City of Phoenix v. Orbitz Worldwide Inc.
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In considering whether online travel companies (OTCs) are subject to municipal privilege taxes under Model City Tax Code (the Code) 444 and 447 the Supreme Court held that the OTCs in this case were subject to taxation under section 444 but not under section 447.
In 2013, the City of Phoenix and other cities (the Cities) issued privilege tax assessments against the OTCs based on the Cities' belief that the OTCs owed unpaid privilege taxes under sections 444 and 447 for engaging in the business of operating hotels or, alternatively, for acting as brokers for hotels. The tax court concluded that the OTCs were liable for the taxes. The court of appeals concluded that the OTCS were subject to taxation under section 444 but not under section 447 and that the Cities could assess the taxes, penalties, and interest under section 444 retroactively. The Supreme Court vacated in part the court of appeals' decision, holding (1) the OTCs are subject to taxation under section 444 because they are brokers engaging in the business of operating a hotel; and (2) the OTCs are not subject to taxation under section 447 because they are not hotels.
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