Robinson v. Priceline.com

389 So.3d 168

2023-0069 (La.App. 1 Cir. 4/17/24)

Kimberly L. ROBINSON, Secretary of the Department of Revenue for the State of Louisiana and City of New Orleans Department of Finance

v.PRICELINE.COM, INCORPORATED, Travelweb, LLC, Trip Network, Inc., Orbitz, LLC, Internetwork Publishing Corp. (d/b/a Lodging.com), Expedia, Inc. (WA), Hotels.com, LP, Hotwire, Inc., Egencia, LLC, Travelocity.com LP, Site59.Com LLC, Destination Management, Inc., and Does 1 Through 1000, Inclusive

NO. 2023 CA 0069

Court of Appeal of Louisiana, First Circuit.

Judgment Rendered: April 17, 2024

Appealed from the 19th Judicial District Court, In and for the Parish of East Baton Rouge, State of Louisiana, Case No. C650894, The Honorable Wilson E. Fields, Judge Presiding

Loretta G. Mince, James R. Swanson, Jason W. Burge, Caroline Hogan Paschal, New Orleans, Louisiana, Counsel for Plaintiff/Appellant, State of Louisiana, Department of Revenue

John W. Crongeyer, pro hac vice, Atlanta, Georgia and Alexandria E. Seay, pro hac vice, Atlanta, Georgia and Gregory E. Bodin, Baton Rouge, Louisiana and Brandon J. DeCuir, Baton Rouge, Louisiana and Brian K. Jackson, pro hac vice, Birmingham, Alabama and Alejandro "Al" Perkins, Baton Rouge, Louisiana and Drew M. Talbot, Baton Rouge, Louisiana and Russell J. Stutes, Jr., Lake Charles, Louisiana and Margaret H. Kern, Covington, Louisiana, Counsel for Plaintiffs/Appellants, City of New Orleans and Intervenors, City of Baton Rouge/ Parish of East Baton Rouge, Parish of St. Tammany, Calcasieu Parish School Board, Lafayette Parish, Rapides Parish, Bossier Parish, Ouachita Parish, and Caddo Parish

Elizabeth Herrington, pro hac vice, Benjamin Kabe, pro hac vice, Chicago, Illinois and Edward D. Wegmann, James C. Percy, Matthew A. Mantle, New Orleans, Louisiana and Thomas M. Flanagan, Anders F. Holmgren, Camille E. Gauthier, New Orleans, Louisiana and William Peterson,pro hac vice, Houston, Texas, Counsel for Defendants/Appellees, Expedia, Inc. (WA), Hotels.com, LP, Hotwire, Inc., Egencia, LLC, Trip Network, Inc., Orbitz, LLC, Internetwork Publishing Corp. (d/ b/a Lodging.com)

Jerald P. Block, Sarah M. Lambert, Matthew P. Hymel, Thibodaux, Louisiana, Counsel for Amicus Curiae, American Hotel and Lodging Association, in support of Plaintiffs/Appellants

Nicole Saad Bembridge, pro hac vice, Carl M. Szabo, pro hac vice, Christopher J. Marchese, pro hac vice, Paul D. Taske, pro hac vice, Washington, DC and Counsel for Amicus Curiae, NetChoice, in support of Defendants/Appellees

Sarah Harbison, James Baehr, New Orleans, Louisiana and Counsel for Amicus Curiae, The Pelican Institute, in support of Defendants/Appellees

Laura Chadwick, pro hac vice, Arlington, Virginia, Counsel for Amicus Curiae, Travel Technology Association, in support of Defendants/Appellees

BEFORE: THERIOT, PENZATO, AND GREENE, JJ.

PENZATO, J.

₃In this tax case, the State of Louisiana, Department of Revenue; the City of New Orleans Department of Finance; the City of Baton Rouge, Parish of East Baton Rouge Finance Department; Sheriff Randy Smith, Tax Collector for the Parish of St. Tammany; Kimberly Tyree, Director of the Calcasieu Parish Sales and Use Tax Department; the Lafayette Parish School System, through its Sales Tax Division; the Rapides Parish Police Jury, through its Sales and Use Tax Department; the Bossier City-Parish Sales and Use Tax Division; the City of Monroe, through its Taxation and Revenue Division; and the Caddo-Shreveport Sales and Use Tax Commission appeal a trial court judgment in favor of the following online travel companies: Expedia, Inc. (WA); Hotels.com, LP; Hotwire, Inc.; Egencia, LLC; Trip Network, Inc.; Orbitz, LLC; and Internetwork Publishing Corp. (d/b/a Lodging.com) (collectively "Expedia"). For the reasons set forth herein, we affirm.

