Judge rules online firms don’t owe $700M in hotel room taxes

Companies that sell Hawaii hotel rooms to travelers online do not have to pay the state’s hotel room tax, a state judge ruled this afternoon.

The state Department of Taxation issued the companies tax bills totaling nearly $700 million for failing to pay the hotel room tax from 1999 to the end of last year.

The online travel companies, which include Expedia, Hotwire, Hotels.com, Orbitz, Priceline and Travelocity, appealed their tax assessments to the state court.

Circuit Judge Gary Won Bae Chang said that when the state Legislature enacted the transient accommodations tax law, it did not intend for the tax to apply to OTCs and other travel agents.

The state says the OTCs also owe millions of dollars in unpaid general excise tax.

Chang will hear arguments for and against the OTCs’ GET tax appeal in December.