Priceline 2011 Annual Report Download - page 24

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Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Our executive, administrative, and U.S. operating offices and network operations center are located in approximately
70,000 square feet of leased office space located in Norwalk, Connecticut. We also lease approximately 49,000 square feet of
office space in Grand Rapids, Michigan. Booking.com Limited leases approximately 48,000 square feet of office space in
Cambridge, England. Booking.com B.V. leases approximately 458,000 square feet of office space in Amsterdam, Netherlands
and in 39 other countries in support of its international operations. Agoda leases approximately 74,000 square feet of office
space in Bangkok, Thailand, and in 18 other countries in support of its international operations. Rentalcars.com leases
approximately 29,000 square feet of office space in Manchester, England. We do not own any real estate as of February 1,
2011.
We believe that our existing facilities are adequate to meet our current requirements, and that suitable additional or
substitute space will be available as needed to accommodate any further expansion of corporate operations.
Item 3. Legal Proceedings
Litigation Related to Hotel Occupancy and Other Taxes
We and certain third-party defendant online travel companies are currently involved in approximately fifty lawsuits,
including certified and putative class actions, brought by or against U.S. states, cities and counties over issues involving the
payment of hotel occupancy and other taxes (i.e., state and local sales tax) and our "merchant" hotel business. Our subsidiaries
Lowestfare.com LLC and Travelweb LLC are named in some but not all of these cases. Generally, each complaint alleges,
among other things, that the defendants violated each jurisdiction's respective hotel occupancy tax ordinance with respect to the
charges and remittance of amounts to cover taxes under each law. Each complaint typically seeks compensatory damages,
disgorgement, penalties available by law, attorneys' fees and other relief. We are also involved in one consumer lawsuit
relating to, among other things, the payment of hotel occupancy taxes and service fees. In addition, approximately sixty
municipalities or counties, and at least six states, have initiated audit proceedings (including proceedings initiated by more than
forty municipalities in California), issued proposed tax assessments or started inquiries relating to the payment of hotel
occupancy and other taxes (i.e., state and local sales tax). Additional state and local jurisdictions are likely to assert that we are
subject to, among other things, hotel occupancy and other taxes (i.e., state and local sales tax) and could seek to collect such
taxes, retroactively and/or prospectively.
With respect to the principal claims in these matters, we believe that the ordinances at issue do not apply to the service
we provide, namely the facilitation of reservations, and, therefore, that we do not owe the taxes that are claimed to be owed.
Rather, we believe that the ordinances at issue generally impose hotel occupancy and other taxes on entities that own, operate
or control hotels (or similar businesses) or furnish or provide hotel rooms or similar accommodations. In addition, in many of
these matters, municipalities have asserted claims for "conversion" - essentially, that we have collected a tax and wrongfully
"pocketed" those tax dollars - a claim that we believe is without basis and have vigorously contested. The municipalities that
are currently involved in litigation and other proceedings with us, and that may be involved in future proceedings, have asserted
contrary positions and will likely continue to do so. From time to time, we have found it expedient to settle, and may in the
future agree to settle, claims pending in these matters without conceding that the claims at issue are meritorious or that the
claimed taxes are in fact due to be paid.
In connection with some of these tax audits and assessments, we may be required to pay any assessed taxes, which
amounts may be substantial, prior to being allowed to contest the assessments and the applicability of the ordinances in judicial
proceedings. This requirement is commonly referred to as "pay to play" or "pay first." For example, the City of San Francisco
assessed us approximately $3.4 million (an amount that includes interest and penalties) relating to hotel occupancy taxes, which
we paid in July 2009. Payment of these amounts, if any, is not an admission that we believe we are subject to such taxes and,
even if such payments are made, we intend to continue to assert our position vigorously. We have successfully argued against a
"pay first" requirement asserted in another California proceeding.
Litigation is subject to uncertainty and there could be adverse developments in these pending or future cases and
proceedings. For example, in October 2009, a jury in a San Antonio class action found that we and the other online travel
companies that are defendants in the lawsuit "control" hotels for purposes of the local hotel occupancy tax ordinances at issue
and are, therefore, subject to the requirements of those ordinances. On July 1, 2011, the court issued findings of fact and