Expedia 2010 Annual Report Download - page 52

• The South Carolina Supreme Court in the South Carolina Litigation ruled that the amounts that the online
travel companies retain for the services that they provide in connection with merchant hotel transactions
are subject to state sales taxes.
• The court in the Columbus-Findlay, Ohio Litigation entered final judgment in favor of the online travel
companies after concluding that the online travel companies have not failed to remit taxes that they have
collected.
• The court in the Philadelphia Litigation affirmed the decision of the Philadelphia Board of Finance that
Expedia is not subject to Philadelphia’s hotel occupancy tax.
• The court in the Orange County, Florida Litigation denied Orange County’s request for a determination
that the online travel companies are subject to Orange County’s hotel occupancy tax ordinance.
• The court in the Lawrence County, Pennsylvania Litigation dismissed the lawsuit against the online travel
companies.
• Suit was brought by certain online travel companies, including certain Expedia subsidiaries, challenging
the state of North Carolina’s amended sales tax statute.
For additional information on recent developments, see Part II, Item 1, Legal Proceedings.
We have established a reserve for the potential settlement of issues related to hotel occupancy tax litigation,
consistent with applicable accounting principles and in light of all current facts and circumstances, in the amount
of $24 million as of December 31, 2010 and $21 million as of December 31, 2009. A variety of factors could
affect the ultimate amount we pay, if any, in connection with any of the occupancy tax-related matters. In
addition, as of December 31, 2010, we have accrued $13 million related to court decisions and final settlements,
which includes amounts expected to be paid in connection with the South Carolina Litigation.
Certain jurisdictions may require us to pay tax assessments, including occupancy tax assessments, prior to
contesting any such assessments. This requirement is commonly referred to as “pay-to-play.” Payment of these
amounts is not an admission that the taxpayer believes it is subject to such taxes. During 2010 and 2009, we
expensed $3 million and $48 million related to monies paid in advance of litigation in occupancy tax proceedings
in the cities of Santa Monica and San Francisco. We do not believe that the amounts we retain as compensation
are subject to the cities’ hotel occupancy tax ordinances. If we prevail in the litigation, the cities will be required
to repay these amounts, plus interest. However, any significant pay-to-play payment or litigation loss could
negatively impact our liquidity.
In addition, certain jurisdictions, including the states of New York and North Carolina and the city of New
York, have enacted legislation taxing online travel company services as part of sales taxes for hotel occupancy.
Segments
We have three reportable segments: Leisure, the TripAdvisor Media Network and Egencia. We determined
our segments based on how our chief operating decision makers manage our business, make operating decisions
and evaluate operating performance.
Our Leisure segment provides a full range of travel and advertising services to our worldwide customers
through a variety of brands including: Expedia.com and Hotels.com in the United States and localized Expedia
and Hotels.com websites throughout the world, Expedia Affiliate Network, Hotwire.com, Venere, eLong and
Classic Vacations.
Our TripAdvisor Media Network segment provides advertising services to travel suppliers on its websites,
which aggregate traveler opinions and unbiased travel articles about cities, hotels, restaurants and activities in a
variety of destinations through tripadvisor.com and its localized international versions as well as through its
various travel media content properties within the TripAdvisor Media Network.
Our Egencia segment provides managed travel services to corporate customers in North America, Europe,
and the Asia Pacific region.
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