Online travel companies advertise the best deals for their clients, but according to the Montana Department of Revenue those aren't the best deals for the state.

Attorneys representing the DOR and travel booking websites made their final arguments before the Montana Supreme Court on Friday, as the jurists made their annual visit to the University of Montana campus.

The Revenue Department says transactions between customers and online travel companies, like Priceline and Orbitz, have cost the state of Montana millions of dollars in taxes. 

"A million travelers have come to this state without getting the transparency the law requires," John Crongeyer argued for the DOR. "The money belongs to the state." 

The issue hinges on whether online companies should pay taxes on the money they collect by booking hotel rooms in Montana.

Currently, when a customer makes a hotel reservation online, the online company takes a fee for the transaction, but doesn't pay state taxes. The Montana hotel then pays taxes on the wholesale value of the reservation.

"When you boil it all down, their argument amounts to this proposition: They are arguing that is not engaged in the business of selling and renting hotel rooms," Crongeyer said. "I would ask you to think about that." 

When Helena-based attorney Mike Green, who represents the online companies, began his arguments, he told the seven Supreme Court justices that the Revenue Department was attempting to change existing Montana statutes through the courts after the Legislature "expressly denied" their proposed measures in 2007.    

"I urge you to reject the DOR's attempt to smear the (online travel companies') business model," Green said. "They are successful. They provide a valuable service to travelers around the country and around the world, in fact, and the fact that their model may result in a slightly lower tax revenue on a particular transaction in Montana, simply can't drive tax policies that this Legislature has already set." 

A Lewis and Clark District Court judge initially ruled in favor of the online companies, but the DOR appealed the case to the Montana Supreme Court last year.

After hearing the attorneys' final arguments Friday, the justices will make their decision on the case in the upcoming weeks.  

UM's law school hosted the final arguments in celebration of "law week," said Pippa Browde, a professor who specializes in federal tax law. 

She said over 70 other jurisdictions have engaged in similar suits against online travel companies with varying outcomes. Wyoming, for example, just ruled in favor of the state's revenue department.  

She said comparing this case to other cases in the country is comparing "apples to oranges." Because Montana has such a unique tax system, it's impossible to guess what the Supreme Court's decision would be, she explained.