In January of this year, the City of Los Angeles filed suit against online travel agencies claiming that they failed to collect and pay the city the 14% hotel occupancy tax.

The suit against Priceline, Travelocity, Hotels.com, Expedia, Hotwire, Travelnow, Orbitz, Cheap Tickets and Cendant claims they failed to pay the city tens of millions in taxes each year, going back to 1999.

The online travel agencies pay the hotel tax on the discounted wholesale prices they pay hotels, while marking that up by as much as 35% for their consumers retail price. Los Angeles is seeking hotel taxes on the mark-up.

The preceding Superior Court judge in Los Angeles ordered this week discovery on several issues and scheduled the next hearing for Sept 14.

Many other municipalities are anxious to see Los Angeles prevail on the suit, if not initiate their own law suites or take part in an expanded class-action case, involving up to 100 California municipalities to collect back taxes. Las Vegas, San Francisco, Orlando’s Orange County are a few considering their own law suits.

Los Angeles has estimated that Hotels.com and Expedia.com alone, which are both owned by Barry Diller's IAC/InterActiveCorp., owe a combined $10 million a year in occupancy taxes.