San Antonio v. Hotels.com, L.P.
The Facts
Hotels.com paid San Antonio hotel occupancy taxes on the full retail price of hotel rooms booked through its platform, but the city's taxes applied only to the discounted wholesale price Hotels.com paid the hotels. The Fifth Circuit held San Antonio's tax violated the Internet Tax Freedom Act, which prohibits discriminatory taxes on electronic commerce. On remand, the question arose whether Hotels.com was entitled to prejudgment interest on the tax refund, and whether sovereign immunity shielded the city from paying it.
The Application
San Antonio's tax violated federal law by applying to Hotels.com's full retail price rather than the discounted wholesale price it paid the hotels. When Hotels.com won its federal refund judgment under the Internet Tax Freedom Act, 28 U.S.C. Section 1961 automatically attached post-judgment interest to that judgment as a matter of law. San Antonio's attempt to invoke sovereign immunity to escape the interest obligation failed because Congress's waiver of sovereign immunity for the tax refund action necessarily encompasses the interest that is an integral component of the federal judgment itself, not a separate remedy. The city therefore remains liable for both the refund principal and the accrued post-judgment interest.
The Conclusion
**The ruling confirms that municipalities subject to federal tax refund judgments must pay interest along with the principal refund.** The decision limits the ability of local governments to use sovereign immunity arguments to avoid the full financial consequences of illegally collected taxes.
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Case Analysis
Overview
The Supreme Court unanimously held that San Antonio owed Hotels.com post-judgment interest when the city was ordered to refund taxes collected in violation of the federal Internet Tax Freedom Act. Justice Kagan wrote for the Court, finding that sovereign immunity did not bar the interest award accompanying the refund judgment.
Facts
Hotels.com paid San Antonio hotel occupancy taxes on the full retail price of hotel rooms booked through its platform, but the city's taxes applied only to the discounted wholesale price Hotels.com paid the hotels. The Fifth Circuit held San Antonio's tax violated the Internet Tax Freedom Act, which prohibits discriminatory taxes on electronic commerce. On remand, the question arose whether Hotels.com was entitled to prejudgment interest on the tax refund, and whether sovereign immunity shielded the city from paying it.
Issue
Whether a city that loses a tax refund case under federal law must pay the statutory post-judgment interest that accompanies a federal court money judgment, or whether sovereign immunity shields the city from that obligation.
Rule
Under 28 U.S.C. Section 1961, federal court money judgments accrue post-judgment interest as a matter of law. When Congress waives sovereign immunity to permit a refund action, the interest that attaches to the judgment is part of the relief the waiver encompasses.
Analysis
San Antonio's tax violated federal law by applying to Hotels.com's full retail price rather than the discounted wholesale price it paid the hotels. When Hotels.com won its federal refund judgment under the Internet Tax Freedom Act, 28 U.S.C. Section 1961 automatically attached post-judgment interest to that judgment as a matter of law. San Antonio's attempt to invoke sovereign immunity to escape the interest obligation failed because Congress's waiver of sovereign immunity for the tax refund action necessarily encompasses the interest that is an integral component of the federal judgment itself, not a separate remedy. The city therefore remains liable for both the refund principal and the accrued post-judgment interest.
Conclusion
**The ruling confirms that municipalities subject to federal tax refund judgments must pay interest along with the principal refund.** The decision limits the ability of local governments to use sovereign immunity arguments to avoid the full financial consequences of illegally collected taxes.
Notes
OT2020. Added via SCOTUS bulk import 2026-05-14
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