« Ind. Gov't. - More on: Applications available to fill upcoming vacancy on IURC | Main | Environment - "Congress puts states in coal ash drivers' seats" »

Thursday, December 22, 2016

Ind. Decisions - "Orbitz Tax Assessment Tossed in Indiana"

The Indiana Tax Court decision Tuesday in Orbitz, LLC v. Indiana Department of Revenue (ILB summary here) is the subject of a Bloomberg BNA story by Michael J. Bologna that begins:

The Indiana Tax Court handed another victory to online travel companies in their battle with municipal and state revenue agencies, ruling that Orbitz LLC isn’t liable for a sales tax and innkeeper’s assessment levied by the Indiana Department of Revenue ( Orbitz LLC v. Ind., Dep’t of State Revenue, Ind. T.C., No. 49T 10-0903-TA-00010, 12/20/16 ).”

Judge Martha Blood Wentworth on Dec. 20 found no basis for affirming an Indiana revenue department assessment of $200,000 imposed in December 2007. Wentworth ruled that Chicago-based Orbitz couldn’t be characterized as a “retail merchant” under state law and couldn’t be held responsible for any taxes on the “mark up”—the difference between the wholesale room rate charged by hotels to Orbitz and the retail rate paid by customers to Orbitz.

The ruling, however, included a determination that could impact Orbitz’s checkbook.

On a separate question of the proper measure of the tax base for the transactions in question, Wentworth ruled any additional assessments of sales or innkeeper’s taxes that might be due should be assessed against the hoteliers as the proper retail merchants. That determination could be meaningful because most major hotel chains have for many years required the OTCs to enter into agreements that indemnify them against adverse tax rulings.

“During the period at issue, the Department erred in issuing sales and innkeeper’s tax assessments against Orbitz based on the retail rate of Indiana hotel rooms as a matter of law because the hoteliers, as the retail merchants, were liable for the taxes, not Orbitz,” Wentworth wrote.

It was unclear how Indiana would respond to the ruling. A spokesperson for the Indiana revenue department didn’t immediately respond to a request for comment. An attorney representing Orbitz declined to comment.

Posted by Marcia Oddi on December 22, 2016 08:51 AM
Posted to Ind. Tax Ct. Decisions