HONOLULU (Legal Newsline) – The Hawaii Supreme Court ruled last week that a group of online travel companies, including Expedia, Hotwire and Travelocity, owe the state about $70 million in taxes.
The state’s high court, in its 100-page opinion, upheld part of a lower court’s judgment against the 10 companies, but said they weren’t subject to the state’s Transient Accommodations Tax, or TAT.
The state had retroactively assessed the companies — Expedia, Hotwire, Travelocity, Hotels.com, Site59.com, Orbitz, Trip Network, Internetwork Publishing Corp., Priceline and Travelweb — for unpaid General Excise Tax and TAT for periods beginning between 1999 and 2001 and continuing until 2011, plus applicable penalties.
In 2013, a tax appeals court ruled in favor of the state, which said the companies owed nearly $250 million in taxes and penalties.
The state also argued that the companies owed more than $400 million in hotel room taxes and penalties.
Justice Richard Pollak, who authored the court’s decision, said TAT did not apply to the online travel companies.
“Considering that the legislature intended the TAT to be a tax upon the transient, assessed on the cost of a hotel room, and collected through the mechanism of the operator, it is clear that the legislature did not intend that the TAT would be assessed in full on multiple operators,” he wrote in the ruling, issued Tuesday.
“Here, the hotels in the assessed transactions are acknowledged by all parties to be an operator within the meaning of the use of that term as provided by HRS § 237D-1; thus, for purposes of the TAT assessments, only the hotels are operators in the assessed transactions.
“Therefore, the OTCs are not operators and the TAT is not applicable to the OTCs in the assessed transactions.”
The high court remanded the case to the tax court for further proceedings consistent with its opinion.
From Legal Newsline: Reach Jessica Karmasek by email at [email protected].
