Eventually, I wouldn’t be surprised to see the hotel tax issue wind up before the U.S. Supreme Court.

Of course, the OTCs are not hotel operators. They do not have any form of management contract with the hotel owner, nor do they provide staff or control any operational expense line item at a hotel property.

OTCs do however, serve as the merchant of record for consumer hotel transactions. In most cases, the OTCs now state that they do not assess fees on standalone hotel bookings. The hotels also require that the OTCs match the Best Available Rate quoted on the hotel website.

It all comes down to how the local tax law is written. If a city defines the hotel tax basis is the retail amount charged to the consumer, the OTC’s may wind up with a tax liability on their markup over the net wholesale rate paid to the hotel.

If the basis is the amount paid to the hotel operator, the OTCs seem obliged only to collect taxes on the hotel’s net rate, enabling the OTC to bank the tax differential between the net and retail rates as margin when matching tax inclusive BAR pricing established by the hotel operator.

With each municipality having slightly different wording of hotel occupancy tax laws and many fearing retribution by the OTCs if they elect to update their tax laws, this issue is far from over.

It appears that the only group that benefits from this messy litigation are the lawyers for the OTCs that continue to get paid win or lose all the way through the appeals process. Given that each OTC normally has its own team of lawyers and there are a myriad of municipalities and/or counties and/or states involved, there is a huge amount of overlap and inefficiency.

While the final outcome is still hard to predict, two things are for certain: There will be many ongoing appeals from both sides, and this is going to get expensive. It would be interesting to tally up the aggregate legal spend on both sides of the courtroom.