By Kevin Dayton
Advertiser Capitol Bureau Chief
A proposal to close a "loophole" in the state’s hotel room tax may be in trouble in the House, with almost half of the representatives voting against the bill in what would normally be a procedural House floor vote.
The bill was introduced by House Finance Chairman Dwight Takamine and is backed by the ILWU, which wants the state to impose the state’s hotel room tax on tour wholesalers.
When hotels rent rooms to individual tourists or to tour wholesalers, the hotels pay the state’s 7.25 percent hotel room tax.
But tour wholesalers often buy blocks of rooms from the hotels and resell them at a higher price. In those cases, the hotel tax is imposed on the price the hotels charge to the wholesaler, not on the final price the tour wholesalers charge tourists.
The union contends that means the wholesalers aren’t paying their fair share of taxes, and argued the state could raise as much as $45 million a year by imposing the hotel tax on the amounts the tourists pay to the wholesalers.
But in a recent floor vote, 18 Republicans and one Democrat voted against that proposal, and three other Democrats indicated they have strong reservations about the bill, House Bill 1589. That is nearly the majority needed to kill the bill in the 51-member House.
Rep. Ed Case, D-23rd (Manoa) called the bill "an imaginative way to generate new revenue" for the state, but urged his colleagues to kill it. Case said the measure would actually expand the reach of the hotel tax beyond the intent of the original law.
Takamine, D-1st (Hamakua, N. Kohala), said he plans to hear the bill when it comes to the Finance Committee to determine whether operators are getting around the hotel tax.
ILWU officials said they uncovered the so-called "loophole" while researching issues in connection with negotiations for a new contract for about 300 workers at the Royal Lahaina Resort on Maui.
The resort is owned by Ed Hogan, founder and chairman of Pleasant Travel Services Inc. Hogan also runs wholesale tour companies, including Pleasant Hawaiian Holidays.
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