Travel

#Online Travel Sites Owe Millions in Back Taxes to State - Civil Beat

The Hawaii Supreme Court says Expedia, Orbitz and others are subject to general excise taxes.

The Hawaii Supreme Court ruled Tuesday that nine online travel companies — including Expedia, Orbitz, Priceline and Travelocity — owe up to tens of millions of dollars in back taxes to the state for selling Hawaii hotel rooms over the Internet.

“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,” Attorney General Doug Chin 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.”

The AG s office says that in 2010 the state tax department issued GET and transient accommodation tax assessments against the travel companies for back taxes starting from 2000.

Attorney General Doug Chin.

Cory Lum/Civil Beat

The companies refused to pay, arguing that their revenue generating activities did not occur in the State of Hawaii.

Not so, says the high court, which upheld the very broad reach of Hawaii’s GET, stating that it applies to “virtually any economic activity imaginable even if the businesses don t have a physical presence in the island.

“On top of those back taxes, we believe online travel companies must pay GE taxes to the State of Hawaii for the past years up to the present and going forward, based on this ruling,” said Chin. “It’s a privilege to do business in Hawaii. Bottom line, these online travel companies derived substantial revenues from the sale of Hawaii hotel rooms and they need to pay their fair share.”