Hoteliers whose hotel businesses work with online booking agencies understand all too well the dilemma. Hotel booking sites like Expedia and Hotels.com sell hotel reservations to customers, hand over a discounted price to the hotels, and pocket their profits – all good business. But the dilemma arises when the booking companies go to pay taxes on the hotel rooms they’ve sold. And that’s where the local and state governments are getting involved.

The state of Florida announced recently it is suing online travel booking companies for taxes owed. The problem isn’t that the online companies aren’t paying taxes at all – they are. However, they’re paying taxes on the rates the hotels receive, not the rates the companies collect. The state’s case alleges the difference in those two figures to amount to untold millions of dollars. In question are tax dollars the state says taxpayers have already paid to the online booking companies, but that the companies have not forwarded to tax authorities.

The lawsuit has caused the online companies to take off the gloves. An Expedia release called the lawsuit “meritless” and brought up a very real side effect that could further impact the hotel industry – the fact that online booking companies bring in a lot of tourist dollars and offer easy-access booking and discounts for travelers.

The lawsuit is one of a number filed recently. Similar claims have surfaced in Atlanta, Bowling Green, KY, Chicago, Philadelphia, San Antonio and New York, as well as other popular tourist towns.

Look for fewer bargains from the online sites, more frustration from guests who have grown accustomed to online deals, and less publicity across the board. For hotels located outside the main tourist areas, that could result in some serious damage to the bottom line. Should the lawsuit be successful, how will this affect your hotel business?  What percentage of your bookings are made through third party booking sites?