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Business litigation pits cities against online travel firms

Business litigation can have a significant impact on the consumer, in the form of higher costs in order to offset the expense of litigating and any potential adverse consequences. For example, take the Georgia hotel and occupancy tax.

Online travel companies have long been battling over the amount the companies are required to pay. The dispute has been brewing since at least 2003 and spilled over into business litigation. In a lawsuit involving the cities of Columbus and Atlanta, a judge sided with the cities. Now, a class action lawsuit surrounding the same issues on behalf of many Georgia cities and counties is currently pending in federal court.

In an example provided by the Atlanta Journal Constitution, a hotel room in Atlanta costs $100 per night, and the city has an agreement with an online travel company for $60 nightly. Online companies have been paying the city's 7 percent occupancy tax based on the $60 it pays to the city, while the city argues it should pay on the $100 charged to the consumer.

The recent case was decided in favor of the tax collector, and at least in Columbus and Atlanta, the tax must now be paid on the full amount. The online travel companies reacted by omitting Columbus from its database, instead referring online shoppers to hotels in nearby locations. They have lobbied for legislative intervention as well.

Senate Bill 244 is currently pending before the Georgia General Assembly. Its proponents point to the recent court actions, arguing the consumer is the one getting hurt. The cities strongly oppose the legislation, and the battle continues. Based on the current Georgia court ruling, Atlanta is seeking to collect almost $4 million in back taxes from the online companies, dating back to 2003.

At a time when the economy is hanging in the balance, these cases merit special consideration. The goal is to seek a result that will generate the most business, and also allowing those working toward that end to earn a fair wage. While it remains to be seen what the outcome of this business litigation dispute will be, the hope is that it will be one to spur growth and create jobs.

Source: The Atlanta Journal Constitution, "After losing in courts, online travel companies try state Legislature," Bill Rankin, Aug. 22, 2011

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