Gotta Pay The Vig

A number of cities are suing a whole bunch of online travel websites like Orbitz, Expedia, and Travelocity.com claiming that the websites are underpaying taxes on hotel rooms.

San Antonio filed a class-action lawsuit this week seeking to recover lost taxes, and Los Angeles, San Diego, Philadelphia, Atlanta and Chicago have filed similar suits. The state of Texas and two of its biggest cities, Dallas and Houston, are considering their own actions.

San Antonio believes online travel agencies negotiate room discounts from hotels, and sell the rooms at a markup to consumers. The agencies, though, only pay hotel taxes on the wholesale price.

"This scheme is being perpetrated by the Web-based hotel travel companies on every city and state in the country as far as we can tell," said Steve Wolens, a lawyer representing the city of San Antonio. "And they have been shameless about it."

Wolens estimates San Antonio loses as much as $2 million annually in missed tax revenue.

Everywhere you look, cities and states are trying to grab taxes from entities to meet their budgets. Never mind the fact that the online websites pay millions in taxes to these cities, the cities are claiming that they should pay more.