State Pursues $170 Million From Online Travel Companies

March 24, 2011, 7:27 AM HST · Updated March 24, 10:36 AM
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By Wendy Osher

File photo by Wendy Osher.

The state Attorney General’s office and the Department of Taxation are seeking $170 million in unpaid hotel occupancy taxes they say is collectively owed by several online travel companies that furnish hotel rooms in the state.

The companies named in the complaint include Expedia, Orbitz, Travelocity, Hotwire.com, Hotels.com, Priceline, and others.

The State Department of Taxation assessed the companies for both unpaid general excise (GET) and transient accommodation (TAT) taxes.  The companies in turn, appealed the assessments to the Tax Appeal Court in a motion filed yesterday.

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Under state law, TAT and GET taxes are imposed on each hotel room rental within the state, and serve as a significant source of revenue for Hawaii.

According to the State Attorney General, the companies underpay taxes by purchasing hotel rooms from hotels at wholesale rates, and then sell them at marked up rates to consumers, failing to remit the full amount owed to Hawaii.

The state further alleges that the companies have not been remitting these taxes for the period dating back to 1999.

If the state prevails, it would not only collect back taxes, penalties, and interest owed, it would also collect approximately $12-$14 million a year in additional tax revenues in the future.

“Hawaii hotels are good corporate citizens and are paying applicable taxes on the rooms they sell to consumers,” said Attorney General David Louie.  “It is unfair that these companies play by different rules,” he said.

Louie said the taxes traditionally collected support critical government services that include human services, transportation, public safety, and other core governmental functions.

***Supporting information courtesy State Attorney General

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