Expedia 2013 Annual Report Download - page 24

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Adverse application of existing tax or unclaimed property laws, rules or regulations or
implementation of new unfavorable laws, rules or regulations, could have an adverse effect on our business
and financial performance.
The application of various domestic and international transactional taxes such as sales, use, occupancy,
value-added, payroll, excise and other tax or unclaimed property laws, rules and regulations to our historical and
new products and services is subject to interpretation by the applicable authorities, which authorities may become
more aggressive in their interpretation and/or enforcement of such laws, rules and regulations over time, whether
as a result of economic pressures or otherwise. While we believe that we are compliant with current tax
provisions, the applicable authorities may take a contrary position and such positions may adversely affect our
business, financial condition and results of operations.
Many of the fundamental statutes and regulations that impose these taxes and other obligations were
established before the growth of the internet and e-commerce. If the tax or other laws, rules and regulations were
amended, if new unfavorable laws, rules or regulations were adopted, as has recently occurred in certain
jurisdictions, or if current laws are interpreted adversely to our interests, particularly with respect to occupancy or
value-added taxes or unclaimed property, the results could increase our tax payments or other obligations
(prospectively or retrospectively), subject us to interest and penalties, decrease the demand for our products and
services if we pass on such costs to the consumer, result in increased costs to update or expand our technical and
administrative infrastructure or effectively limit the scope of our business activities if we decide not to conduct
business in particular jurisdictions. As a result, these changes could have an adverse effect on our businesses or
financial performance.
A number of authorities have brought lawsuits and have levied assessments asserting that we are required to
collect and remit hotel occupancy or other taxes. In addition, we have in the past and may in the future be
required in certain jurisdictions to pay tax assessments, which may be substantial, prior to contesting the validity
of tax 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. For example, during 2009, we paid $48 million
in advance of litigation in occupancy tax proceedings in the city of San Francisco. The city of San Francisco has
also issued additional assessments of tax, penalties and interest for the time period from the fourth quarter of
2007 through the fourth quarter of 2011 against the travel companies, including $22 million against Expedia,
Hotels.com and Hotwire. During 2013, we paid $171 million in advance of litigation in general excise tax
proceedings in the state of Hawaii. The state of Hawaii has also issued additional assessments for general excise
tax, penalties and interest against the online travel companies, including $40.4 million against Expedia,
Hotels.com and Hotwire excluding duplicative assessments. Hotels.com is currently under audit by the State of
Texas. There is a pay-to-play requirement to challenge an adverse audit result in court.
We continue to work with relevant authorities and legislators to clarify our obligations under existing, new
and emerging laws and regulations.
We are involved in various legal proceedings and may experience unfavorable outcomes, which could
adversely affect our business and financial condition.
We are involved in various legal proceedings and claims involving taxes, property, personal injury, contract,
alleged infringement of third-party intellectual property rights, antitrust, consumer protection, securities laws,
and other claims, including, but not limited to, the legal proceedings described in Part I, Item 3, Legal
Proceedings. These matters may involve claims for substantial amounts of money or for other relief that might
necessitate changes to our business or operations. The defense of these actions is and may continue to be both
time consuming and expensive. If these legal proceedings were to result in unfavorable outcomes, it could have a
material adverse effect on our business and financial performance.
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