Council File: 04-0600-S45
Title
TRANSIENT OCCUPANCY TAX LAWSUIT / INTERNET HOTEL SALES / REVENUE
Subject
Motion - The Fiscal Year (FY) 2004-2005 Budget included a number of options to maximize revenue to the City. One such option was to fully apply the Transient Occupancy Tax on hotel bookings made through the Internet. Each year an increasingly larger percentage of hotel rooms in the City are being sold through on-line services on the Internet, by which reservations are made through third party brokers who buy hotel rooms at a discount and resell the rooms at a price closer to "retail". The Internet brokers pay the City tax based on the "wholesale" price, not the retail price paid by the customer. The Internet broker retains the difference between the tax it remitted to the hotel, calculated upon the wholesale price of the room, and the full tax as measured by the higher "retail" price paid by the consumer. It was estimated that full application of the Transient Occupancy Tax would generate approximately $3 million annually.
In the interim, a class action complaint has been filed by a coalition of internet based hotel lodging and travel services businesses, alleging the following: violations of the uniform Transient Occupancy Tax ordinances; unfair business practices in violation of California Business and Professions Code ยง 17200 et seq; conversion; and imposition of a constructive trust. Further, a jury trial has been demanded.
It is imperative that the Council receive a briefing from the City Administrative Officer, Chief Legislative Analyst and City Attorney on the status of this legal action and its potential impact on anticipated revenue to the City.
THEREFORE MOVE, that the City Council direct the City Administrative Officer, Chief Legislative Analyst and the City Attorney, to report to the Budget and Finance Committee within 14 days on the impact of the Transient Occupancy Tax (TOT) lawsuit, relative to Internet Hotel Sales, on the City's anticipated Transient Occupancy Tax revenue for Fiscal Year (FY) 2004-2005 and related issues.
Date Received / Introduced
01/11/2005
Last Changed Date
10/19/2005
Mover/Seconder Comment
Cardenas for Parks Mover 2005 / Padilla
File History
1-11-05 - This day's Council session
1-11-05 - Ref to Budget and Finance Committee
1-11-05 - File to Budget and Finance Committee Clerk
2-1-05 - For ref - Communication from the Chief Legislative Analyst / City Administrative Officer WAS No. 05-01-0107, dated February 1, 2005, relative to the impact of a complaint concerning Internet-based hotel room sellers on the City's anticipated Transient Occupancy Tax revenue for Fiscal Year 2004-2005 and related issues.
2-3-05 - Ref to Budget and Finance Committee - to Committee Clerk
2-16-05 - For ref - Communication from the City Attorney R05-0066, dated February 15, 2005, relative to a contract with the law firm of Kiesel Boucher & Larson to represent the City in its lawsuit against various Internet hotel-booking companies in the case of the City of Los Angeles, California, on behalf of itself and all others similarly situated v. Hotels.com, L.P., et al. - BC 326693.
2-17-05 - Ref to Budget and Finance Committee
2-17-05 - File to Budget and Finance Committee Clerk
3-29-05 - Council Action - Budget and Finance Committee report ADOPTED *AS AMENDED to:
1. APPROVE the request of the Office of the City Attorney to enter into a contract with the law firm of Kiesel Boucher & Larson to represent the City in its lawsuit against various Internet hotel-booking companies.
2. NOTE and FILE the joint Chief Legislative Analyst (CLA) and City Administrative Officer (CAO) report relative to the financial impact of the complaint against Internet Hotel sellers inasmuch as the report is submitted for information and no further Council action is required.
3-29-05 - Council Action - Verbal Motion - Parks Mover 2005 / LaBonge - ADOPTED - HEREBY MOVE that Council AMEND the Budget and Finance Committee Report (Item No. 23, Council File 04-0600-S45) relative to the Transient Occupancy Tax (TOT) lawsuit and request for outside counsel, as follows:
1. REQUEST the City Attorney and outside counsel to report back to the Budget and Finance and Conventions, Tourism, Entertainment Industry and Business Enterprise Committees in two months to discuss the further possible ramifications of the City's action.
