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Internet travel firms owe state $170M

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Hawaii officials are seeking $170 million from several online travel companies for unpaid hotel room taxes.

Attorney General David Louie said in a court filing Wednesday that his office intends to pursue the money from the sites including Expedia, Orbitz, Travelocity, Priceline, Hotwire and

The companies have been purchasing rooms from hotels across Hawaii at wholesale rates and selling them to consumers at marked-up prices, authorities said. From 1999 to 2010, the companies gathered taxes based on the increased rate but did not pay the full amount to the state, according to the state.

Andrew Weinstein, a spokesman for the Interactive Travel Services Association — which counts all the companies as members — said online travel agencies have always followed the law.

"This is a long standing business model," Weinstein said Thursday. "These laws have always applied to the amount received by the hotel — not to any amount charged by intermediaries like travel agents."

Hawaii’s hotel room and general excise taxes are a significant source of revenue for Hawaii, Louie said. The current room tax is 9.25 percent while the general excise tax is another 4.5 percent on Oahu and 4 percent on other islands.

Weinstein counters that lodging taxes do not apply to fees charged by travel agents or online travel companies according to Hawaii law.

"We’re extremely disappointed that the attorney general would pursue this course of action in the face of the facts in the law," Weinstein said.

A ruling in favor of the state could set a "dangerous precedent," Weinstein said. The state would then apply lodging taxes to facilitation fees to off-line travel operators as well.

The companies have appealed the assessments to the state’s Tax Appeal Court. A Travelocity spokeswoman declined to comment because the case was still in litigation. The other companies did not immediately return calls seeking comment Thursday.

The case could mean obtaining $12 million to $14 million in additional tax revenue, Louie said. The taxes the companies owe support critical government services such as transportation and public safety, he said.


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