Tax & Accounting Blog

Hawaii Pursuing OTCs for Unpaid General Excise Taxes

Indirect Tax, Sales and Use Tax March 31, 2011

The Hawaii Departments of Revenue and Attorney General are pursuing several on-line travel companies (OTCs) for $170 million in unpaid hotel occupancy taxes and general excise taxes they say these companies as a group owe the State. The companies involved include Expedia, Orbitz, Travelocity,,, Priceline, as well as other smaller OTCs.

Under both the State’s transient accommodation tax and general excise tax statutes, taxes are imposed on each hotel room rental within the State. The State alleges that the OTCs have failed to remit the full amount of tax owed for the years 1999 through 2010. According to the allegations the OTCs involved purchase hotel rooms from hotels at wholesale rates and sell them at marked up rates to consumers.  The OTCs collect taxes based on the retail amount charged to the consumer – from the renters of the hotel rooms, but then do not remit the full amount owed according to the State.

The OTCs involved have appealed the assessments to the Tax Appeal Court. The Hawaii Attorney General has in return filed Answers to those appeals. OTCs have recently come under heavy scrutiny for these practices in many jurisdictions. It will be interesting to see how they fare around the country.