Judge OKs $3.5M settlement in hotel tax suit

Guests at Charleston County hotels, like the Renaissance Charleston Historic District on Wentworth Street (above), pay a 6 percent accommodations fee based on the room rate. Of that, 2 percent each goes to the city, county and state.

Charleston County and North Charleston will collect a combined $1.4 million from several popular travel websites to settle a legal dispute over local hotel taxes.

Circuit Judge R. Markley Dennis approved the deal at a hearing Monday in downtown Charleston.

The settlement closes out a lawsuit that North Charleston filed against the websites along with Aiken County and the city of Columbia in mid-2013. Charleston County joined the case later.

At issue was the amount of so-called accommodations fees that local governments collect from the online booking services.

The industry’s standard practice is to acquire large blocks of hotel rooms at discounted rates and then resell them at a profit.

Litigation began to spread across the country when local government officials discovered that the websites were basing their tax payments on the wholesale prices. The online firms have argued that only the rate they negotiate with hotels is taxable.

North Charleston and Charleston County’s accommodations fees add 2 percent to a hotel bill.

Their lawsuit named a long list of travel websites, most of them owned and operated by Expedia, Priceline, Travelocity and Orbitz.

Described as a compromise to avoid further litigation, Monday’s settlement totaled $3.5 million. About $2.49 million will be left after legal fees and expenses.

Charleston County will collect almost $1.16 million and North Charleston will receive about $240,600. Columbia and Aiken County will get about $393,689 and $8,431, respectively.

The rest of the money will go to about 70 other South Carolina government bodies that were added to the class-action lawsuit, said Charleston attorney Jesse Kirchner, who helped file the case. The Isle of Palms, for instance, will be paid nearly $52,500.

“This effectively ends the accommodations tax litigation in South Carolina,” Kirchner said Monday.

The online travel websites also have agreed to register with all municipalities in the state and “remit accommodations taxes going forward, which is a pretty big deal, too,” he said.

Expedia, which owns Travelocity and is buying Orbitz, and Priceline did not respond to requests for comment.

The city of Charleston and the town of Mount Pleasant were part of a similar lawsuit in 2006. That case was settled for $900,000 about three years ago. Of that, Charleston received $657,000, and Mount Pleasant was paid $50,000.

Contact John McDermott at 937-5572.