Bid for back taxes on car rentals goes before Hawaii Supreme Court

Bid for back taxes on online car rentals goes before state Supreme Court

HONOLULU (HawaiiNewsNow) - The state and the nation's largest online travel companies squared off again before the Hawaii Supreme Court on Thursday.

The last time was three years ago, when the high court ordered Priceline, Expedia, Travelocity and others to pay $53 million in state back taxes for hotel room bookings dating back more than a decade.

Now, the state is arguing that the companies owe another $50 million in back taxes for car rental revenues it earned since 2004.

"They're creating an uneven playing field. Instead of paying taxes like every citizen or every other business does, they put the money in their pockets," said attorney Gary Cruciani, who represents the state.

But lawyer Paul Alston, who represents the online companies, disagreed. He argued that online rental car transactions have been exempt from excises taxes since 1991 because the taxes would hurt tourism.

"That would severely undermine the economics of rental car transactions in Hawaii. It's not a good thing for Hawaii," said Alston

The Supreme Court isn't expected to rule for several months.

But the ultimate decision on whether the state can tax online travel companies and Internet retailers like Amazon might not rest with Hawaii's high court but with the U.S. Supreme Court.

The U.S. Supreme Court justices have agreed to hear North Dakota's challenge to a 26-year-old case in which the high court barred states from collecting taxes from companies that don't have a physical presence in their states.

Expecting a positive ruling, Hawaii lawmakers are now proposing to tax Internet companies that do more than $100,000 in annual sales and don't have a brick-and-mortar store here.

They said the measure could mean hundreds of millions more in taxes for Hawaii's treasury.

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