The Georgia Supreme Court on Monday revived a hotly contested lawsuit by the city of Atlanta against online travel companies that claims the firms are illegally pocketing millions of dollars in hotel tax revenue.
The city filed suit in 2006 against 17 Internet travel reservation companies, including Expedia, Travelocity.com, Hotels.com, Priceline.com and Obitz. The suit seeks to recoup hotel and occupancy taxes.
In a 5-2 decision, the court told a Fulton County judge to decide the heart of the high-stakes litigation: whether the online companies are subject to the tax.
The hotel and occupancy tax for Atlanta hotel and motel rooms is 7 percent. The city uses most of the tax revenues to boost tourism.
In its suit, the city of Atlanta claims that the Internet reservation companies, as sellers of hotel rooms, must collect the hotel and occupancy tax from their customers and pay them to the city.
After the suit was filed, the online reservation companies moved to dismiss the case on the grounds that the city rushed to court before exhausting its administrative remedies.
A Fulton County judge agreed, as did the Georgia Court of Appeals.
But on Monday, the state Supreme Court overturned those decisions.
“In our view, the city cannot be required to exhaust an administrative process as a prerequisite to obtaining a determination that the ordinance prescribing that process even applies in the first place,” Justice Carol Hunstein wrote for the majority.
The Atlanta case is being closely watched by local governments and the online travel industry. It was brought at a time when more people make hotel reservations online.
The online travel companies are under legal assault across Georgia — and nationwide — as cities and counties seek to recoup tax money they claim is rightfully theirs. A class-action lawsuit on behalf of Georgia cities is pending against 18 online travel companies in U.S. District Court in Rome.