Wednesday, January 31, 2001
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Posted on: Wednesday, January 31, 2001

Room tax 'loophole' hurts state, ILWU says

By Kevin Dayton
Advertiser Capitol Bureau Chief

The ILWU is asking legislators to close what it calls a "tax loophole" that, according to the union, is costing the state tens of millions of dollars in uncollected hotel room taxes each year.

Eusebio Lapenia Jr., president of ILWU Local 142, said union officials discovered the purported loophole while researching issues in connection with negotiations for a new contract for about 300 workers at the the Royal Lahaina Resort on Maui.

The Royal Lahaina Resort is owned by Ed Hogan, founder and chairman of Pleasant Travel Service Inc. Hogan also runs wholesale tour companies, including Pleasant Hawaiian Holidays.

Lapenia said House Finance Chairman Dwight Takamine, D-1st (Hamakua, N. Kohala), introduced a bill on behalf of the union last week to make wholesalers pay the hotel room taxes as advocated by the union.

When asked if the tax proposal is an effort to place pressure on the Royal Lahaina Resort to settle with the union, Lapenia replied: "I think one can interpret that as what you just stated."

The old contract for the Royal Lahaina workers expired May 31, and the union has been bargaining for a new agreement for about seven months, he said.

Hogan could not be reached for comment last night.

When hotels rent rooms to individual tourists or to tour wholesalers, they pay the state’s 7.25 percent hotel room tax. The wholesalers buy blocks of rooms from the hotels, mark up the price of the rooms and resell them.

Lapenia said the hotel room tax law is written so the tax isn’t imposed on wholesalers when wholesalers mark up hotel rooms and resell them.

The ILWU estimated that if the tax were collected when the wholesaler sells it to the guest instead of when the hotel sells it to the wholesaler, the state would collect an extra $45 million a year. However, state tax officials estimated the figure at closer to $29 million, Lapenia said.

The ILWU — International Longshore and Warehouse Union — is the largest labor union in Hawaii. Local 142 has about 25,000 members, including 10,000 to 11,000 in the hotel industry.

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