Avalara MyLodgeTax > Blog > State and Local News > Vast majority of Hawaii's short-term rental hosts on the Big Island do not collect lodging taxes

Vast majority of Hawaii’s short-term rental hosts on the Big Island do not collect lodging taxes

  • Mar 15, 2018 | Jennifer Sokolowsky

More than 6,000 short-term rental operators are doing business on Hawaii Island without registering with the state or collecting lodging taxes.

According to data compiled by Ross Birch, executive director of the Island of Hawaii Visitors Bureau, 8,647 Big Island short-term rentals were advertised on platforms such as Airbnb and VRBO in 2017, a 16.7 percent increase over the previous year. Only 2,037 are registered with the state.

Birch called the situation a “free-for-all” in which there’s no penalty for illegally operating vacation rental businesses.

Various efforts have been made at the state and county level to regulate short-term rentals for the past several years, and pressure is growing to get something done. Currently there are several government proposals that deal with the issue.

In the current state legislative session, Senate Bill 2963 has passed the Senate and is now being considered in the House. Provisions of the bill include:

  • Rental platforms such as Airbnb would be allowed to collect lodging taxes on behalf of hosts. However, both the platform and the host would be jointly responsible for tax compliance.
  • Platforms would be required to provide information to the state such as details of how many nights were rented, rates per night, and names and addresses of local contacts.
  • It would be illegal for short-term rental platforms to do business with operators who do not comply with state and local laws. Violations would result in a minimum $25,000 fine.
  • Failure to comply with any tax or zoning law would be considered a Class C felony that could result in seizure of property as well as income earned from short-term rentals.
  • An amnesty program would be created for short-term rental operators who are currently operating outside of the rules.

Hawaii Governor David Ige vetoed a similar bill two years ago, in part because of a lack of strong enforcements provisions. The bill is supported by the hotel industry and opposed by Airbnb and HomeAway/VBRO.

Another bill, House Bill 2605, would give $1 million to each county in Hawaii for a registration, property taxation, and tracking system for short-term rentals. It goes before the House Finance Committee Wednesday.

Meanwhile, on the Big Island, Hawaii County Bill 108 would require existing short-term rentals outside of the Vacation District, the General Commercial District, or Resort Nodes to apply for a nonconforming use certificate in order to be grandfathered in. Short-term rentals in the allowed districts would be required to register with the county, but would not need to apply for a nonconforming use permit.

The county bill is on hold until the Board of Ethics rules on whether bill co-sponsor Karen Eoff, a North Kona Councilwoman, has a conflict of interest because she owns a short-term rental in the Vacation District.

Throughout the state of Hawaii, short-term rental income is subject to a 9.25 percent transient accommodations tax (TAT), as well as a 4 percent general excise tax (GET). Rental hosts can pass these taxes on to their guests, but each tax must be listed separately on the accommodations bill, and the host must collect the taxes and remit them to the proper tax authorities.

After years of questioning how to regulate short-term rentals, Hawaii is drawing closer to having rules and regulations with teeth. If you’re a short-term rental operator in Hawaii, it’s a good time to make sure you comply with lodging tax rules. MyLodgeTax, a tax management solution, can help you make sure you’re getting lodging tax right.

Lodging tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Avalara Author
Jennifer Sokolowsky
Avalara Author Jennifer Sokolowsky
Jennifer Sokolowsky writes about tax, legal, and tech topics. She has an extensive international background in journalism and marketing, including work with The Seattle Times, The Prague Post, Avvo, and Marriott.