Several online hotel-booking companies say they should not be subject to Wyoming’s full sales tax on lodging services.

A group of seven companies has filed a brief with the Wyoming Supreme Court arguing that a plan to force them to pay more in state sales taxes is unconstitutional.

State officials say Wyoming is losing out on thousands, or even millions, of dollars in lost revenue because of the way sales taxes are collected and remitted.

Currently, the state only gets a “tax recovery fee” from the hotels. That is based on the lower negotiated rate that a hotel agrees to with an online booking service, such as Expedia or Travelocity.

As an example, state Department of Revenue Director Dan Nobel said a company could reserve a block of rooms from a hotel for $80 apiece. The company then could offer the rooms to their customers at $100 each.

He said the state has been collecting sales tax based on the hypothetical $80 instead of the $100.

The Department of Revenue sought a rule change that would allow it to tax the full retail price charged to consumers.

But the online travel companies appealed the rule to the Wyoming Equalization Board earlier this year.

That body affirmed the change, but the companies issued another appeal, moving the case to the state Supreme Court.

Larry Wolfe is the attorney representing Expedia, Travelocity, Priceline, Hotwire, Orbitz, Cheaptickets and

He said the court should dismiss the rule because the companies should not be considered “vendors” since they do not have physical presences in the state and do not provide actual lodging services.

“The (online travel companies) themselves do not grant the reservation, do not sell hotel rooms in Wyoming and do not confer any right of occupancy on a traveler,” he wrote in the documents filed this week. “Such a right is conferred only by the hotel, and only when the guest checks in and is given the key.”

Wolfe also argued that the tax violates the commerce clause of the U.S. Constitution because only Congress can regulate interstate commerce.

In addition, he said, the tax would violate the federal Internet Tax Freedom Act that bars states from putting “discriminatory taxes” on electronic commerce.

“For more than 50 years, travel agents, aggregators, tour operators and other travel intermediaries have booked hotel reservations at discounted rates and then marked them up or added service fees to them,” he wrote.

“Yet Wyoming has never required any of these intermediaries to collect and remit sales tax.

“Indeed, it appears that Wyoming has never attempted to impose sales tax on any entity that did not own or manage a brick-and-mortar hotel structure located and licensed to operate in Wyoming.”

But the state has argued the tax should be applied on the full amount since the retail customer’s payment is the actual transaction. Since that occurs with a hotel in Wyoming, the state says it falls within the allowed taxable standards.

Nobel previously said the state will hold off on enforcing the rule until the Supreme Court makes its decision.

If the state wins the dispute, he added, it will begin the process of auditing the sales tax payments for the past several years to see how much the state is owed.

Nobel said it is not known how much that is.

“For one, we do not know how rampant this process is, though I believe this is happening with a large percentage of the rooms being sold,” he said.

He said the state would also have to audit the payments to find out the amount of the tax recovery charge since it is currently not being disclosed.

“The audit could take a while,” he said. “But in the meantime we are just going to wait for the Supreme Court ruling.”

(c)2013 Wyoming Tribune-Eagle (Cheyenne, Wyo.). Distributed by MCT Information Services