Hawaii Vacation Rental Tax Guide
Avalara Tax Guides

Airbnb, Homeaway, and VRBO have changed the way vacationers travel. More and more guests are choosing to rent private homes rather than book hotels. The opportunity for residents of Hawaii to take advantage of this and operate their own short-term rental has never been greater. With a bounty of glorious destinations including Honolulu, Maui, and Oahu, The Aloha State offers prospective vacation rental hosts the opportunity to pad their income, offset their mortgage, and meet new people.

But new income opportunities bring new tax implications. State and local tax authorities in Hawaii expect those operating short-term vacation rental homes to properly collect and file lodging taxes commonly referred to as transient accommodations tax, sales tax, bed tax, or hotel tax.

What can I expect to learn from this guide?

The goal of this guide is to expose you to the process of achieving sales tax compliance in the state of Hawaii. You will learn the basics to help gain an understand of collecting, filing, and remitting taxes associated with your short-term rental.

The remainder of this guide will focus on each of these steps to provide you with a more detailed view of the actions you should take to gain a deeper understanding of the tax requirements for your specific Hawaii address.

Where can I find my Hawaii lodging tax rate?

We realize that many visitors are mostly interested in determining what the tax rate is for their rental address. Step one below will direct you to our free tax rate lookup tool. You can also click on the Hawaii city links listed to the right. It's important to remember lodging tax rates are unique to your specific address. As such, we recommend all short-term rental operators submit their rental address rather than relying on city level tax details.

Who is this guide written for?

This guide is written for anyone who is operating a short-term vacation rental in Hawaii. The type of home is irrelevant as apartments, condos, and single family homes are all taxed in the same manner.

This may include those who are renting on marketplaces such as Airbnb, HomeAway, or VRBO, those who are renting through their own website, or those who are utilizing a property management service.

Disclaimer: No vacation rental tax guide is a substitute for professional tax advice. Consider this document as an asset to help you understand and prioritize your questions pertaining to Hawaii short-term vacation rental taxes. (Last Updated: May, 2018)

 

Table of Contents


  1. Determining the tax rate specific to your Hawaii rental address

  2. Understanding Hawaii lodging tax compliance

  3. State and local tax registration and licensing

  4. Collecting lodging taxes from guests

  5. Filing due dates and penalties

  6. Preparing and filing Hawaii lodging tax returns

  7. Other rules and regulations to consider

 

 

1. Determining the tax rate specific to your Hawaii address


We know many of our readers are anxious to get to the details pertaining to their taxes. For many short-term rental operators, this guide will make more sense and be more meaningful after you have a better understanding of what your tax rate is.

For specific tax rate details and general licensing requirements, visit our tax rate lookup tool and enter your rental address. We’ll send the report to your email address as quickly as our tax experts are able to complete it.

There are four pieces of information you can expect your Hawaii lodging tax rate report report to provide you with for your rental address.

  1. Estimated total tax rate to collect from guests (state + local)

  2. Estimated total returns per year and frequency (state + local)

  3. Estimated number of required registrations

  4. Minimum rented days to qualify as a taxable stay

Some locations in Hawaii require more extensive research and may take up to 48-hours to complete. It should be noted this free report should not be considered 100% accurate. Tax rates and the rules governing them change frequently. Please consider your tax rate report to be informative rather than definitive.

Takeaway

The tax rate operators of short-term vacation rentals in Hawaii are expected to collect from guests is rarely a single value. Rather, it is a combination of state, county, city, and special taxes.

Action

Request a free lodging tax rate report from Avalara for my Hawaii vacation rental property.

 

2. What does it mean for my short-term rental to be tax compliant?


You might wonder why you have to consider general excise tax (GET) and transient accommodations tax (TAT) when renting out your Hawaii home (or other dwelling). For state and local governments, tax revenue represents a sizable portion of funding. The lodging industry’s movement toward more nontraditional rental options shifts revenue away from hotels, motels, and B&Bs and toward homeowners. Like hotels and motels, homeowners operating a short-term rental are required by law to collect, file, and remit taxes.

Whether you choose to rent your home through a marketplace like Airbnb or direct to the consumer, you open the door to tax liability at the state and local level.

