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Designer Skin LLC v. S & L Vitamins, Inc., et al.
Unauthorized internet reseller of plaintiff’s products is not guilty of trademark infringement, and does not cause actionable initial interest confusion, by using plaintiff’s trademarks in meta tags of website at which plaintiff’s and its competitors’ products are sold, and in...

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City of Rome, et al. v., LP, et al.

Civ. Action No. 4: 05-CV-249-HLM (N.D Ga., May 8, 2006)

Municipalities Permitted To Proceed With Claim To Recover Excise Taxes From Online Travel Services

Court denies defendants' motion to dismiss claims brought by municipalities in Georgia, charging defendant online travel services with improperly failing to remit excise taxes collected from motel guests in connection with their purchase of hotel accommodations.  The Court also allowed plaintiffs to go forward with claims that defendants misled consumers by failing to apprise them that such collected excise taxes were not being remitted to the appropriate governmental authorities.  The Court did dismiss claims plaintiffs brought to recover sales taxes allegedly due as a result of defendants' sales of hotel accommodations.  The Court held that such claims could only be pursued by the Georgia Revenue Commissioner, who was not a party to this suit and had not yet made a determination that any such taxes had been improperly withheld by the defendants.

Municipalities Claim Defendants Fail To Remit Excise Taxes Due On Resale Of Hotel Accomodations

Plaintiffs are Cities and Counties in Georgia who commenced this class action on behalf of similarly affected municipalities in the State.

Defendants are operators of online travel services that, among other things, resell hotel rooms to the public.  Among the named defendants are some of the largest online resellers of accommodations, including,, Orbitz, and  None of the named defendants are alleged to actually operate hotels in the municipalities in question.  Instead, they allegedly offer to the public lodging in Georgia hotels operated by third parties.

The plaintiff municipalities impose excise taxes "upon the furnishing for value to the public of any room or rooms furnished by any person or legal entity licensed by, or required to pay business or occupation taxes to, the municipality for operating a hotel or similar facility." Such excise taxes are also imposed on every person who is a motel or hotel guest in a room subject to such taxation.  These taxes are imposed as a percentage of the price at which the room is let. 

The law requires an entity collecting these taxes from a hotel guest to remit the same to the appropriate governmental municipality.  If that entity collects more than the taxes actually due, it is required to remit the full amount it collects.

The plaintiff municipalities also claim that there are sales taxes due as a result of these transactions that they have not received.

The Complaint charged defendants with failing to remit the full amount of excise taxes collected from those who let hotel rooms located in the plaintiffs' municipalities.  More particularly, the Complaint alleged that defendants purchased hotel accommodations from Georgia-based establishments, which they resold to the public at higher prices.  The defendants only remitted such taxes, however, as were due based on the price defendants paid for the rooms in question, and not at the higher rate at which such rooms were resold to the public.  The Complaint alleged that this was done notwithstanding the fact that a "tax and service fee" was collected from the public based on the higher room rate actually paid by the public for the room.

The Complaint also asserted that defendants misled the public by failing to disclose that they did not remit the full amount of taxes due, and by failing to disclose what portion of the "tax and service fee" that defendants charged represented taxes and what portion represented service fees.

Defendants Subject To Suit Because They Collected Taxes From Customers

Defendants sought to dismiss plaintiffs' excise tax claims, arguing they are only imposed on hotel operators either licensed by the appropriate governmental authority to operate a hotel in the subject municipality, or that are obligated to pay a business or occupations tax as a result of their operation of such facilities.  Defendants claimed the Complaint must be dismissed because they do not fall in either category, as they are not alleged to operate hotels in the municipalities at issue.

The Court rejected this argument.  Pointing to the provisions of the applicable statutes that obligated those who collect excise taxes from the public to remit the full amount collected to the appropriate municipality, the Court held the Complaint states a claim, and allowed the municipalities to proceed with their action to recover such excise taxes. 

Defendants' Liability Unresolved

Left for another day was the question of whether any such taxes were in fact due to the plaintiffs.  As noted above, the amounts defendants collected were denominated a fee for "taxes and services."  Defendants have claimed that in addition to hotel rooms, they also provide various services to their customers, including facilitating their booking of hotel accommodations.  The extent to which the sums defendants collected are allocated to such services, or the tax, if any, due thereon, was left unresolved.

It should also be noted that this is but one of a number of lawsuits brought by municipalities across the country seeking a resolution of this question. Other lawsuits are pending in California, Pennsylvania and Illinois.  In addition, a similar claim has been filed in Georgia on behalf of the City of Atlanta.

Sales Tax Claims Dismissed For Lack Of Standing   

The Court did dismiss so much of plaintiffs' Complaint that sought to recover sales taxes allegedly due as a result of these sales of hotel accommodations.  While plaintiffs were the beneficiaries of such taxes, the Court held that, by statute, any claims therefore could only be pursued by the Georgia Revenue Commissioner.  As he had not, at this time, advanced such claims, or even determined that any such taxes were due, claims seeking the recovery of such sales taxes had to be dismissed.  The Court also denied plaintiffs' motion to add the Revenue Commissioner to this action as a necessary party.

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