EXCLUSIVE: Online companies facing growing tax bill - Hawaii News Now - KGMB and KHNL

EXCLUSIVE: Online companies facing growing tax bill

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Lowell Kalapa Lowell Kalapa
Robin Reck Robin Reck

Already faced with a record tax bill, Travelocity, Expedia and other online travel companies may be on the hook for tens of millions of dollars in additional back taxes.

Hawaii News Now reported exclusively on Friday that the online companies will have to pay the state nearly 150-million dollars in back taxes for booking hotel rooms in Hawaii.

Now, we've learned that the companies are liable for taxes on income it received for booking rental cars, snorkeling and other travel activities.

"Because the delivery of the room or the rental car or catamaran ride is in the state, the gross income received ... regardless by whom ... is subject to the tax," said Lowell Kalapa, president of the Tax Foundation of the Hawaii.

The state has not yet issue these new tax assessments but sources familiar with the case say it will likely do so over the next several months.

The online companies said they were not aware of any additional tax assessments by the state. The companies, which plan to appeal Friday's decision, said the ruling will hurt the isles' visitor industry by making it more expensive to travel here.

"This ruling will significantly increase costs for all tour operators … this change in tax treatment will harm consumers and significantly reduce demand for Hawaii vacations," said Robin Reck, spokeswoman for the Washington, D.C.-based Travel Technology Association.

Under Hawaii tax law, the online companies have to pay the money the state within 30 days of the tax court's order.

But the money has to go into a special fund and the state can't spend the money unless it wins the appeals.

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