax, the 3% Lodging Facility Sales Tax[,] and/or the 4% Rental Vehicle Sales Tax.” The OTCs responded that they had no obligation to register with the Department or to collect the requested taxes. On November 8, 2010, the Department filed suit against the OTCs, arguing that the OTC fees are taxable under both the Lodging Facility Use Tax and the Sales Tax. The OTCs responded by denying responsibility to collect tax on OTC fees received from customers, and contending that they are not taxpayers with regard to the Lodging Facility Use Tax or Sales Tax. The parties filed cross-motions for summary judgment on these issues.

¶ 5 On March 6, 2014, the District Court granted summary judgment in favor of the OTCs, holding that the plain language of the Lodging Facility Use Tax and Sales Tax statutes contains no basis on which to tax OTC fees. The Department appealed the District Court's order. The Multistate Tax Commission filed an amicus brief in support of the Department, and the Montana Chamber of Commerce and the Montana Taxpayers Association together filed an amicus brief in support of the OTCs. On April 10, 2015, the Court heard oral argument from the parties. On May 15, 2015, the parties filed supplemental briefs on whether the Court must construe and apply the two statutes together. The OTCs requested that, if this Court determines that either statute applies to the OTC fees, we apply our decision prospectively only.

STANDARDS OF REVIEW

¶ 6 We review summary judgment orders de novo. Bailey v. State Farm Mut. Auto. Ins. Co., 2013 MT 119, ¶ 18, 370 Mont. 73, 300 P.3d 1149. Summary judgment is appropriate when the moving party demonstrates an absence of a genuine issue of material fact and entitlement to judgment as a matter of law. M.R. Civ. P. 56(c)(3) ; Smith v. Burlington N. & Santa Fe Ry. Co., 2008 MT 225, ¶ 10, 344 Mont. 278, 187 P.3d 639. The interpretation of a statute is a question of law that we review for correctness. City of Missoula v. Iosefo, 2014 MT 209, ¶ 8, 376 Mont. 161, 330 P.3d 1180. [S]tatutory language must be construed according to its plain meaning and, if the language is clear and unambiguous, no further interpretation is required.” Infinity Ins. Co. v. Dodson, 2000 MT 287, ¶ 46, 302 Mont. 209, 14 P.3d 487.

DISCUSSION

¶ 7 1. Whether the District Court erred in determining that the OTCs are not required to collect and remit taxes on OTC fees under the Lodging Facility Use Tax.

¶ 8 In 1987, the Montana Legislature adopted the Lodging Facility Use Tax, §§ 15–65–101 through 136, MCA, imposing “on the user of a facility a tax at a rate equal to 4% of the accommodation charge collected by the facility.” Section 15–65–111(1), MCA. Section 15–65–101(1), MCA, defines “accommodation charge” as “the fee charged by the owner or operator of a facility for use of the facility for lodging....”

The Lodging Facility Use Tax provides, “The owner or operator of a facility shall collect the tax....” Section 15–65–112(1), MCA. A “facility” is “a building containing individual sleeping rooms or suites providing overnight lodging facilities to the general public for compensation.” Section 15–65–101(4)(a). The statute does not provide a definition for “owner or operator.”

¶ 9 In 2003, the Department promulgated an administrative rule defining “owner or operator” as “any person or organization who rents a lodging facility to the public and is ultimately responsible for the financial affairs of the facility. Such person may be an individual, corporation, partnership, estate, trust, association, joint venture or other unincorporated group or entity.” Admin. R.M. 42.14.101(9) (2003).2 The Department contends that we should apply this definition and adhere to the Wyoming Supreme Court's reasoning in Travelocity.com, LP v. Wyo. Dep't of Revenue, 329 P.3d 131 (Wyo.2014). In Wyo. Dep't of Revenue, the Wyoming Supreme Court determined that the OTCs were “vendors” under a Wyoming statute requiring vendors to collect and remit taxes to the Wyoming Department of Revenue. Wyo. Dep't of Revenue, 329 P.3d at 139, 143 (citing Wyo. Stat. Ann. § 39–15–103(c) ). Wyoming's tax code defined “vendor” as “any person engaged in the business of selling at retail or wholesale tangible personal property, admissions or services....” Wyo. Dep't of Revenue, 329 P.3d at 139 (quoting Wyo. Stat. Ann. § 39–15–101(a)(xv) ). The Wyoming Supreme Court determined that the OTCs were vendors because they “control the financial aspects of the [retail] transaction completely.” Wyo. Dep't of Revenue, 329 P.3d at 143. However, the Department itself defined “owner or operator” as an individual or entity who is “ultimately responsible for the financial affairs of the facility. Admin. R.M. 42.14.101(9) (2003) (emphasis added). The OTCs do not participate in the day-to-day bookkeeping of a facility, make management decisions, or decide how a facility will spend its revenue. In short, they are not responsible for the financial affairs of a facility. Accordingly, the OTCs are not owners or operators under the Department's administrative definition.

¶ 10 In the absence of a statutory definition for “owner or operator,” courts in other jurisdictions have applied the dictionary definition. E.g., Pitt Cnty. v. Hotels.com, LP, 553 F.3d 308, 313 (4th Cir.2009) ( “Operator” means “a person who actively operates a business ... whether as owner, lessor, or employee,” and “operate” means “to manage and put or keep in operation whether with personal effort or not.”) (quoting Webster's Third New International Dictionary 1580–81 (2002)); City of Branson v. Hotels.com, LP, 396 S.W.3d 378, 383 (Mo.Ct.App.2013) (defining “operate” as [t]o run or control the functioning of ... [,] and “operator” as [t]he owner or director of a business or industrial concern.”) (quoting The American Heritage Dictionary of the English Language 920–21 (1975)) (changes in original). The OTCs do not fit within the dictionary definition of “owners or operators.” They do not possess, run, control, manage, or direct the functioning of a hotel or rental agency.

¶ 11 The plain language of the Lodging Facility Use Tax provides no basis for taxing OTC fees. The OTCs are not required to collect or remit the Lodging...

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