Hotel-Booking Sites Win Tax Case in New Jersey

(CN) - Priceline and other hotel-booking websites cannot be sued by New Jersey municipalities for occupancy taxes, the 3rd Circuit ruled.

Before sites like Priceline can book customers into rooms, they first negotiate a wholesale rate with the individual hotels and then make a profit by charging customers a higher rate.

In a class-action lawsuit for unpaid taxes, conversion and unjust enrichment, Lyndhurst Township said it should be allowed to tax the higher price paid by customers rather than the wholesale rate that hotels charge the websites.

Against this claim, a bevy of defendants including Priceline, Lowestfare.com, Travelocity, Expedia, Hotels.com, Hotwire, Cheap Tickets and Orbitz attacked Lyndhurst's standing.

The defendants also pointed out that the New Jersey Division of Taxation had already cleared them of liability to the tax.

A New Jersey federal judge agreed to dismiss the case, and the Philadelphia-based 3rd Circuit affirmed Tuesday.

"As the state Legislature never granted Lyndhurst the power to 'collect and administer' (that is, to 'enforce') its hotel occupancy tax, there is nothing to construe liberally in its favor," Judge Thomas Ambro wrote for a three-judge panel.

"As a result, the statute cannot be interpreted (liberally or otherwise) to give Lyndhurst implied powers that the state Legislature decided not to confer on it."

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