Failure to comply with Hawaii tax laws may not catch up with short-term rental operators in the short term. As previously mentioned, however, the rapidly growing sharing economy is under the proverbial microscope. It’s recommended you address tax compliance before tax authorities address it for you.

Take the time to understand when, where, and how you’re expected to collect, file, and remit GET and TAT to the Hawaii Department of Taxation. The sooner you understand your tax responsibilities, the better you can avoid potential late payment fines and interest penalties.

Takeaway

Hawaii state and local tax officials are increasingly paying attention to short-term rental operators not complying with tax laws and regulations. If you have been operating a short-term rental and ignoring your tax responsibility, the time to act is now. Ignoring tax compliance only makes the problem bigger.

Action

If you’ve been operating your vacation rental without collecting and filing taxes, consider contacting the tax experts at Avalara to determine your best path forward. Typically, any outstanding Hawaii taxes can be dealt with by executing a “back filing”. In more egregious cases, a voluntary disclosure agreement may be your best path forward.

 

3. Registering with the Hawaii Department of Taxation


Prior to operating a short-term vacation rental, you will need to register with the Hawaii Department of Taxation. You can expect to need the following two tax licenses to legally operate your short-term rental.

  • General Excise Tax License

  • Transient Occupancy Tax License

You are not required to register for a business license to operate your rental.

After your licensing and registration is completed, you’ll be assigned a filing frequency. Typically, this is monthly or quarterly. More about this later in the guide. It should be noted that collecting GET or TAT in Hawaii prior to completing all necessary registrations is against the law.

Takeaway

Before you can collect any lodging taxes from your guests, you are required to register with the Hawaii Department of Taxation. Licenses often have associated fees and frequently must be renewed annually.

Action

Based on the address of your short-term vacation rental, apply for the appropriate licenses and pay the necessary fees to ensure you are collecting taxes legally. If you are unsure of which licenses and registration you need, contact the tax experts at Avalara MyLodgeTax for assistance.

 

4. Collecting lodging taxes from rental guests


Before collecting any taxes from your guests, find out whether any taxes are being collected on your behalf. If your guests booked their rental through a vacation rental marketplace such as Airbnb, HomeAway, or VRBO, it’s possible some taxes (typically not all) were collected at the time the property was booked. This rarely happens at both the state and local level. However, assuming lodging taxes pertaining to your Hawaii rental are managed on your behalf is not recommended.

Most states require short-term vacation rental operators to collect state and local taxes. Hawaii is no different. Having to manage multiple taxes can be confusing. In Hawaii, however, these taxes are relatively simple with only Oahu addresses having any special taxes to consider. As shown in the table below, there are only three taxes pertaining to short-term vacation rentals in Hawaii.

 

Tax Name

Tax Jurisdiction

General Excise/Use Tax

State

Transient Accommodations Tax

County (Island)

Oahu Surcharge Tax

Oahu

 

Takeaway

Collecting the correct taxes from guests is the responsibility of the short-term rental operator. In Hawaii, those taxes exists at the state and county levels. Never assume marketplaces such as Airbnb, HomeAway, or VRBO are managing these taxes for you.

Action

Identify the taxes you are required to collect for each of your vacation rental locations. If you are using a marketplace, determine which taxes (if any) are being collected and filed on your behalf. Need assistance? Call the tax experts at Avalara MyLodgeTax at (877) 589-0207 to review your tax profile.

 

5. Tax filing due dates and late penalties


As previously mentioned, a tax filing frequency and due dates are assigned when you complete your registration with the Hawaii Department of Taxation.

Failure to file your tax returns on time may result in late fees, interest payments, and in extreme cases, legal action. This holds true regardless of whether any tax was collected during the filing period. Once you’re registered with the state of Hawaii, you will need to stay on top of your filing deadlines which are typically quarterly and occassionally monthly. In addition, the state requires an annual GET and TAT reconciliation filed in the first quarter of the year.

In the event that a due date falls on a weekend or a federal holiday, the return is considered on time if filed on or before the next business day.

The Hawaii Department of Taxation has set the following tax filing due dates:

 

Filing Frequency

Due Date

Quarterly

Due the 20th of the month following the close of the filing period.

Monthly

Due the 20th of the month following the close of the filing period.

