Hawaii – Online Travel Companies Subject to General Excise Tax

1/18/2013

SALT Report 2057 – A Hawaii Tax Appeal’s Court issued a ruling that requires online travel companies to pay the state $150 million in overdue general excise taxes. The Judge stated that, since 2000, the OTC’s have made more than $2.7 billion in sales of hotel room in Hawaii. Over that time period the OTC’s collected money to cover the GET as well as the transient accommodation tax from those purchasing hotel rooms, but failed to file any returns or pay any taxes to the State.

The amount of unpaid taxes is approximately $110 million, plus interest in the amount of $40 million. In addition to the unpaid taxes, the court’s ruling could result in future GET collections of approximately $20 million per year, beginning in 2012.

The Judge ruled that the GET is the responsibility of almost every business as it is a tax imposed on the privilege of doing business in the State. Further, the Judge stated that the broad nature of the GET includes electronic commerce and therefore, the online sale of hotel rooms by OTC’s.

Additional proceedings are scheduled for March 8, 2013 to determine if the OTC’s are also subject to penalties for failure to file returns or pay taxes due.

For Further Information:

Hawaii Department of the Attorney General – News Release 2013-1