Wake County v. Hotels.Com, LP, 2007 NCBC 35 (N.C. Super. Ct. Nov. 19, 2007)(Diaz)

Four North Carolina counties sued hotels.com, alleging that the online aggregator purchased blocks of hotel rooms from hotel owners and only paid occupancy tax based on the price paid, even though they sold those rooms to lodgers for more than they had paid and even though the lodgers paid occupancy tax based upon the higher price. (The Court referenced a series of cases filed across the country on the same issue).

The plaintiff counties had various ordinances and various administrative procedures regarding the enforcement of those ordinanances, and the Court observed that the case raised "thorny issues of statutory interpretation." It denied the motion to dismiss as to the principal claims because the defendant was collecting the tax and failing to remit it, and also failing to file the returns required by law.

The Court granted the motion as to an unfair and deceptive practices claim, however, holding that the act does not apply when the alleged wrong is already the subject of extensive governmental regulation and oversight, as there is for a failure to remit taxes. Otherwise, the Court observed, every tax dispute could become an unfair and deceptive practices claim, entitling the taxing authority to treble damages. The Court also noted that there was no commercial activity involved which implicated the deceptive practices statute.

The Court also dismissed the claims of one of the plaintiff counties, because it had failed to exhaust its own administrative remedies before filing suit. Having chosen to create such procedures, the county was not entitled to arbitrarily decide to ignore them.

Full Opinion

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