White plan to sue internet travel companies delayed by council
The Houston Business Journal notes that Mayor White's plan to hire outside legal counsel to sue internet travel companies has been held up by City Council:
The city delayed a vote on Wednesday on a measure that calls for hiring Houston-based commercial litigation firm Gibbs & Bruns LLP to investigate whether city has any legitimate legal claims to taxes online travel companies don't pay on rooms they buy in bulk and then resell to online consumers.
Typically, online companies pay taxes on the price they pay, but not on the mark-up paid by customers. If taxed on that difference, the companies would be obligated pay to millions of dollars in back taxes to the city.
[snip]
As a whole, the state's tax code does not directly address the issue -- a modern dilemma spawned by the nebulous nature of online retail activity.
"This is a very gray area," said Councilmember Carol Alvarado. "Even the state comptroller doesn't know what should be taxed."
[snip]
If hired, Gibbs & Bruns would represent the City of Houston on a contingency fee basis, with the city paying the firm a percentage of the money it might win from the online companies on a sliding scale.
According to its proposed contract with Gibbs & Bruns, the city would pay the firm 30 percent of the first $15 million it recovers, plus 25 percent of any award over $15 million up to $25 million. If the city is awarded a higher claim, then the firm would earn more. Gibbs & Bruns would also be reimbursed for any expenses incurred as part of the effort.
But the nature of the uncharted legal territory has some city officials cautious of pursuing the legal action.
Jenna Colley does not report which members of council tagged the item. Anne Linehan, however, helpfully pointed out to me earlier that the item was tagged by Councilmembers Wiseman, Holm, and Sekula-Gibbs.
Posted by Kevin Whited @ 04/12/06 11:39 PM | Houston Politics | Technorati | Sphere | Comments (9)
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