LAS VEGAS (KTNV) — A dispute over documents erupted in a Clark County courtroom this morning as lawyers argued over a case that could bring a massive windfall to Nevadans. It involves room tax money that helps build and fund schools, fix roads and contribute to public services like police.
The lawsuit alleges that online travel companies like Expedia and Orbitz have been pocketing millions in taxes that should go to the state.
WATCH | Nevada lawsuit claims Expedia, Orbitz kept hundreds of millions in hotel room taxes
The scheme works like this: Hotels sell rooms to booking sites at a wholesale price. The sites mark up the price, sell the room to consumers and collect taxes at that higher rate — but only pay tax on the lower wholesale price they originally paid. That means more tax money goes into the booking sites' pockets than into Nevada's.
Attorney Dominic Gentile is leading a team of lawyers representing the state of Nevada.
"It's an intentional design scheme to turn public tax funds to private profits," Gentile said.
Expedia attorney Jeff Rossman pushed back on the state's position.
"The state of Nevada — the real party in interest here — stated to the Expedia defendants in 2005 that Expedia was not responsible for the taxes at issue," Rossman said.
The booking sites argue that a 2005 state tax opinion places the responsibility for the taxes on hotels, not on them. Hotels have been largely silent as the lawsuit has dragged on.
"And candidly, the online travel agencies have such influence and power over the hospitality industry that it's understandable," Gentile said.
Gentile argued that because previous cases along these lines in other states have been sealed, Nevada has had to fight to force the travel companies to turn over documents he needs to prove his case. He says those documents will show what the booking companies knew about their obligation to pay the taxes and what they are trying to hide.
"They don't want to do it. So we had to go to the court to ask the court to order them to do it," Gentile said.
That fight has lasted six years so far. Gentile estimates a win could add up to hundreds of millions of dollars for Nevada taxpayers.
"Expedia did $14.37 billion in revenue last year. So, I don't think it's going to hurt it much," Gentile said.
The judge did not rule after the hearing this morning, saying he needs more time to read over documents. This story will be updated when he does.
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