Communities mull appeal of hotel tax decision

Several Northern Illinois communities are considering whether to appeal a recent decision that denied their federal lawsuits to collect more hotel taxes from online travel sites.

“This isn’t a class action, so each municipality will have to make their own decision about how to proceed and whether they want to appeal the decision,” Robin Ward, in-house counsel for Arlington Heights, said.

Lombard was the only one of more than a dozen municipalities that was allowed to sue more than a dozen companies that use a “merchant model” agreement to offer cut-rate hotel deals to consumers.

The villages claimed the companies were skirting hotel-tax collection rules by not paying the tax on the retail price of the room, but the lower wholesale rate instead.

The judge said only the wording of Lombard’s ordinance applies the tax to room rental, not a specific rate. It requires a tax of 5 percent of “the charge on individual billings” and applies to anyone involved in the business of renting hotel rooms.

In most of the other ordinances, the municipalities specified that the tax is to be paid by a hotel owner, operator or manager. The municipalities argued, unconvincingly, that the companies qualify as managers or operators because they are in the business of renting hotel rooms.

Ward said Arlington Heights’ officials have not decided yet how to proceed. She said the options include an appeal or changing the ordinance to reflect Lombard’s verbiage.

The municipalities, which include Bedford Park, Warrenville, Oakbrook Terrace, Oak Lawn, Orland Hills, Rockford, Willowbrook, Burr Ridge, Des Plaines, Lombard, Orland Park, Tinley Park and Schaumburg, have until July 15 to submit proposals for a way to determine the extent of the online travel sites’ liability to each town.

The case is set for a status hearing on Aug. 9.

–Illinois News Network

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