Expedia Inc. and three other online travel companies paid $23.6 million to the city of Chicago under four confidential settlements, ending more than a decade of litigation focused on the e-commerce companies’ alleged failure to pay city lodging taxes.
Previously sealed documents obtained by Bloomberg BNA under a freedom of information search reveal Expedia struck an $18 million agreement with Chicago on April 25. Expedia’s subsidiaries Hotels.com LP and Hotwire Inc. also participated in the settlement.
The settlement came just one day before the Appellate Court of Illinois issued a ruling that absolved Bellevue, Wash.-based Expedia of any liabilities to the city for an alleged pattern of miscalculating tax obligations under the Chicago hotel accommodations tax (CHAT). Expedia was facing a $29.1 million bill for unpaid taxes and penalties heading into that decision (City of Chicago v. Expedia, Inc. , Ill. App. Ct., 1st Dist., No. 1-15-3402, 4/26/17 ).
The same tax litigation triggered three previous confidential settlements, in July 2014 with other defendants, including Orbitz LLC, Priceline.com Inc., and Travelocity.com LP. Under those agreements, Orbitz paid the city $1.55 million, Priceline paid $2.6 million, and Travelocity paid $1.48 million.
Bill McCaffrey, a spokesman for Chicago’s Law Department, confirmed that all of the defendant OTCs have reached settlements with the city and now apply the 4.5 percent CHAT on the full retail room rate charged to consumers. A central question in the 12-year tax dispute involved whether the tax should be calculated against the higher retail rate paid by consumers or the discounted wholesale rate negotiated between OTCs and hotels.
McCaffrey said Chicago was represented by outside counsel throughout the litigation. Carol Gilden, a partner with Cohen Milstein Sellers & Toll PLLC, served in that capacity.
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