By Chris Mehrmann and Charlie Kearns

The Montana Supreme Court held that online travel companies (OTCs) – including Priceline, Expedia, Orbitz and others – are subject to the state’s sales taxes on accommodations, campgrounds and rental vehicles, but are not subject to the state’s lodging facility use tax. The court held that the reservation fees are subject to sales tax because, in its view, the fees are included in the sales price and that the OTCs, as sellers of these reservation services, must collect and remit these taxes to the Department of Revenue. However, because the OTCs are neither owners nor operators of lodging facilities, the court held that the reservation fees are not subject to the lodging tax. The OTCs requested a prospective application of the court’s decision, arguing that any imposition of back taxes would be inequitable. Rejecting this argument, in part, the court ordered that the OTCs pay tax retroactive to 2010, when the Department filed its lawsuit, since they were on notice that the Department considered them liable for tax. Interestingly, the court also noted that Montana’s lodging facility use tax and sales tax regimes are “inconsistent and incompatible.” Since the regimes were “created sixteen years apart” and “tax two separate transactions,” the court declined to read the statutes in pari materia. Dept. of Revenue v. Priceline.com, Inc., No. DA 14-0260 (Mont. Aug. 12, 2015).