Posted on: Friday, March 30, 2001

Senate to vote on wholesaler hotel tax

By Ronna Bolante
Advertiser Capitol Bureau

A bill that would require wholesale tour companies to pay an extra tax of $7.25 per day for each hotel room they sell is headed for a state Senate vote.

The Senate Ways and Means Committee yesterday approved the bill, which was opposed by some lawmakers and tourism-related organizations, including the Hawai'i Hotel Association.

Sen. Donna Kim, D-15th (Kalihi Valley-'Aiea), proposed the surcharge to plug a "loophole" in hotel tax law that allows wholesalers to escape paying the state's hotel room tax. The loophole may be costing the state between $30 million to $45 million a year, according to some estimates.

"We're kind of looking at it as a possible proposal for additional revenue and a certain amount of tax equity," said Committee Chairman Brian Taniguchi, D-11th (McCully, Mo'ili'ili, Manoa).

The Legislature faces a number of budget demands this year, including public school teacher pay raises and other public worker union contracts.

Critics of House Bill 1589 say the surcharge is a tax increase that will make Hawai'i a less attractive destination for tourists at a time when the future of the state's economy is uncertain.

Nearly half of all visitors to Hawai'i come on package tours, according to figures from the state Department of Business, Economic Development and Tourism.

Taniguchi said he was optimistic about the bill's success at the Legislature this session.

The House has approved a version of the bill that would require wholesale tour companies to pay the 7.25 percent room tax on the amount they add to the price of a hotel room when they offer it to customers.

Hotels now pay the 7.25 percent hotel room tax when they sell the room to the wholesalers, but wholesalers then mark up the price and resell it to their customers.

The International Longshore and Warehouse Union, which proposed the new levy, argued that meant the tax was being imposed on a fraction of the price of the room, not the real room rental rate.

The ILWU proposed the new hotel tax after negotiating for 10 months for a new contract for about 300 employees at the Royal Lahaina Resort on Maui.

The resort's owner is tourism magnate Ed Hogan, who also owns Hawai'i's largest wholesale tour operator, Pleasant Hawaiian Holidays.