The Tourist Development Tax at issue is authorized by s. 125.0104, Fla.Stat., which provides that “every person who rents, leases, or lets for consideration any living quarters or accommodations in any hotel, apartment hotel, motel, resort motel, apartment, apartment motel, roominghouse, mobile home park, recreational vehicle park, condominium, or timeshare resort for a term of 6 months or less is exercising a privilege which is subject to taxation…” under that section. Section 125.0104(3)(f), Fla.Stat., provides in turn that the tax “shall be charged by the person receiving the consideration for the lease or rental, and it shall be collected from the lessee, tenant, or customer at the time of payment of the consideration for such lease or rental.”
The trial court and the First District Court of Appeal both ruled in favor of the online travel companies, and held that the taxable activity covered by the statute is the operation of running hotel accommodations, and not the mere act of renting to a tourist. And since hotels are ultimately the parties receiving consideration for the lease or rental, as opposed to the commission retained by the online travel companies for serving as a broker, the trial and appellate courts found that the tax was only meant to apply to funds ultimately received by the lodging establishment.
The counties argued, and dissenting Judge Padovano of the First District agreed, that the tax is directed at the total amount of money that a tourist pays to stay in a Florida hotel. The dissent looked to the plain language of s. 125.0104(3)(a)1., Fla. Stat., and noted that the act of leasing accommodations is subject to taxation; the statute does not explicitly provide for taxation only if the lease is effected by a lodging establishment. Judge Padovano pointed out that in a previous case before the Supreme Court that considered the tourist development tax, the Supreme Court considered the tax as one due on funds paid by a tourist for a hotel room, and not one on the net proceeds received by a hotel. Miami Dolphins, Ltd. v. Metropolitan Dade County, 394 So.2d 981 (Fla. 1981). The dissent also considered the business models used by online travel companies. Under the “agent model”, a travel company books a room, then the tourist pays the full amount to the hotel, which remits a fee to the company. The entire amount received by the hotel is subject to tax. Under the “merchant model”, which gave rise to this action, a travel company books a room and collects the entire bill from the tourist. It then transfers a portion of the bill to the hotel, and retains a portion of it for its services. Only the portion received by the hotel is taxed. The dissent and the counties contend that treating one transaction differently from the other is elevating form over substance, as both transactions are essentially the same.
The counties want the Supreme Court to review the case under its discretionary jurisdiction based on express conflict with the Miami Dolphins decision and based on a question certified as one of great public importance. Given the importance of the tourism industry to Florida and the money that is at stake, the importance of this case can hardly be understated. It remains to be seen if the Supremes will weigh in on it.