HONOLULU -- Hawaii's ASTA chapter is lobbying for a reduction in
the tax that agencies pay on airline commissions.
Hawaii is the only state where agents pay a significant tax on
airline commissions, and the chapter's move is aimed at providing
relief from possible higher taxes.
Bills in the state House and Senate would reduce the state's
general excise tax (GET) on airline commissions from 4% to
The state administration wants to increase the wide-ranging
excise tax levied on almost all goods and services from 4% to as
much as 5.35% as part of a major tax restructuring designed to
kick-start the economy from a seven-year slump.
But the plan also proposed that business sectors hit
particularly hard or unfairly by a GET increase would get the
excise tax reduced to 0.5%.
The restructuring also would provide the biggest cuts in income
and corporate taxes in the state's history, aimed at attracting
investment. Agencies pay the 4% GET on gross commissions, and the
bills introduced would reduce only the portion paid on airline
Following a hearing, the House Finance Committee said it would
report favorably on the house version, H.B. 2749. No action has
been taken on the Senate version as yet.
Danny Casey, chairman of the ASTA chapter's legislative
committee, testified before the finance committee. Airlines, as a
result of the commission caps and commission reductions, Casey
said, "had removed more than $7 million per year from the Hawaii
"This is money that once helped travel agencies produce jobs and
tax revenues, but now just helps the airlines pad their profit
statements. It is this airline industry that is benefiting from a
landing-fee waiver granted by our state," he said, referring to the
state's two-year suspension of airline landing fees imposed last
September to boost tourism.
Casey also said the number of Hawaii's Airlines Reporting
Corp.-accredited locations had declined from 289 to 242 in the past
He told Travel Weekly the chapter thinks it has a better chance
of getting a tax bill passed than in previous years.
In the past two sessions, the chapter supported more ambitious
bills abolishing the GET on airline commissions. Both times they
failed to clear the first hurdle as they were killed by the House
Finance Committee. This time, in theory at least, the chapter's
move to reduce taxes has the support of the state
The tax restructuring was recommended by the Governor's Economic
Revitalization Task Force, a 26-member body that met last fall, and
whose plan was accepted in total by Gov. Ben Cayetano.
GET is paid by businesses on gross income or sales and is
subject to "pyramiding" -- paying tax on tax. Some business
sectors, such as manufacturers, distributors, and the insurance
industry, pay just 0.5% GET. Most sectors pay 4%, and many, such as
retailers, hotels, and tourist attractions and activities, pass the
tax on to consumers.
However, travel agencies, like real estate brokers, historically
have absorbed the tax and are prohibited by federal law from
passing the tax on to consumers who buy airline tickets.