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Travel companies must pay state $53M to settle tax case

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Doug Chin

The state Attorney General’s office said today it has recovered $53.1 million in general excise taxes, penalties and interest from online travel companies in litigation that began in 2011. 

The Tax Appeal Court previously ruled travel companies, including Travelocity.com LLP, Expedia Inc., Orbitz LLC and Priceline.Com LLP, owed general excise taxes but not state transient accommodations tax that’s assessed on operators of transient accommodations like hotels. 

The state and companies appealed the ruling to the Hawaii Supreme Court. 

In March, the Hawaii Supreme Court upheld the Tax Appeal Court’s ruling that the companies are subject to Hawaii’s general excise tax but concluded "that they are taxable only on their net receipts from the sale of hotel rooms in Hawaii, not their gross receipts," according to a news release from the Department of the Attorney General. 

The court rejected the companies’ argument that they were not doing business in Hawaii. 

On Sept. 22, the Tax Appeal Court entered final stipulated judgments, imposing the amounts owed by the online travel companies. 

"Online travel companies derive substantial profits from the sale of hotel rooms, rental cars and other services in Hawaii," Attorney General Doug Chin said. 

"The importance of the Hawaii Supreme Court ruling is the precedent it establishes. People or companies who provide goods and services through the Internet that are used or consumed in Hawaii are subject to Hawaii taxation, despite being domiciled in other states," said Chin. 

Litigation against online travel companies for other state tax obligations for other business activities in Hawaii between 2000 through 2013 is pending. 

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