Hawaii Administrative Rules
Title 18 - DEPARTMENT OF TAXATION
Chapter 237 - GENERAL EXCISE TAX LAW
Subchapter 2 - LICENSES; TAX; EXEMPTIONS
Section 18-237-29.53-06 - Services provided by a travel agency or tour packager at noncommissioned negotiated contract rates

(a) When transient accommodations are furnished through arrangements made by a travel agency or tour packager at noncommissioned negotiated contract rates, the travel agency's or tour packager's service is used or consumed where the transient accommodation is located

(b) When travel-related bookings other than transient accommodations are made or sold by a travel agency or tour packager at noncommissioned negotiated contract rates, the travel agency's or tour packager's service is used or consumed where the travel-related booking is located.

Example 1: Travel Services Corporation ("TSC") sells a five-night stay at Luau Loft, a hotel in Hawaii, to Tammy Traveler, a resident of New Jersey. TSC arranges the transient accommodation at noncommissioned negotiated contract rates. The contract between TSC and Luau Loft provides that Luau Loft will receive ninety per cent of the net rate, the best available rate offered by Luau Loft to the public at the time of the transaction, and that TSC may unilaterally determine the mark-up of the net rate and set the total price charged to the customer. TSC charges Tammy Traveler $600 for the booking. The net rate at the time of TSC's sale to Tammy Traveler is $100 per night, or $500 for five nights. TSC unilaterally sets the mark-up for the booking and the final price of $600. All of the value or gross income that TSC receives is not exempt under section 237-29.53, HRS. TSC's service is used or consumed in Hawaii, where the transient accommodation is located, because the transient accommodation was furnished through arrangements made by a travel agency at noncommissioned negotiated contract rates.

Example 2: Assume the same facts as in Example 1, except that TSC books a five-day rental of a vehicle in Hawaii for Tammy Traveler. TSC arranges the travel-related booking at noncommissioned negotiated contract rates. The contract between TSC and the rental vehicle company provides that the rental vehicle company will receive $50 per day for each vehicle rented and that TSC may unilaterally determine the mark-up and set the total price charged to the customer. TSC charges Tammy Traveler $300 for the booking. All of the value or gross income that TSC receives is not exempt under section 237-29.53, HRS. TSC's service is used or consumed in Hawaii, where the travel-related booking is located. The travel-related booking was made by a travel agency at noncommissioned negotiated contract rates.

Example 3: Alex Adventurer, a resident of Hawaii, visits the office of Maui Travel Agency ("MTA"), a travel agency located in Hawaii, to plan a vacation to Alaska. MTA sells a seven-night stay at Glacier Hotel, a hotel in Alaska, to Alex Adventurer. MTA arranges the transient accommodation at noncommissioned negotiated contract rates. The contract between MTA and Glacier Hotel provides that Glacier Hotel will receive $100 per room per night and that MTA may independently determine the mark-up and set the total price charged to the customer. MTA charges Alex Adventurer $1,000 for the booking, unilaterally determining to charge a mark-up of $300. All of the value or gross income that MTA receives is exempt under section 237-29.53, HRS. MTAs service is used or consumed in Alaska, where the transient accommodation is located. The transient accommodation was furnished through arrangements made by a travel agency at noncommissioned negotiated contract rates.

Example 4: Assume the same facts as in Example 3, except that the contract between MTA and Glacier Hotel provides that MTA may book rooms at Glacier Hotel for $125 per room per night and that, for each booking, MTA will receive ten per cent of the sale. MTA does not have die authority to mark up or unilaterally change the total price charged to the customer. Section 18-237-29.53-06 does not apply because transient accommodations are not being furnished through arrangements made by a travel agency at noncommissioned negotiated contract rates. Instead, MTA is a commissioned agent and section 18-237-29.53-10 applies. Under that rule, all of the value or gross income that MTA receives is not exempt because MTA is in Hawaii and the booking occurred in Hawaii.