New Maui law may allow thousands of short-term rentals to stay in business

The Maui County Council has approved Bill 88, an ordinance that creates new hotel zoning districts on the island to allow roughly 4,500 units slated for phasing out to apply to continue operating as short-term rentals (STRs).

Key takeaways

1. Bill 88 could preserve thousands of Maui STRs. The measure creates new hotel zoning districts that could allow about 4,500 apartment-zoned STRs to apply to continue operating instead of being phased out under Bill 9.
2. Bill 88 doesn’t automatically rezone STRs. The bill creates new Maui hotel zoning districts, but properties must be rezoned in a separate process.
3. Maui STR operators must continue meeting lodging tax obligations. Regardless of future zoning changes, operators are responsible for registering, collecting, filing, and remitting applicable Hawaii state and Maui County lodging taxes.

Bill 88 could soften the blow of Bill 9, which ends exemptions that have allowed roughly 7,000 apartment-zoned units across the county to operate as STRs for decades. Bill 9 will phase out up to 6,200 STRs in apartment zones with a goal of creating more long-term housing. The ordinance requires apartment-zoned STRs in West Maui to cease operations by January 1, 2029. In the rest of the county, the deadline for phaseout will be January 1, 2031.

After Bill 9 was passed in 2025, a council investigative group recommended that the council pass Bill 88, which was introduced by council member Tom Cook. According to Cook, a member of the investigative group, the bill was created in part to protect the county from lawsuits filed by affected property owners.

The bill establishes hotel zoning districts H-3 and H-4 for properties that have operated as STRs under previously permitted use. However, it doesn’t actually rezone any properties, which will need to be done in a separate process.

Bissen introduced Bill 9 in May of 2024, after a statewide law was passed giving counties more powers to regulate STRs in an effort to help relieve the state’s housing crisis. The catastrophic wildfires in West Maui in August 2023 that killed 102 people, destroyed more than 5,000 homes, and displaced more than 12,000 people were also a factor.

According to state law, counties have the power to regulate the time, place, manner, and duration of land and structures, as well as to phase out STRs through zoning regulations in residential and agricultural zones. Counties can also allow transient accommodations of up to 180 consecutive days.

STRs in apartment districts on Maui are on the “Minatoya list,” which was created in 2001 in a legal opinion by Richard Minatoya, then deputy corporation counsel for the county. According to the opinion, condos that were built before March 5, 1991, and had already been approved for STR use by their condo associations could continue to operate as short-term rentals of fewer than 180 days. To do so, they had to have a permit from the county or state and not pause STR use for more than 12 consecutive months. Most of the STRs on the list — 60% — are in South Maui, with 36% in West Maui and 4% in Hana, Paia, and Molokai.

For tax purposes, STRs in Hawaii are defined as stays of less than 180 consecutive days. Income from STR operations is subject to state general excise tax (GET) and state transient accommodations tax (TAT). Maui STR proceeds are also subject to county TAT and a GET surcharge. STR business owners may pass GET and TAT on to their guests.

Hawaii STR operators are required to register with the Hawaii Department of Taxation for GET and TAT licenses or tax ID numbers. For state-administered TAT and GET, as well as county GET surcharge taxes, operators must file lodging tax returns with the state and pay at the time of filing. For county TAT surcharge taxes, hosts file returns with the state, but pay the taxes to county tax 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. Operators are responsible for collecting and remitting them to state and local tax authorities.

Avalara helps simplify tax and compliance for the hospitality industry through automation. With Avalara MyLodgeTax, STR owners and property managers can register with tax authorities, calculate lodging taxes, prepare and file returns, and remit payment. Avalara is trusted by 200,000+ direct and indirect customers in 75+ countries.  

For more on lodging taxes in Hawaii, see our 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.

What’s the difference between Maui Bill 9 and Bill 88?

Bill 9 phases out many apartment-zoned STRs in Maui County over the next several years. Bill 88 establishes new hotel zoning districts that could allow some of those properties to apply to continue operating as short-term rentals.

Does Bill 88 automatically allow affected Maui STRs to remain in business?

No. Bill 88 creates new hotel zoning districts, but individual properties must still go through a separate rezoning process before they can operate under the new zoning designation.

Do Maui STR operators still have to collect and remit lodging taxes?

Yes. Operators are responsible for complying with Hawaii’s lodging tax requirements, including registering with the Hawaii Department of Taxation and collecting, filing, and remitting applicable state and county lodging taxes.