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E-Commerce News
Online Travel Agencies Not Liable For Hotel Occupancy Taxes; Online Dating Service Enjoys CDA Immunity
October 9, 2007
ONLINE TRAVEL AGENCIES NOT LIABLE FOR HOTEL OCCUPANCY TAXESA federal court in North Carolina recently provided some good news to the online travel industry when it dismissed a claim by Pitt County seeking to institute a class action proceeding to recover hotel occupancy taxes from a number of online travel companies.
The court dismissed the claim based on its finding that online travel companies are not "operators" of hotels as defined in North Carolina's occupancy tax statute. This was the principal defense advanced by the online agencies.
The court examined the actual operation of the online services, noting that, essentially, the services "re-sell" hotel rooms to the general public via the Internet. According to the court, this activity is not covered by the common definition of the term "operator."
The court turned to the common definition because neither the North Carolina sales nor occupancy tax statutes defined "operator." The court found it significant that "[P]laintiff does not claim Defendants perform any of the day to day functions commonly associated with hotel management, such as handing over room keys or maintaining guest rooms." The court also found it noteworthy that the state of North Carolina had never intervened in the suit. This raised the specter of inconsistent results within the state.
The court also agreed with the online services’ argument that the difference between what they pay hotels to offer rooms on their Internet sites and what a customer actually pays for a room is a "facilitation" fee, not subject to the occupancy tax. The court found that, by definition, the tax applies only to a hotel operator's gross receipts, that is, "the room price charged by the hotels themselves."
The North Carolina federal court’s ruling is consistent with an Ohio federal court ruling, but inconsistent with cases from Florida, Kentucky and Illinois.
In the Kentucky case, the federal court considered a Louisville ordinance that covered entities "doing business as motor courts, motels, hotels, inns or like or similar accommodations businesses." The court found that to the extent the online companies purchased rooms from hotels at a wholesale price and then leased them to customers at a marked up rate, they were in essence subletting living quarters, and would qualify as "like or similar accommodations businesses" and would be subject to the tax.
The question of the extent to which tax codes apply to online travel services is just one more example of the challenge posed by matching dusty old laws with the digital world. It is a challenge that should keep lawyers busy for a while. Anyone besides me think that’s a good thing?
ONLINE DATING SERVICE ENJOYS CDA IMMUNITY
A man charged with statutory rape of an underaged girl who had lied about her age to participate in an online dating service recently sued the Web site that brought the two together. Really. I don’t make this stuff up. The court dismissed the claim, based on its interpretation of the federal Communications Decency Act.
The lawsuit claimed that the Web site -- SexSearch.com -- had the ability to monitor user profiles, and thus was negligent in allowing the minor to register.
The plaintiff was a SexSearch.com "gold member." (His mother must be proud. And again, I don’t make this stuff up). As its name suggests, SexSearch members can contact each other to arrange meetings for consensual sex. Prospective members complete a questionnaire, which SexSearch.com retained the ability to edit.
The plaintiff located the profile of a user named Jane Roe, who indicated on her questionnaire that she was 18, when in fact she was 14. Plaintiff’s "successful" search led to felony statutory rape charges, which led to the civil suit against SexSearch.com for allowing a minor to register.
The court applied the immunity granted by the CDA, which protects operators of interactive computer services from liability for claims based on content provided by third parties. The CDA immunity applies even if the operator can monitor the information gathering process. The user profile information constitutes third party content.
The court also refused to limit the CDA immunity to defamation claims. The court noted that the immunity applies to all claims arising from the third party content, including claims for breach of contract and contract unconscionability.
The plaintiff also failed to produce evidence that SexSearch.com had edited the user profile to a degree that it could be deemed a content provider. The mere right to modify, if not exercised, does not constitute a waiver of the immunity.
Courts continue to apply the immunity provided by the CDA in an expansive fashion. Maybe the plaintiff here can study it in the prison library.
This Newsletter is a periodic publication of Graydon Head & Ritchey LLP and should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general information purposes only, and you are urged to consult your own advisor concerning your situation and any specific legal question you may have.