Hawaii Supreme Court considers tax appeal by travel firms

The Hawaii Supreme Court will decide whether online travel companies are required to pay general excise taxes for car rentals they sell in the state.

The travel companies are appealing a 2016 state court ruling that required the companies to pay the tax, the Honolulu Star-Advertiser reported Friday.

Expedia, Priceline and Travelocity owe the state about $30 million under the ruling by Judge Gary W.B. Chang, said Gary Cruciani, an attorney representing the state Department of Taxation.

Under the ruling, the travel companies were required to pay the taxes on their gross receipts for transactions that only involved car rentals. For rental sales that were part of a tour package, the companies were required to pay tax on only the portion of the proceeds from car rentals.

The judge also ruled that the companies owed the state general excise taxes for previous tax years plus penalties and interest.

In oral arguments before the state’s highest court Thursday, Paul Alston, who is representing the travel companies, said that renting cars is a tourism-related service protected by state law from taxing at the retail level if already taxed at wholesale. As a result, the companies should not pay general excise taxes.

Cruciani disputed that claim, saying renting cars is not a tourism-related service because it’s not listed as such under state law. The law lists specific services like tours and cruises.

The court is expected to issue a ruling in the coming months.

The Hawaii Supreme Court ruled in 2015 that the travel companies are required to pay state taxes for the hotel rooms they sell online.

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