City keeps up fight for the hotel taxes

Remember Houston's plan to sue online travel services for back hotel occupancy taxes? Yep, so does the city: City Attorney Arturo Michel said he hopes to have City Council approve a legal contract within the month. "We still plan on proceeding with it," Michel told the Chronicle. "We'll keep an open mind, but we've had a lot of good lawyers looking at it, and I'd be surprised if something happened that would change our minds."

At issue is online travel companies' practice of paying a wholesale rate to book hotel rooms, then selling them to customers for an increased price. The companies pay the 17 percent hotel occupancy tax — which finances Houston's tourism efforts and helps pay off all our stadiums stadia sports facilities — on the wholesale rate, but not the final rate consumers pay. Officials say the lost taxes total as much as $2 million a year in Houston.

City Council debated filing suit for the back taxes earlier this year, but the plan was derailed when City Controller Annise Parker sent councilmembers a memo saying she doubted a suit would work. There has been some discussion over whether the tax law applies to online business: Website operators claim their markup from the wholesale rate is a "service fee" that isn't subject to the hotel occupancy taxes. But Steve Wolens, a lawyer who's representing several cities in hotel tax suits, doesn't agree: He said anyone controlling a hotel room is required to collect and pay the tax, including website operators.

Mayor Bill White said the city will continue pushing for a lawsuit. Several other major cities, including L.A., San Diego, San Antonio, Atlanta, Philadelphia and Chicago, have filed similar suits in the last couple of years.

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