Airbnb to begin sharing host data with Hawaii tax authorities

A Hawaii court ruling will pave the way for Airbnb to share short-term rental host data with tax officials in order to enforce state tax laws.

First Circuit Court Judge Bert Ayabe ruled that Hawaii’s Department of Taxation may subpoena Airbnb for data on its hosts to find out whether short-term rental operators are paying lodging taxes.

The ruling allows a data-sharing agreement between the state and Airbnb to move forward. Under that deal, Airbnb will share the records with the state for the 1,000 Hawaii hosts that made the most revenue from 2016 through 2018. The company will give operators two weeks’ notice before sharing the information.

Airbnb will also provide anonymized information on hosts who brought in more than $2,000 annually during that time. The state may request individualized information on these hosts from Airbnb, but may only receive data on 500 operators every two weeks. In the case of a host legal challenge, Airbnb will not release records until the case is resolved.

Earlier this year, a judge denied the state’s attempt to subpoena 10 years of records from Airbnb. The state filed a revised subpoena request in June, after which the state and Airbnb started talks.

In Hawaii, short-term rental taxes are administered by the state, while counties govern short-term rental operations. It’s been difficult for the state to enforce the tax laws due to a lack of data on short-term rentals. Online listings often only reveal hosts’ first names and short-term rental platforms have not previously provided individualized host information to the state.

While state law requires short-term rental listings to include taxation identification numbers, more than 70% of Hawaii Airbnb listings do not include these numbers, according to an investigation by tax authorities.

Short-term rental income in Hawaii is subject to transient accommodations tax (TAT) as well as general excise tax (GET). Vacation rental operators can pass these taxes on to guests, but hosts must register with the state, collect and pay the taxes, and file regular tax returns. 

While short-term rental platforms such as Airbnb and HomeAway/Vrbo collect taxes on behalf of their hosts in many states, they are not allowed to do so in Hawaii.

This past summer, Hawaii Governor David Ige vetoed a bill passed by state lawmakers that would require short-term rental platforms to collect taxes on bookings on behalf of their hosts. Under the vetoed bill, state tax officials would not release information about short-term rentals to counties to assist in enforcement. At the time, Ige said a stronger law could be created that would allow state tax agencies to assist counties in enforcement.

Since short-term rental platforms do not collect taxes, hosts are solely responsible for lodging tax registration, collection, and filing. MyLodgeTax automates lodging taxes to simplify compliance for Hawaii vacation rental operators.

In another Hawaii legal case, the City of Honolulu has paused enforcement of its new short-term rental law for units in a Waikiki condominium building that sued the city.

Condo owners in the Waikiki Banyan tower have been operating their units as vacation rentals for years, but the new law placed the building just outside the boundaries of the resort area where short-term rentals are allowed.

The condo association sued, and the city agreed to stop enforcing the new law in the building until the case is decided, which could take two to three years. The city will withdraw violation notices that it sent to several owners operating short-term rentals.

The Hawaii Vacation Rental Owners Association has also sued the city over the law, calling it unconstitutional and claiming that it violates previous city policies.

The new Honolulu ordinance, passed this summer, strictly regulates short-term rentals, banning them outside of resort areas and requiring vacation rental owners to obtain a permit from the City and County of Honolulu. Hosts must include this permit number on any advertisement. The law prohibits new permits for whole-home rentals, but allows some short-term rentals in homes where the owner lives.

The city started sending warning notices to short-term rental hosts immediately after the law went into effect. The ordinance outlines strong penalties for running illegal short-term rentals, with fines of up to $10,000 per day.

For more on lodging taxes in Hawaii, see our state Vacation Rental Tax Guide. If you have tax questions related to vacation rental properties, drop us a line and we’ll get back to you with answers.