Chicago has sued more than a dozen online travel companies for underpaying cheating the city on hotel taxes for many years. Hotels.com, Hotwire, Cheap Tickets, Cendant Travel, Expedia, Lodging.com, Lowestfare.com, Maupintour, Orbitz, Price-line.com, Site59.com, Travelocity.com, Travelweb and Travelnow.com are accused of not having paid the full 3.5 percent hotel tax levied by the city.

In its suit, the city says the companies negotiate special discount prices with hotels in Chicago and are paying taxes on their lower ‘discounted cost’ as apposed to the higher marked-up ‘retail price’ they collect from consumer.

The 3.5% tax on the $30 markup for a sample $70 net rate the online travel companies pay a hotel, which they sell for $100 to consumers is at issue. Over the past year, several other US taxing authorities have initiated similar lawsuits against internet travel companies. More are expected to follow.

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