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A bed tax -- also called an accommodations tax -- is a fee paid by hotel guests that is used to fund tourism-
related activities. It is collected at both the local and state levels. Local bed taxes vary, but are generally about 1 to 3 percent.
The first of the lawsuits was filed by Los Angeles in 2004. There are now about 50 pending throughout the country.
The Town of Hilton Head Island is in discussions with a lawyer about filing a suit of its own.
Meanwhile, the finance department in Bluffton -- a much smaller tourism destination -- is awaiting the outcome of litigation across South Carolina before deciding what action to take.
A lawyer representing counties and municipalities in both North and South Carolina said local governments could be missing out on up to 10 percent of the bed taxes.
That means Hilton Head could be missing out on $220,000 in uncollected local accommodations taxes from fiscal 2008 alone.
Bluffton could be missing out on about $21,000 in uncollected bed taxes from that same year.
Counties and municipalities allege that online discount booking companies -- Expedia, Travelocity, Orbitz and Priceline -- are not turning over a portion of the taxes on the rooms they book, said Charleston lawyer Ronnie Bonds.
Bonds represents a handful of counties and municipalities, including Charleston, Myrtle Beach and Raleigh, N.C., in lawsuits over the disputed fees. Trial for the Charleston suit, filed in 2006, is set for next year.
The suits claim the sites are either keeping the money or failing to collect it. The consumer is responsible for paying the tax, which the sites should be charging when they book the room, the suits allege.
Hotels and discount booking sites enter contracts that allow the sites to sell rooms at a reduced rate.
Bonds said the sites mark up the rate by 20 percent to 30 percent.
Hotels turn over the taxes based on the contracted rate. The suit alleges the tax also should be figured based on the marked up rate.
In court documents, the sites have said the profits in question are not a mark-up, but "facilitation fees" similar to those charged by travel agents and not subject to the taxes.
Greg DeLoach, Hilton Head's assistant town manager, said the town has been in discussions with Bonds about filing a lawsuit and has reviewed the issue for the past three weeks. He said he expects town manager Steve Riley to approach town council with a recommendation soon. Town council would have to approve filing suit, he said.
John Curry, a former chairman of Hilton Head's Accommodations Tax Advisory Committee who now sits on the state Accommodations Tax Oversight Committee, said the disputed taxes are an issue that will be on that group's agenda at its meeting Monday.
Howard Duvall, executive director of the Municipal Association of South Carolina, said the issue came up during a national conference of municipal associations earlier this week.
"It is a huge problem in South Carolina and nationwide," he said. "It has a big impact on Beaufort County."
During the national conference, speakers discussed the possibility of new federal and state legislation that would exempt the sites from having to pay the taxes both retroactively and prospectively, Duvall said.
Local governments are also possibly missing out on the state-levied 2 percent accommodations tax. They cannot file litigation to collect those taxes because filing is the state's responsibility.
South Carolina has assessed one firm, Expedia, for the disputed taxes, which include the 2 percent state accommodations tax and the 5 percent sales tax, Bonds said. The state is bringing the action in administrative law court, where tax cases are tried. Trial would begin this fall.
According to figures from defense attorneys in Bonds' cases, 32 percent of all hotel bookings are made on the discount Web sites.
