Justia Hawaii Supreme Court Opinion Summaries

Articles Posted in Tax Law

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The Supreme Court vacated the order and judgment of the circuit court granting the State’s motion to dismiss for lack of jurisdiction this challenge to the State’s implementation of Haw. Rev. Stat. 248-2.6, holding that the State’s application of section 248-2.6 was consistent with the statute’s plain language and legislative intent and that the statute does not violate the state or federal constitutions. Section 248-2.6 authorizes the State to be reimbursed for its costs in administering a rail surcharge on state general excise and use taxes on behalf of the City and County of Honolulu. Tax Foundation of Hawai’i filed a class action on behalf of all taxpayers in the City and County of Honolulu challenging the State’s application of section 248-2.6. The circuit court granted the State’s motion to dismiss. The Supreme Court reversed and remanded with instructions to grant the State’s motion for summary judgment on the merits, holding (1) the circuit court had jurisdiction to hear Tax Foundation’s claims; (2) Tax Foundation had standing; (3) the State did not violate the statute by retaining ten percent of the surcharge gross proceeds; and (4) the State’s application of section 248-2.6 did not violate the state or federal constitutions. View "Tax Foundation of Hawaii v. State" on Justia Law

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In this consolidated appeal from twenty-nine General Excise Tax (GET) assessments levied by the State Director of Taxation against five online travel companies based on car rental transactions taking place in the State between 2000 and 2013, the Supreme Court held that rental cars are tourism-related services and that the assessed transactions qualified for the reduced GET rate based only on the portion of the proceeds that the online travel companies retained. The online travel companies in this case argued (1) the majority of the assessments were barred because they already litigated their GET liability for the years 2000 through 2013 to final judgment in an earlier case; and (2) the rental car transactions should qualify for a reduced GET rate calculated based only on the portion of the proceeds that they retained because rental cars are “tourism-related services” within the meaning of a statutory income-reducing provision. The Supreme Court held (1) the assessments could be considered on the merits because the claim preclusion component of res judicata is not an available defense against the government’s sovereign power of taxation; and (2) car rentals are tourism-related services that qualify for GET apportionment under the circumstances of this case. View "In re Tax Appeal of Priceline.com, Inc." on Justia Law

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The Supreme Court held that the tax court erred in determining that the timeliness of an appeal of real property tax assessments was determined by county ordinance and not state law. Appellant filed a notice of appeal to the tax court for each of fourteen parcels challenging the City Council of the City and County of Honolulu’s assessment notices. The notices of appeal were filed the next business day following the deadline set by a county real property tax ordinance. The appeal deadline fell on a Sunday and was followed by a State holiday. The tax court dismissed the appeals, concluding that the county ordinance superseded the “weekend rule” established by Hawai’i state law. The Supreme Court vacated the tax court, holding (1) the City did not possess the constitutional authority to invalidate via an ordinance the statutory weekend rule as it applied to the tax court’s jurisdiction; and (2) therefore, Appellant’s notices of appeal were timely filed. View "Kalaeloa Ventures, LLC v. City & County of Honolulu" on Justia Law

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Hawaii’s use tax, Haw. Rev. Stat. 238-2, does not violate the Commerce Clause of the United States Constitution notwithstanding that the 2004 amendment to the statute eliminated the application of the tax to in-state unlicensed sellers. CompUSA Stores, L.P. filed claims for refund of its 2006, 2007, and 2008 use tax payments. The Department of Taxation (Department) denied the request. CompUSA appealed, arguing that the tax discriminates against out-of-state commerce, cannot be justified by a legitimate local purpose, and thus violates the Commerce Clause and the Equal Protection Clause. The Tax Appeals Court granted the Department’s motion for summary judgment. The Supreme Court affirmed, holding (1) the current version of the use statute establishes a classification between in-state and out-of-state sellers; but (2) the statute satisfies rational basis review because the classification of out-of-state sellers bears a rational relationship to the legitimate state interest of leveling the economic playing field for local businesses subject to the general excise tax. View "CompUSA Stores, L.P. v. State" on Justia Law

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The State Director of Taxation retroactively assessed ten online travel companies for unpaid general excise tax (GET) and transient accommodations tax (TAT) for periods beginning between 1999 and 2001 and continuing until 2011. The Director also assessed penalties. The online travel companies appealed the assessments. The tax court (1) ruled in favor of the Director with regard to the GET assessments; but (2) ruled in favor of the online travel companies with regard to the TAT assessments. The Supreme Court affirmed in part and vacated in part the judgment in regard to the GET assessments and penalties and affirmed in regard to the TAT assessments, holding (1) the GET apportioning provision was misapplied in this case; and (2) the TAT was not applicable to the online travel companies in the assessed transactions. Remanded. View "In re Tax Appeal of Travelocity.com, L.P." on Justia Law

Posted in: Tax Law

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Plaintiff-Appellant John Corboy and a number of real property owners and taxpayers brought claims against various state and county Defendants-Appellants to get an exemption from property taxes equal to an exemption granted to Hawaiian homestead lessees under the Hawaiian Homes Commission Act (HHCA). Plaintiffs are not native Hawaiians, but argued that the tax exemptions for homestead lessees involve race-based discrimination in violation of the Fifth and Fourteenth Amendments to the U.S. Constitution and Federal civil rights laws because only native Hawaiians are eligible to become homestead lessees under the HHCA. Accordingly, they sought a refund of real property taxes paid in excess of what they would have been assessed had each of them been granted an exemption. The State filed a motion for summary judgment on the ground that the disputed exemptions did not violate the equal protection clause because the exemptions were not based upon whether a taxpayer was a native Hawaiian, but instead they were based on whether the taxpayer was a homestead lessee of HHCA land. The tax appeal court granted the Stateâs motion, and on appeal, Plaintiffs challenged the courtâs awarding of the summary judgment. The Supreme Court found that the Plaintiffs lacked standing to pursue their challenges to the constitutionality of the tax exemption and the HHCA. The record reflected that the Plaintiffs were not interested in participating in the homestead lease program and therefore they could not establish an injury sufficient to give them standing to challenge the exemption. The Court vacated the tax appeal courtâs judgment, and ordered the lower court to dismiss Plaintiffsâ cases for lack of jurisdiction.