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Originally published February 9, 2011 at 5:12 PM | Page modified February 9, 2011 at 5:16 PM

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Online travel groups sue N.C. over sales tax

A new legal skirmish has resulted from North Carolina's efforts to collect taxes from online sales. A half-dozen online travel companies, including two owned by Bellevue-based Expedia, filed a lawsuit last week in North Carolina alleging that recent amendments to the state's sales-tax law are unconstitutional and violate the Internet Tax Freedom Act.

McClatchy Newspapers

RALEIGH, N.C. — A new legal skirmish has resulted from North Carolina's efforts to collect taxes from online sales.

A half-dozen online travel companies, including two owned by Bellevue-based Expedia, filed a lawsuit last week in North Carolina alleging that recent amendments to the state's sales-tax law are unconstitutional and violate the Internet Tax Freedom Act.

The amendments, which went into effect Jan. 1, require that fees paid to third-party intermediaries, such as Orbitz, be included in the gross receipts of hotel operators subject to sales and hotel-room taxes.

Operators of travel websites argue that the changes amount to a discriminatory tax because they impose an additional cost on online transactions compared with those that offer similar services offline.

The lawsuit was filed by Orbitz, Trip Network, Travelocity.com, Travelscape, and Hotels.com and Hotwire, both owned by Expedia.

Lawyers with the state's Department of Justice are reviewing the complaint, spokeswoman Noelle Talley said Tuesday.

The lawsuit says the recent amendments to the tax law violate both the commerce clause in the U.S. Constitution and the uniformity clause in the North Carolina Constitution.

It also says the amendments are so vague and ambiguous that they are impossible for an ordinary person to interpret.

Travelocity and Expedia declined to comment on the lawsuit or to say whether they are paying the tax.

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