2. REQUIRE that the annual cap for litigation costs advanced by the firm be $250,000 and a total cap of $500,000.
4-5-05 - File to Budget and Finance Committee Clerk OK
10-18-05 - File in files
1-11-05 - Ref to Budget and Finance Committee
1-11-05 - File to Budget and Finance Committee Clerk
2-1-05 - For ref - Communication from the Chief Legislative Analyst / City Administrative Officer WAS No. 05-01-0107, dated February 1, 2005, relative to the impact of a complaint concerning Internet-based hotel room sellers on the City's anticipated Transient Occupancy Tax revenue for Fiscal Year 2004-2005 and related issues.
2-3-05 - Ref to Budget and Finance Committee - to Committee Clerk
2-16-05 - For ref - Communication from the City Attorney R05-0066, dated February 15, 2005, relative to a contract with the law firm of Kiesel Boucher & Larson to represent the City in its lawsuit against various Internet hotel-booking companies in the case of the City of Los Angeles, California, on behalf of itself and all others similarly situated v. Hotels.com, L.P., et al. - BC 326693.
2-17-05 - Ref to Budget and Finance Committee
2-17-05 - File to Budget and Finance Committee Clerk
3-29-05 - Council Action - Budget and Finance Committee report ADOPTED *AS AMENDED to:
1. APPROVE the request of the Office of the City Attorney to enter into a contract with the law firm of Kiesel Boucher & Larson to represent the City in its lawsuit against various Internet hotel-booking companies.
2. NOTE and FILE the joint Chief Legislative Analyst (CLA) and City Administrative Officer (CAO) report relative to the financial impact of the complaint against Internet Hotel sellers inasmuch as the report is submitted for information and no further Council action is required.
3-29-05 - Council Action - Verbal Motion - Parks Mover 2005 / LaBonge - ADOPTED - HEREBY MOVE that Council AMEND the Budget and Finance Committee Report (Item No. 23, Council File 04-0600-S45) relative to the Transient Occupancy Tax (TOT) lawsuit and request for outside counsel, as follows:
1. REQUEST the City Attorney and outside counsel to report back to the Budget and Finance and Conventions, Tourism, Entertainment Industry and Business Enterprise Committees in two months to discuss the further possible ramifications of the City's action.
2. REQUIRE that the annual cap for litigation costs advanced by the firm be $250,000 and a total cap of $500,000.
4-5-05 - File to Budget and Finance Committee Clerk OK
10-18-05 - File in files
Online Documents (Doc)
| Title | Doc Date |
|---|
| Communication(s) from Public | 05/23/2025 |
| Report from City Attorney | 02/15/2005 |
| Motion | 01/11/2005 |
| Complete Council File | 01/01/2004 |
Council Vote Information
| Council Vote Information |
| Meeting Date: | 03/29/2005 |
| Meeting Type: | Regular |
| Vote Action: | to Adopt as Amended |
| Vote Given: | (15 - 0 - 0) |
| Member Name | CD | Vote |
|---|---|---|
| TONY CARDENAS | 6 | YES |
| ERIC GARCETTI | 13 | YES |
| WENDY GREUEL | 2 | YES |
| JANICE HAHN | 15 | YES |
| TOM LABONGE | 4 | YES |
| MARTIN LUDLOW | 10 | YES |
| CINDY MISCIKOWSKI | 11 | YES |
| ALEX PADILLA | 7 | YES |
| BERNARD C PARKS | 8 | YES |
| JAN PERRY | 9 | YES |
| ED REYES | 1 | YES |
| GREIG SMITH | 12 | YES |
| ANTONIO VILLARAIGOSA | 14 | YES |
| JACK WEISS | 5 | YES |
| DENNIS ZINE | 3 | YES |