Expedia Accused in Class Action of Overcharging Taxes for Online Hotel Reservations

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Expedia, Inc. is among the defendants in a proposed class action out of Washington that claims the travel company overcharges customers for hotel reservations made through Reservations.com. Specifically, the case alleges Expedia secretly inflates the “Taxes & Fees” applied to customers’ online purchases and pockets the extra money.

Filed against Expedia and subsidiaries EAN.com, LP, Travelscape, LLC, and Hotels.com L.P., the 27-page lawsuit explains that Expedia obtains hotel room inventory at a wholesale rate through “merchant model” contracts with hotels and then sells reservations to consumers for a marked-up price on sites such as Reservations.com. The travel company, according to the case, must remit taxes on the prices it pays to hotels for room inventory, a cost Expedia passes on to customers in an amount labeled in online transactions as “Taxes & Fees.”

The case alleges that despite representing that the “Taxes & Fees” charge is money “hotels must pay to the government,” Expedia secretly inflates the amount and pockets the difference. Detailing several instances of the defendants’ alleged “secret tax overcharge,” the lawsuit points out that the Taxes & Fees demanded by Expedia for room bookings, whether the company must pay taxes at either the wholesale or full-room rate, always include a tax overcharge because they’re “always higher than the taxes remitted on the hotel rooms.”

“For example,” the complaint reads, “Reservations.com showed a room rate of $159 and ‘Tax Recovery Charges & Fees’ of $50.88 for a reservation at the W Hotel in Seattle for November 22-24, 2018. The real total state and local Seattle tax for a Seattle hotel room is 15.6%, plus $2 per night, so the total ‘Taxes & Fees’ on this room should have been $27, and not $50.88 as listed.”

The case adds that the overcharge is often even higher because the defendants are generally required to remit taxes on the discounted wholesale rate paid to hotels instead of on the full price charged to customers. Based on the alleged Seattle hotel overcharge, the lawsuit estimates the defendants have collected a minimum of $95 million in unlawful tax charges.

The case seeks to cover a proposed class of individuals who, anytime since January 1, 2014, purchased pre-paid hotel room reservations through Reservations.com that were supplied by Expedia or its subsidiaries.