Opinion ID: 2507122
Heading Depth: 1
Heading Rank: 1

Heading: Enumerations of Error Raised by the OTCs

Text: 1. The OTCs assert that the trial court erred when it determined that the rent for occupying a City hotel room is the room rate paid by the consumer rather than the negotiated wholesale rate between the OTC and the hotel. The interpretation of statutes and ordinances is a question of law, which we review de novo on appeal. Expedia v. City of Columbus, supra, 285 Ga. 684(4), 681 S.E.2d 122. The Enabling Statute provides for municipalities to impose an excise tax at the applicable rate on the lodging charges actually collected. OCGA § 48-13-51(a)(1)(B)(i). Section 146-79 of the City's ordinance provides: There is levied and assessed and there shall be paid a tax of seven percent of the rent for every occupancy of a guestroom in a hotel in the city, (emphasis supplied), and section 146-76 defines rent as the consideration received for occupancy valued in money.... (Emphasis supplied.) Additionally, section 146-80 states: Every person occupying a guestroom in a hotel in this city is liable for the tax levied in this article. (Emphasis supplied.) Under the statute and ordinance, the tax is on the consumer. The statute and ordinance do not tax any transaction between a non-occupant such as an OTC and the hotel. [1] Thus, reading the ordinance in toto and in pari materia to the Enabling Statute, the amount that is taxable is the retail amount paid for occupancy by someone who will occupy the room. Since the consumer cannot obtain the right to occupy the room without paying the retail room rate charged by the OTC, it is the retail room rate that is the taxable amount or rent under the City's ordinance. [2] See also City of Fairview Heights v. Orbitz, Inc., 2006 WL 6319817 at -6, 2006 U.S. Dist. LEXIS 47085 at  19-20 (S.D.Ill. July 12, 2006) (rent charged was amount hotel room occupant paid to the OTC and not the negotiated wholesale rate). Accordingly, the trial court's conclusion on this issue must be sustained. 2. The OTCs allege the trial court erred in issuing the injunctive relief described herein at paragraph (e), supra. We disagree. As we explained in Expedia v. City of Columbus, supra, 285 Ga. at 688(2), 681 S.E.2d 122, there is no governmental authority in the City, or in this State, that requires any OTC to collect hotel occupancy taxes. Rather the OTCs are following their business model when they collect money for the payment of hotel occupancy taxes from consumers who wish to occupy the City's hotel rooms. [3] Inasmuch as the OTC is the merchant of record and the consumer pays the line item taxes and fees to the OTC and makes no tax payment to any other entity, then the OTC is collecting taxes as a matter of fact during each and every such transaction with the consumer who is the end user of the hotel room. Each provision of the trial court's injunction is qualified with the phrase so long as the OTCs collect hotel occupancy taxes and/or all applicable taxes from their customers, recognizing for so long as the OTCs voluntarily collect taxes from consumers seeking to occupy rooms in the City's hotels, taxes must be collected and remitted based on the room rate paid by the consumer for occupancy. [4] Id. The monies collected do not belong to the OTCs or the hotels, but are held in trust for the City. See, e.g., Ready Trucking, Inc. v. BP Exploration & Oil Co., 248 Ga.App. 701, 705(2), n. 2, 548 S.E.2d 420 (2001) (one is free to enter into an agreement to reimburse another for a tax obligation, as long as the State ultimately receives the proper amount of tax. [Cit.]); Alon USA, LP v. State, 222 S.W.3d 19, 28 (Tex.App.2005) (since the state is the beneficiary of the tax, any intermediary persons purporting to collect taxes are obligated to hold such funds in trust for the state and may become liable to the state for payment). In addition, the OTCs' argument concerning whether the City is or is not a third-party beneficiary of their contracts with hotels is inapposite. The City does have an interest in regard to the OTCs' transactions as third-party tax collectors. If the OTCs were to cease acting as third-party tax collectors, the injunction would be moot; however, if the OTCs continue collecting hotel occupancy taxes from consumers occupying City hotel rooms, the OTCs shall collect and remit those tax monies lawfully, i.e., based on the room rate charged to the consumers for occupancy. The trial court did not err in issuing its injunctive order. 3. The OTCs argue that the trial court erred when it voided those portions of their contracts which provided that hotel occupancy taxes would be collected and remitted based on the negotiated wholesale rate. A contract to do an immoral or illegal thing is void. If a contract is severable, however, the part of the contract which is legal will not be invalidated by the part of the contract which is illegal. OCGA § 13-8-1. The statute gives Georgia courts authority to void contracts and/or portions thereof. In this case, pretermitting whether any portions of the OTCs' contracts with the City's hotels are void, contractual terms which call for the under remission of hotel occupancy taxes would be unenforceable. Since we have ruled that the City's ordinance requires the collection and remission of taxes based on the room rate paid by the consumer, it would be unlawful for any entities collecting hotel occupancy taxes in the City to do so in a manner that is inconsistent with this opinion. In this case, the trial court was not called upon to decide whether the various contracts were enforceable, and so reaching a determination that the contracts were void was improper. However, because the injunction provides for the proper collection and remittance of the City's hotel occupancy taxes should the OTCs elect to continue to act as third-party tax collectors, the error is effectively moot and provides no basis for reversal.