Justia Tax Law Opinion Summaries

Hawaiian Airlines entered into a contract with Boeing, agreeing to indemnify Boeing for any taxes incurred on maintenance supply parts sold to Hawaiian. Boeing did not remit general excise taxes (GET) on these sales, claiming an exemption under Hawai'i Revised Statutes (HRS) § 237-24.9. The Hawai'i Department of Taxation audited Boeing for tax years 2013-2018 and proposed disallowing the exemption. Boeing received a Notice of Proposed Assessment (NOPA) in May 2021, and Hawaiian paid $1,624,482.75 under protest, then filed a lawsuit seeking a declaration that GET was not owed and a refund of its payment.The Tax Appeal Court dismissed the lawsuit, ruling it lacked jurisdiction because there was no "final agency decision" or "actual dispute" at the time of Hawaiian's payment. The court found that the inter-office memorandum, email, and closing letter from the Department did not constitute formal administrative decisions. The Intermediate Court of Appeals (ICA) affirmed the dismissal, citing the need for a formal administrative decision to create an actual dispute under HRS § 40-35.The Supreme Court of Hawai'i reviewed the case and held that a NOPA qualifies as a "formal administrative decision" sufficient to create an actual dispute for HRS § 40-35 jurisdiction purposes. The court found that the NOPA contained a demand and determination of tax liability, thus meeting the requirements set forth in Grace Business Development Corp. v. Kamikawa. The court vacated the tax court's dismissal and the ICA's judgment, remanding the case for further proceedings consistent with its opinion. View "Tax Appeal of Hawaiian Airlines, Inc. v. Department of Taxation" on Justia Law

This case involves two appeals by West Maui Resort Partners LP and Ocean Resort Villas Vacation Owners Association against the County of Maui. The appellants, who manage nearly 700 time share units, challenged their Maui County tax assessments, arguing that the County's tax assessments were unconstitutional and violated the County's own code. They contended that the County's creation of a Time Share real property tax classification acted as an illegal tax on time share visitors. They also argued that time share units and hotel units have an identical "use" for real property purposes, and therefore, should be taxed in the same real property tax classification.The Tax Appeal Court granted summary judgment for the County in both cases. The court concluded that the County acted within its constitutional authority to tax real property in creating the Time Share classification and taxing properties assigned to it. The court also found that the County had several legitimate policy purposes rationally related to the creation of the Time Share classification, including raising revenue for infrastructure maintenance and addressing time share properties' unique impacts on the community.The appellants appealed to the Intermediate Court of Appeals, which transferred the cases to the Supreme Court of the State of Hawai‘i. The Supreme Court affirmed the Tax Appeal Court's summary judgment for the County in both cases, concluding that the County did not exceed its constitutional authority when creating the Time Share classification, nor did it violate its own code in doing so. The court also held that the Time Share classification's creation and rates were constitutional under the equal protection clauses of the Hawai‘i and U.S. Constitutions. View "In Re: West Maui Resort Partners LP v. County of Maui" on Justia Law

In a case regarding the timing of appeals, the Supreme Court of the State of Hawaii has clarified the interpretation of Hawaii Rules of Appellate Procedure (HRAP) Rule 4(a)(3). The case arose from a tax dispute between taxpayers Schuyler and Marilyn Cole and the City and County of Honolulu, leading to a consolidated appeal with other similar cases. In July 2017, the Tax Appeal Court granted summary judgment to the City, and the Taxpayers filed a motion for reconsideration. However, the court failed to rule on this motion within 90 days, and the court's clerk did not provide notice of automatic denial of the motion, as required by HRAP Rule 4(a)(3).The Supreme Court held that if the court clerk does not notify the parties within 5 days after the 90th day that a post-judgment motion has been automatically denied, the time to appeal starts either when the clerk provides notice to the parties or when the court enters a nullified order. The Court also held that judicial inaction cannot operate to foreclose a right to appeal. As a result, the Taxpayers' appeal clock started when the court issued its late order on the motion for reconsideration, and they filed their appeal within the 30-day window from that point, therefore the Intermediate Court of Appeals had jurisdiction over the appeal.The Supreme Court expressed concern about the potential for indefinite extension of the appeal deadline due to court and clerk oversight and suggested that the Standing Committee to Review the Hawaii Rules of Appellate Procedure may wish to consider proposing an amendment to HRAP Rule 4(a)(3). The case was remanded to the Intermediate Court of Appeals for further proceedings. View "Cole v. City and County of Honolulu" on Justia Law

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

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

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

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