CHARLESTON -- Hotel booking websites recently agreed to pay $900,000 to three S.C. municipal governments, including North Myrtle Beach, to settle a lawsuit in which the municipalities sought additional tax money from them.
Ronnie Bonds, an attorney representing the consolidated cases for Charleston, Mount Pleasant and North Myrtle Beach, said the agreement means about $193,000 for North Myrtle Beach, $657,000 for Charleston and $50,000 for Mount Pleasant. Bonds said the settlement, which comes in hundreds of thousands of dollars above what the municipalities claimed to have lost in tax revenue, accounts for two future years.
The dispute lies in how much money Internet brokers, such as hotels.com, Hotwire, Priceline and Expedia, should pay in taxes to the places where their customers stay. Many municipalities collect a certain percentage of the gross proceeds from every hotel room night sold.
Online booking companies pay based on the amount they agree to forward to the hotel, not the total they charge customers, which can include service fees and taxes.
Charleston began imposing a 2 percent hotel tax in 1996 to offset expenses incurred "as a direct result of the demands placed on the City by the tourism industry," its lawsuit said.
It goes on to allege that the online companies failed to pay that tax.
The lawsuit also said the companies charged marked-up room rates but paid taxes only on the lower prices they negotiated with hotels, which in turn pay the city.
Mount Pleasant's lawsuit, with a 1 percent tax rate at stake, made the same argument.
In each case, the local ordinances specifically say taxes apply to the gross rate paid for the rooms.
In South Carolina the tax money collected goes toward projects directly related to supporting the tourism industry.
The municipalities went through mediation with the online companies in federal court.
"It's a compromise," Bonds said. "Given the costs of going forward to try the case and the risk involved in a trial, I'd say the city is satisfied."
He pointed out that the money paid only settles the claim and that the websites deny owing money.
Attorneys for the sites could not be reached for comment Friday.
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