Today Hawaii’s Supreme Court ruled in favor of online travel agencies, affirming an earlier tax appeal court decision.
In the case of state of Hawaii versus Travelocity, the court ruled that the compensation travel intermediaries keep for their services is not subject to the state's transient accommodation tax. (See the filing, here.)
Between 1999 and 2001 and continuing until 2011, the Hawaiian tax office retroactively assessed 10 online travel companies for unpaid general excise tax.
During that time, the companies collected the Hawaii state general excise tax on rates marked up from wholesale, but only paid taxes to the state at the wholesale rates.
Today's ruling ordered the state to refund most of the general excise tax and penalties the state had assessed on the online travel companies: Expedia, Hotels.com, Hotwire, Travelocity; Site59.com, Orbitz, Trip Network, Internetwork, Priceline, and Travelweb.
The suit initially assessed $150 million as being owed, though amounts could have been higher had the ruling been different.
Hawaii officials, including state's Attorney General David Louie, had no statement at the time of publication. In an previous statement in October 2013, he had said:
Clearly, through the sale of millions of hotel room nights in Hawaii to Hawaii and other consumers, in a substantial number of Hawaii hotels, and collecting room rentals in the billions of dollars, the online travel companies are doing business in Hawaii.
Today the industry's trade association, Travel Tech, hailed the decision, which is the final stop in the Hawaiian saga.
Many other courts in other states have ruled similarly in similar cases across the United States. Expedia alone has faced 88 lawsuits involving room tax, of which 34 are active.
The Travel Tech association argues that taxation applies to entities that own or control hotels, not to the companies that help the hotels sell their rooms.
NB: Image of Waikiki hotels courtesy of Simon Clancy/Flickr via Creative Commons