Title: In the Matter of Aloha Airlines, Inc.
Citation: 547 P.2d 586
Docket Number: 5678
State: Hawaii
Issuer: Hawaii Supreme Court
Date: March 19, 1976

547 P.2d 586 (1976) In the Matter of the Tax Appeal of ALOHA AIRLINES, INC., Appellant. No. 5678. Supreme Court of Hawaii. March 19, 1976. C. Michael Hare, Honolulu (Cades Schutte Fleming &amp; Wright, Honolulu, of counsel), for appellant. Richard Y. Wada, Deputy Atty. Gen. of Hawaii, Honolulu, for appellee. Before KOBAYASHI, Acting C.J., OGATA, MENOR and KIDWELL, JJ., and Circuit Judge CHANG in place of RICHARDSON, C.J., recused. PER CURIAM. Appellant taxpayer appeals from a decision of the tax appeal court, upon an agreed statement of facts, that commissions retained by travel agents from the proceeds of sales of air passage on Appellant's flights are includable in Appellant's taxable gross income. We affirm. The Air Traffic Conference Sales Agency Agreement between Appellant and the travel agents authorized to sell air passenger transportation offered by Appellant provided that and that The Agreement provided for periodic remittance by the agents to Appellant of all sums held for Appellant. Commissions chargeable against sale proceeds were not required to be remitted and never came into Appellant's possession. Appellant was subject to tax under HRS Ch. 239 upon its gross income from the transportation of passengers. Appellant contends that the commissions retained by travel agents under the above-quoted contract provisions represented moneys which never became the property of Appellant and were not includable in its taxable gross income. However, it is clearly apparent from the face of the contract that the proceeds of sales by the travel agents were compensation for the furnishing of air transportation service by Appellant and that the agents were not entitled to their commissions unless and until the service was actually rendered by Appellant. It is well established that income is taxed to the party who earns it and that liability may not be avoided by an anticipatory assignment of the income. United States v. Basye, 410 U.S. 441, 93 S. Ct. 1080, 35 L. Ed. 2d 412 (1973). We hold that the amount received by Appellant's travel agents in payment for transportation furnished by Appellant constituted gross income of Appellant within the meaning of HRS Ch. 239, although portions of such gross income were retained of right by the agents pursuant to their contracts. Affirmed.