 

If you’re already renting your home but not collecting lodging taxes from guests, understand you may be in violation of Hawaii tax laws. Take the time to review your legal responsibility (with a tax professional, if necessary) and understand the risk of continuing to not collect the required taxes.

As tax revenue is a major source of state and local funding, tax authorities are becoming more aggressive in their efforts to identify individuals and businesses not in compliance with lodging tax laws. This is particularly true for short-term vacation rentals where misinformation about tax compliance is common and many hosts are not tax compliant.

Takeaway

The Hawaii Department of Taxation requires GET and TAT returns to be filed by the 20th of the month following the close of the filing period. Failure to file or remit taxes by this date may result in monetary penalties. Due dates falling on weekends or federal holidays are moved to the next business day.

Action

Determine your state and local filing due dates. Set repeating monthly or quarter reminders to assist with remembering due dates. Not interested in filing returns? For just $20 / month, Avalara MyLodgeTax will prepare, file, and remit all your taxes.

 

6. Preparing and filing lodging tax returns


After you’ve collected the proper taxes from your guests, it’s time to file your tax returns with the Hawaii Department of Taxation. GET and TAT require separate returns filings. Also, in Hawaii, once you have registered with the state, you are required to file these returns each filing period regardless of whether any tax has been collected. Such returns are commonly known as “zero dollar returns.”

If you are filing returns yourself, be sure to thoroughly review your returns prior to submission. Simple mistakes such as typos, missing signatures, and incorrect tax information can lead to unwanted delays. It’s not uncommon for well-meaning taxpayers to overlook basic details that may result in filings being rejected.

Takeaway

Preparing and filing tax returns is the responsibility of the person operating a short term vacation rental and are required regardless of whether any tax revenue has been collected during the filing period. Beware of simple errors as they can result in returns being rejected by the Hawaii Department of Taxation.

Action

Determine which Hawaii tax forms you need to file. Prepare and file these returns prior to the assigned due date. If you are unsure of which tax return forms you need to file, contact the tax experts at Avalara MyLodgeTax for assistance.

 

7. Other rules and regulations to consider


Homeowners and property managers in Hawaii should be careful to consider local tax laws when renting their home to short-term guests. Every city and county may have their own rules regarding legality of short-term rentals, which vacation rental taxes to collect, and which licenses to obtain.

Zoning Rules: Not all buildings are available for business, rental, or living usage. Most local governments have laws specifying how a home can be used. Before renting out your home, be sure to review city zoning and planning codes.

Building and Housing Standards: In most cities throughout the United States, minimal construction, design, and maintenance standards exist. Dwellings may need to meet stated criteria in order to operate legally. Contact your state and local governments for more details.

Homeowner Associations: Homeowner Associations (HOA) located in Hawaii may have specific rules regarding vacation rentals as dictated in Declaration of Covenants, Conditions, and Restrictions (CC&Rs). Additionally, the CC&Rs may include a provision allowing for amendments to add further restrictions on the property in the future. It's important to review this information to understand any vacation rental limitations inherent to your HOA. As a member, it’s your responsibility to understand the association’s covenants and rules.

Other Rules to Consider: This list should not be considered exhaustive. Other rules and regulations associated with leases/subletting, and condo or co-op rules may apply to your situation. A good place to start is by reviewing your signed lease and speaking with your landlord or property manager.

 

Frequently asked questions


Are short-term rentals legal in Hawaii?

Generally speaking, yes. However, this is a complicated question that is specific to the address of your rental.

Short-term lodging is a relatively new occupancy option and still under review by some cities, counties, and homeowners associations. Groups who oppose this rental option exist and, in some communities, are actively campaigning to regulate them. It’s always best to check with tax experts to be sure you have the most up to date information about your specific vacation rental location.

Call Avalara MyLodgeTax at (877) 589-0207 and a tax expert can review your location and provide you with an accurate answer.

What is the definition of “short-term rental” in Hawaii?

Short-term rentals are defined by the Hawaii Department of Taxation as rental periods of less than 180 consecutive days. Residents with a signed lease for continuous residence longer than this should be charged GET, but not TAT.

Does the Hawaii Department of Taxation require vacation rental owners to register with the state?

