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Judge rules against Anaheim in suit over hotel taxes [updated]

February 1, 2010 |  3:30 pm

A Los Angeles County Superior Court judge ruled Monday against Anaheim in its pursuit of more than $21 million the city claimed it was owed by travel websites.

The city had argued that companies such as Expedia, Priceline and Orbitz owed the money because they were paying hotel occupancy taxes based on a wholesale price rather than the retail price paid by customers.

Judge Carolyn B. Kuhl wrote in her opinion that online companies are not liable under Anaheim’s hotel tax ordinance because they are not hotel operators, proprietors or managing agents.

As online hotel reservations have increased in popularity, cities including Anaheim that depend heavily on tourist dollars have been engaged in an increasingly hostile dispute over taxes owed by travel websites. Cities across the country have alleged that they are being deprived of funds, while companies have argued that they are just intermediaries and should not be taxed like hotel operators.

In a statement, Darrel Hieber, an attorney for the travel companies in the case, said they were “heartened by the court's decision” and hoped it would lead other cities to work with the companies rather than “wasting time and energy on frivolous litigation.”

City officials did not return calls for comment.

[Updated, 6:10 p.m.: Late Monday, Anaheim released a statement saying city officials disagreed with the judge's ruling and they "will explore our options to protect the city."]

-- Paloma Esquivel in Orange County