LAS VEGAS (KLAS) — Clark Hill PLC, an international law firm, has filed a whistleblower lawsuit alleging that some of the nation’s largest online travel companies collectively withheld hundreds of millions of dollars in Nevada state tax payments across multiple years.
The lawsuit names Orbitz, Travelscape, Travelocity, Expedia, Priceline, TripAdvisor and other companies.
The qui tam lawsuit, filed in Clark County’s Eighth Judicial District Court, is a type of lawsuit in which whistleblowers are rewarded in successful out-comes where the government recovers money lost to false claims or other kinds of fraud.
The case was brought on by Las Vegans Sig Rogich and Mark Fierro. Their group has been working on background information and preparation for the suit for several years.
As spelled out in the lawsuit, online travel companies contract with hotels for the right to purchase rooms at discounted wholesale prices. The online travel companies, according to the complaint, then sell the rooms to the public at higher retail prices plus additional fees, charging the customers’ credit cards for the entire amount.
Fierro Communications provided the following example in a press release Wednesday: an online travel company may obtain a room from a hotel for $150 and sell it to a customer for $200. Although the law requires the companies to pay taxes on the total amount of $200, they were instead transmitting taxes based on the lower wholesale price of $150, the complaint alleges.
According to the complaint, the funds improperly diverted from state tax coffers amount to hundreds of millions of dollars. If you take nearly 150,000 hotel rooms at a 90% annual occupancy rate and multiply the tax dollars across a number of years, the amount of revenues owed to Nevadans is staggering, according to the complaint.
“There is no way the online travel companies did this mistakenly,” said Rogich, president of The Rogich Communications Group. “They intentionally withheld this money that rightfully belongs to taxpayers in Nevada. This is a common scheme in which they attempt to avoid payment of Nevada’s Combined Transient Lodging Tax, which is required by Nevada law.”
“The bad news is this money should have been going to Nevada’s schools, law enforcement organizations, infrastructure and a broad array of other needs of Nevada citizens,” said Fierro, president of Fierro Communications, Inc. “The good news is that when we win this case, and we are confident that we will prevail, it will rank among the biggest windfalls that Nevadans have experienced since the landmark 1998 settlement with the tobacco industry.”
According to Fierro Communications, the entities most affected by the loss of revenue include:
- Las Vegas Convention and Visitors Authority
- Clark County School District
- Transportation districts
- Nevada Department of Tourism
- The state of Nevada general fund
- The Clark County General Fund
- The state’s Distributive School Account
- The Clark County School District Bond Fund for school construction
Because online travel companies do not pick the city their customers travel to, the lawsuit will not affect the volume of travel to Las Vegas.