FACTS AND PROCEDURAL HISTORY

On August 24,2016, the State of Louisiana, Department of Revenue ("State") and the City of New Orleans Department of Finance ("City of New Orleans") filed a petition for collection of taxes and declaratory judgment against a number of online travel agencies¹ to address what the State and City of New Orleans called "a systematic and direct violation of Louisiana’s tax laws, including Louisiana state law and the City Ordinances of the City of New Orleans[.]" Specifically, the petition ₄alleged that the defendants were "dealers" as defined by La. R.S. 47:301(4)(f);² engaged in the business of selling and furnishing sleeping rooms, cottages, or cabins to transient guests; required to report and remit sales and use taxes for the sale of services under Louisiana law and the City of New Orleans Code; but failed to do so.

According to the petition, under the merchant model adopted by the defendants, the defendants entered into contracts with individual lodging places wherein the parties agreed on a "Wholesale Rate" for the rooms and the defendants acquired the right to display, offer, and facilitate reservations of the rooms to the public at a higher "Retail Rate." The petition alleged that while sales and use taxes were remitted by the lodging places based on the "Wholesale Rate," the defendants collected taxes from the consumer based on the "Retail Rate" but did not remit those taxes directly, thereby depriving the State and the City of New Orleans of the full amounts due and owing to them from the defendants’ sale of lodging.

The petition sought a judgment declaring that the defendants were required by state and local tax laws to collect taxes on the gross amount paid by the consumer for the lodging reservation and to remit to the appropriate taxing authority the tax charges collected on the gross amounts paid. The petition further alleged that the defendants’ collection of taxes from consumers created a fiduciary duty owed by them to remit the amount collected to the appropriate taxing authority, and that the defendants’ method of setting forth taxes and fees as a lump sum prevented consumers from ascertaining the true amounts being paid for taxes and fees. The State and the City of New Orleans sought a judgment declaring that the defendants breached their fiduciary duty and ordering payment of all monies being held by the ₅defendants as constructive trustees for the State and the City of New Orleans.³ Finally, The State and the City of New Orleans sought judgment ordering the payment of all taxes, interest, and penalties due to the State and the City of New Orleans.

Following the filing of the original petition, the City of Baton Rouge, Parish of East Baton Rouge Finance Department; Sheriff Randy Smith, Tax Collector for the Parish of St. Tammany; Kimberly Tyree, Director of the Calcasieu Parish Sales and Use Tax Department; the Lafayette Parish School System, through its Sales Tax Division; the Rapides Parish Police Jury, through its Sales and Use Tax Department; the Bossier City-Parish Sales and Use Tax Division; the City of Monroe, through its Taxation and Revenue Division; and the Caddo-Shreveport Sales and Use Tax Commission (collectively, along with the City of New Orleans, "local taxing authorities") intervened.⁴

A bench trial proceeded against Expedia. At trial, the evidence established that Expedia is an online marketplace that allows consumers to search for and book a variety of travel services, including hotel stays. To this end, Expedia contracts with travel suppliers (in this case, hotels) for the right to display, offer, and facilitate reservations of the suppliers’ travel products (hotel stays) to consumers through Expedia’s websites. Under the merchant model at issue herein, Expedia contracts with hotels (or hotel chains), which make rooms available to Expedia at a discounted rate ("net rate"). Expedia then marks up the net rate and presents it to the consumer as the rate for the hotel ("retail rate"). Under the merchant model, Expedia is the ₆merchant of record in the transaction with the consumer, collects payment for the hotel stay directly from the consumer at the time of booking, and, after the consumer’s hotel stay, forwards payment for the hotel stay to the hotel. Expedia also collects from the consumer the funds necessary to pay the taxes due the state and local taxing authorities and remits them to the hotel, which is responsible for remitting the taxes to the state and local taxing authorities.

Several examples of consumer searches on Expedia’s website were introduced into evidence.⁵ When a consumer visits Expedia’s website and inputs the city and date of stay, he is provided a list of hotels and the cost per night for the room. The consumer can select from the listed hotels and request a reservation for the desired accommodation. Expedia, as an intermediary, communicates electronically with the hotel to determine whether the hotel has rooms available. If the hotel has availability, the hotel issues the reservation and sends a confirmation number back to Expedia, which Expedia then forwards to the consumer. The consumer has the option to pay at the time of booking (merchant model) or to pay at the time of the stay (agency model). In the merchant model at issue herein, once the reservation is confirmed by the hotel, the consumer’s credit card is charged by Expedia. Evidence presented at trial provides an example of how the charges are typically displayed to the consumer:

Price Summary
Accommodation 1	$123.29
1 night	$106.33
Taxes & Fees6	$16.96
Total	$123.29

[Editor’s Note: The preceding image contains the reference for footnote (⁶)]

₇Informational pop-ups as well as Expedia’s terms and conditions explain the components to the charges. The retail room rate is a combination of (1) the net rate the hotel charges for occupancy of the room, and (2) a facilitation fee retained by Expedia for its services in facilitating the reservation. The "Taxes & Fees" are (1) a recovery of the estimated taxes the hotel will be responsible for on the net rate, and (2) a service fee retained by Expedia as additional compensation for its services. The...