Appeals court upholds dismissal of hotel taxes suit against online brokers by Ky. cities

Appeals court rejects Ky. online hotel tax suit

LOUISVILLE, Ky. — A federal appeals court has upheld the dismissal of a lawsuit in which Louisville and Lexington officials tried to collect taxes from hundreds of online hotel brokers such as Hotels.com.

The U.S. 6th Circuit Court of Appeals ruled Tuesday that Kentucky’s law governing hotel taxes doesn’t cover online travel companies. U.S. District Judge Thomas Russell dismissed the suit in 2008.

The city of Louisville three years ago sued hundreds of Web sites, including Orbitz and Travelocity, that rent discount hotel rooms, accusing the online travel companies of not paying taxes on the rooms rented.

Lexington joined the lawsuit, asking Russell to award an unspecified amount from the online travel companies to the two municipalities and to the 24 cities and 25 Kentucky counties that have hotel taxes.