The Hawaii Supreme Court decided Tuesday that nine popular online travel companies will be required to pay up to tens of millions of dollars in state taxes for selling Hawaii hotel rooms over the Internet.
The companies are Expedia, Hotels.com, Hotwire, Orbitz, Priceline.com, Travelocity.com, Trip Network, Internetwork Publishing Corp. and Travelweb.
“This landmark ruling is the first time the Supreme Court ruled that online commerce may be just as subject to pay general excise taxes as local brick-and-mortar businesses,” Doug Chin, state attorney general, said in a press release. “It is the result of years of effort by the Attorney General’s office to collect state taxes from national companies who profited from selling Hawaii hotel rooms.”
In 2010, the state tax department issued GE tax and transient accommodation tax assessments against the online travel companies for back taxes starting from 2000. The online travel companies refused to pay, arguing that their revenue generating activities did not occur in Hawaii, the AG’s office said.
The Supreme Court said the general excise tax law applies to those who do business in the state even without a physical presence in the islands.
The ruling affirms the Tax Appeal Court’s judgment upholding the state’s assessments of penalties and interest against online travel companies for failing to file tax returns and pay general excise taxes from 2000 through 2011.
“It’s a privilege to do business in Hawaii,” Chin added. “Bottom line, these online travel companies derived substantial revenues from the sale of Hawaii hotel rooms and they need to pay their fair share.”