Short-term rental taxes to rise in two Hawaii counties

Taxes on short-term rentals are set to rise in two of Hawaii's counties. Starting January 1, Kauai County and Hawaii County will add local surcharges to the state general excise tax (GET), which applies to all lodging, including short-term rentals.

In Kauai, a 0.5 percent surcharge will be added to the state rate of 4 percent for a total GET rate of 4.5 percent. In Hawaii County, a 0.25 percent surcharge will be added, for a total rate of 4.25 percent

In Hawaii, short-term rental income is subject to a 10.25 percent transient accommodations tax (TAT), as well as the GET. Hosts can pass these taxes on to their guests.

Unlike many states, Hawaii does not allow short-term rental platforms such as Airbnb and HomeAway to collect lodging taxes on behalf on their hosts. This means that hosts are responsible for collecting all lodging taxes on their short-term rentals and remitting the taxes to authorities. Many Hawaii short-term rental operators use MyLodgeTax automation to simplify and manage lodging tax compliance.

Short-term rentals are a bone of contention in Hawaii, with some calling for more robust regulation and enforcement. However, no major changes to short-term rental laws have been passed recently, despite efforts by the state legislature and local governments over the past several years. 

Early this year, Hawaii Governor David Ige vetoed the legislature’s latest short-term rental bill, which would have allowed short-term rental platforms to collect lodging taxes directly from guests on behalf of hosts. The bill would also have required platforms to turn over rental operator information and property details so that governments could verify the legal status of short-term rental operators.

A proposal by Honolulu Mayor Kirk Caldwell to ban short-term rentals in residential areas was rejected last month by the Honolulu Planning Commission.

In Hawaii County, the county Planning Committee recently voted to advance a new short-term rental bill on to the County Council. The bill would require registration for short-term rental operators, ban new whole-home short-term rentals, and regulate the areas in which short-term rentals could operate.

In fiscal year 2017, Hawaii collected $508.4 million in lodging taxes, an increase of 13.8 percent. In 2018, lodging tax collections are expected to increase 7.3 percent to $545.9 million, helped by a 1 percent TAT rate increase that went into effect January 1.