By: Derek Hawkins//December 5, 2017//
7th Circuit Court of Appeals
Case Name: Village of Bedford Park, et al., v. Expedia, Inc., et al.
Case No.: 16-3932; 16-3944
Officials: BAUER and HAMILTON, Circuit Judges, and DARROW, District Judge.
Focus: Statutory Interpretation – Local Hotel Tax Ordinances
Thirteen Illinois municipalities (“the municipalities”) assert that the Appellees‐Cross‐Appellants, which are online travel agencies (“OTAs”), have withheld money owed to them under their local hotel tax ordinances. The OTAs operate their online travel websites under the “merchant model”; customers pay an OTA directly to re‐ serve rooms at hotels the OTA has contracted with. The participating hotels set a room rental rate. The OTA charges the customer a price that includes that rate, the estimated tax owed to the municipality, and additional charges for the OTA’s services. After the customer’s stay, the hotel invoices the OTA for the room rate and taxes, and remits the taxes collected to the municipality. The municipalities argue that they have been shorted tax revenue over the years because the OTAs do not remit taxes on the full price that customers pay.
To illustrate, assume a 5 percent tax. If a customer books a room directly with a hotel for $100 a night, the hotel collects $5 for taxes and remits that to the municipality. But if a customer books a room through an OTA for $100 and the hotel’s room rental rate is only $60, the OTA pays the hotel $63 and the hotel remits $3 to the municipality. The municipalities seek to collect the additional $2 from the OTAs. But none of the municipal ordinances place a duty on the OTAs to collect or remit the taxes, so the municipalities have no recourse against the OTAs. The OTAs are entitled to summary judgment against all of the municipalities.
The facts of this case are not highly disputed, but their legal significance is. At issue is how the OTAs in this case—Expedia, Priceline, Travelocity, and Orbitz—function and the thirteen municipal tax ordinances. This case involves construction of municipal ordinances, which are interpreted in the same manner as Illinois statutes. Landis v. Marc Realty, L.L.C., 919 N.E.2d 300, 303 (Ill. 2009). The Court’s “primary objective is to ascertain and give effect to the intent of the legislature.” In re Consol. Objections to Tax Levies of Sch. Dist. No. 205, 739 N.E.2d 508, 512 (Ill. 2000). “The language of the statute provides the best indication of the legislature’s intent.” Id. Where a phrase or word is undefined, “[i]t is appropriate to employ a dictionary to ascertain [its] meaning.” Landis, 919 N.E.2d at 304. “A statute is ambiguous when it is capable of being understood by reasonably well‐informed persons in two or more different senses.” People v. Beachem, 890 N.E.2d 515, 520 (Ill. 2008) (quoting In re J.W., 787 N.E.2d 747, 767 (Ill. 2003)). If a statute imposing a tax is ambiguous, it must be “strictly construed against the government and in favor of the taxpayer.” In re Consol., 739 N.E.2d at 512.
The district court’s grant of summary judgment to the OTAs against all but one municipality is AFFIRMED. The district court’s grant of summary judgment to the Village of Lombard is REVERSED and summary judgment shall be entered in favor of the OTAs.
Affirmed in part. Reversed in part.