Internet taxes

An interesting issue arises when a travel company such as Expedia buys wholesale and sells retail. What is the amount of tax that is owed to the City, the taxing agency?

Atlanta recently filed a lawsuit claiming that Internet companies such as Expedia purchased hotel rooms at “wholesale,” e.g., $50, and sold them at a higher price, “retail,” e.g., $75. They then paid the City of Atlanta their 7% tax on their purchase price.

The City claims that tax is due on the higher amount, the amount of the sale to the ultimate customer.

This case is not different from any “brick and mortar” case … but it is the Internet … And the Internet is the Wild West at the moment with a lot of action by the States and now the cities wanting a piece of the action that they used to get before the presence of the Internet.

Western States have joined together to tax Internet sales … and there is action in Congress as well.

Ultimately, the new Supreme Court will enter the fray with its interpretation of the Commerce Clause and other aspects of the Constitution.

Until then, enjoy the ride!

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