Hawaii AG announces $150 million ruling against online travel companies

By Bryan Cohen | Jan 15, 2013

HONOLULU (Legal Newsline) - Hawaii Attorney General David Louie announced a ruling Saturday by the tax appeal court that orders multiple online travel companies to pay approximately $150 million to the state in overdue taxes.

Judge Gary W.B. Chang granted summary judgment on Friday for the state of Hawaii against Priceline, Travelocity, Orbitz, Hotwire, Hotels.com and Expedia, ruling that the Hawaii General Excise Tax applied to the sales of hotel rooms in Hawaii by online travel companies. The amount of unpaid taxes owed by the companies is approximately $110 million, with $40 million worth of interest.

Chang's ruling could result in the state receiving future GET collections of approximately $20 million per year.

"We are very pleased that Judge Chang recognized that the state's GET casts a wide and tight net and that these taxes are owed and should be paid," Louie said. "Hawaii hotels are good corporate citizens, paying their fair share of taxes to support the state's infrastructure, such as roads, schools, personnel and other costs, and the OTCs need to also play by the rules and pay their fair share. We look forward to reaching a final resolution and collecting these monies for the people of Hawaii."

Chang ruled that the GET is a privilege tax levied on businesses for the privilege of doing business in the state. He emphasized the broad nature of the tax and ruled that it included the OTCs sale of Hawaii hotel rooms.

The OTCs have made sales of more than $2.7 billion of Hawaii hotel rooms since 2000. While the OTCs collected sufficient money to cover the GET and transient accommodation taxes from consumers buying hotel rooms in Hawaii, the companies never filed any returns or paid any taxes to the state. The court ruled that the OTCs did not owe any transient accommodation taxes on the hotel sales, a ruling the state can appeal.

The OTCs can also appeal the court's ruling on the GET.

Additional court proceedings will take place on March 8, when the court will decide if the OTCs should be assessed any penalties for failure to file tax returns or pay taxes that are due. A trial date is set for April 15 to resolve any outstanding issues.

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