The state can penalize companies that sell Hawaii hotel rooms to travelers online for not filing state general excise tax returns and not paying the tax, a state judge ruled Monday.
Circuit Judge Gary W.B. Chang had previously ruled that the online travel companies, including Expedia, Hotwire, Hotels.com, Orbitz, Priceline and Travelocity, owe the state $158 million for general excise taxes due for 2000 through 2011, including interest.
On Monday, Chang ruled that the firms also owe penalties because they did not present any evidence to indicate that they had reason to believe that they were not required to pay the state GET or file GET returns.
State law dictates the imposition of up to a 2 percent penalty on the amount of tax due for failing to file a tax return and up to 25 percent for failing to pay the tax.
The state Department of Taxation is still calculating the penalty, said Hugh Jones, deputy state attorney general. However, he said the state estimates the penalty, with interest, will total at least $70 million. He said the ruling could also result in future GET collections from the companies of approximately $20 million per year.
Monday’s ruling completes the companies’ state tax appeal.
Chang had also previously ruled that online travel companies are not subject to the state’s transient accommodations or hotel room tax. The state had given the firms a $400 million bill for unpaid hotel room taxes for the period from 1999 through 2011.
Jones said the firms grossed $2.7 billion selling Hawaii hotel rooms during that period.
The state is appealing Chang’s ruling on the hotel room tax.
The online travel companies are expected to appeal Chang’s rulings on the GET.
If the firms do appeal, they will still have to pay the $158 million plus the penalty to have the appeal heard, Jones said.
