More trouble for online travel companies, Frisco Considering Class Action

The Town of Frisco is considering joining a class-action lawsuit against more than 20 online travel companies accused of not paying full sales and lodging tax amounts due to municipalities.

“We do not currently have any tax filings from these companies. This lawsuit is meant to remedy that,” Frisco revenue specialist Chad Most told council Tuesday afternoon.

The suit alleges online companies have been purchasing rooms from local hotels, selling them to customers at higher rates and then failing to pay sales and lodging taxes to municipalities on the difference in price. For example, if a room is sold to an online company for $200, and the entity then sells it for $250, “they owe tax on the $250, not the $200 they paid the hotel,” Trey Rogers, a partner from the Denver-based law firm Rothgerber, Johnson & Lyons LLP, which is leading the suit, told council Tuesday.

The lawsuit claims municipalities could be owed back taxes from the last 10 or more years.

Defendants include popular online companies like Expedia, Hotwire, Travelocity and Priceline, plus “outbranches” of those companies. Rogers told council that amounts to about 90 percent of the online booking businesses. Two Colorado-specific companies are also named, along with one operation out of Nevada.

“We think we got almost all of them,” Rogers said.

The Town of Breckenridge initiated the suit in July, and is named as the primary plaintiff. The Town of Vail is also considering signing up. The suit could include as many as 80 home-ruled municipalities in Colorado, which may also sign on. The firm is in conversations with a half-dozen other towns at this point, Rogers said.

Some council members expressed concern over pay versus recovery. Rogers told the council this is “not one of those class-actions,” where lawyers make more than the participants, and the numerous plaintiffs are faceless. If plaintiffs won, the firm would take about 30 percent.

“This is about a group of municipalities who said, ‘wait a minute, there’s a problem … I feel it’s different,’” councilman Kent Willis said.

After looking at the town’s taxable lodging revenues, Rogers determined the town stands to make a sizable amount.

“I can tell you, we’re talking about the mid-six figures for Frisco,” he said.

The town would not be responsible to pay the company unless funds were recovered.

Council will further discuss the matter at its next work session Sept. 27.

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