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Judge rules Honolulu short-term rentals can continue operating

  • Jan 8, 2024 | Jennifer Sokolowsky

A group of Oahu short-term rental (STR) owners may continue to operate, a federal judge has ruled more than a year after he granted the group a temporary injunction in response to a new Honolulu STR law.

The ordinance, passed in April 2022, bans rentals of between 30 and 89 days in non-resort areas. The Hawaii Legal Short-Term Rental Alliance, a group of STR operators, sued over the ordinance, saying it would violate their legacied rights. Under previous laws, short-term rentals were defined as rentals of at least 30 days. Under the latest law, short-term rental owners in resort districts may offer STRs for less than 30 days.

The alliance sought exceptions for their legally operating short-term rental properties that were established prior to the law’s passage, some going back decades. 

In October 2022, U.S. District Court Judge Derrick K. Watson granted the group the temporary injunction, prohibiting the City and County of Honolulu, as well as the Department of Planning and Permitting, from enforcing the ban on rentals of 30 to 89 days.

Ordinance still applies to new STRs

The alliance argued that the ordinance violates a state law prohibiting county zoning ordinances that conflict with prior use. Watson agreed and granted the group a summary judgment in his latest ruling, allowing existing Honolulu STRs to continue operations. However, the law still applies to STRs established after it was passed.

After the temporary injunction was issued in 2022, the city ceased to enforce the ban of rentals between 30 and 89 days, but it did enforce the rest of the ordinance. The law restricts permits for vacation rentals to resort-zoned areas, including Waikiki and Ko Olina, and prohibits vacation rental guest parking in rural, apartment, or residential zones. Under the ordinance, violations can result in fines of up to $10,000 per day.

In August, Oahu temporarily suspended its STR law to increase temporary housing options for Maui and Big Island wildfire survivors. With Maui housing still in extremely short supply, Hawaii Governor Josh Green said in December that he is considering a moratorium on STR operations on Maui to help the more than 6,000 Maui residents who lost their homes in the fires.

Keep compliant with Hawaii tax rules

In Hawaii, short-term rental income is subject to state and county transient accommodations tax (TAT) as well as general excise tax (GET). Vacation rental operators must pay the taxes based on their gross rental proceeds but can pass these taxes on to guests.

Hawaii transient accommodations operators must be registered with the state’s Department of Taxation, file regular tax returns, and pay county taxes to Honolulu tax authorities and state taxes to state authorities.

While STR marketplaces such as Airbnb and Vrbo collect taxes on behalf of their hosts in many states, they’re not allowed to do so in Hawaii. That means Oahu hosts are responsible for taking care of all tax obligations, including registering, filing lodging tax returns, and paying taxes to both the state and the county.

Avalara MyLodgeTax can help Hawaii short-term rental hosts automate registration and filing for state and county TAT and state GET. For more on lodging taxes in the state, see our Hawaii 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.

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.
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Learn more about HI lodging tax rules