Yes. For the purpose of collecting GET and TAT, the Hawaii Department of Taxation requires short-term vacation rental operators to register with the state prior to hosting guests and collecting taxes on vacation rental revenue.

What is the current general excise tax (GET) rate in Hawaii?

The Hawaii GET rate is currently 4.16 percent. The state allows you to collect 4.712 percent to compensate hosts for acting as pseudo-tax collectors. Have questions? We recommend you generate a free lodging tax rate report or call our tax experts at (877) 589-0207 for more information.

What is the current transient accommodations tax (TAT) rate in Hawaii for short-term rentals?

As of January 1, 2018, the TAT rate for short-term rentals in Hawaii is 10.25 percent. If your rental is located on Oahu, you may also have to collect an additional surcharge tax of 0.5 percent. Have questions? We recommend you generate a free lodging tax rate report or call our tax experts at (877) 589-0207 for more information.

Should GET and TAT be charged on cleaning fees?

Yes. GET and TAT are applied to all mandatory fees charged to your guest. Cleaning fees are generally mandatory and are therefore considered part of the taxable revenue.

Do local jurisdictions in Hawaii have vacation rental requirements?

Yes. Transient accommodations tax (TAT) applies at the county level (Honolulu, Kauai, Maui and Hawaii).

Are there local registration requirements in Hawaii?

No. All registrations for short-term vacation rental operators takes place at the state level.

Are there any other licenses or permits needed for Hawaii vacation rental property owners?

Yes. All short-term vacation rental operators in Hawaii are required to obtain a certificate of registration from the Hawaii Department of Taxation. Additionally, in some parts of Oahu, you may need to obtain a “nonconforming use certificate” from the City and County of Honolulu.

What happens if I forget to collect tax from my guests?

Generally speaking, GET and TAT is collected from guests upon payment. However, the Hawaii Department of Taxation places the legal responsibility for this tax revenue squarely on the shoulders of the host. Failure to collect tax from guests means the host will need to pay the tax or recoup the tax revenue from the guests.

Furthermore, the state has the authority to levy fines and charge interest on late payments and outstanding tax revenue.

Who is responsible for collecting transient accommodations tax (TAT) if I rent my home through a marketplace such as Airbnb, HomeAway, or VRBO?

In nearly all cases, it is the homeowner or property manager who is required to collect, file, and remit lodging taxes to the Hawaii Department of Taxation. At the time this guide was written, there are no short-term rental marketplaces (ie. Airbnb, HomeAway, VRBO, or TripAdvisor) managing Hawaii lodging taxes on behalf of hosts.

Are there exemptions from transient accommodations tax (TAT) in Hawaii?

Yes. It’s important to remember short-term guests have rights and you need to understand and respect those rights. Tax exemptions are a prime example. Although uncommon, there are situations where guests may be exempt from paying GET or transient accommodations tax in Hawaii. Examples include full-time students, active military personnel present in the community under official orders, and rental of accommodations in a migrant labor camp.

In most cases, substantiating documentation must be presented by the guest prior to payment.

My guests are not from Hawaii. Do I need to collect transient accommodations tax (TAT)?

Yes. TAT is collected based on the rental location and, with few exceptions, is applied to all short-term renters in Hawaii. As mentioned in the prior questions, there are some exemptions to this rule, but they are not predicated on the state or country a person calls home.

Are apartment or condo rentals taxable?

Yes. Apartments and condos in Hawaii offered as short-term rentals are taxed in the same manner as single family homes.

What are the due dates for transient accommodations tax returns in Hawaii?

The due date for GET and TAT is the 20th of the month following the completion of the filing period.

I didn’t rent my property during this filing period. Am I still required to lodging tax returns with the Hawaii Department of Taxation?

Yes. Short-term vacation rental operators registered with the Hawaii Department of Taxation are required to file returns each assigned filing period regardless of whether any tax revenue was collected. This is commonly referred to as a “zero tax return.”

What happens if my assigned due date is on a weekend or holiday?

If your lodging tax return due date falls on a Saturday, Sunday, or state/federal holiday, GET and TAT returns and payments will be timely if they are postmarked on the first business day following the assigned due date.

Does the Hawaii Department of Taxation offer a discount for on-time filing?

No. At this time, the Hawaii Department of Taxation is not offering a timely filing discount for on-time returns filing.

Can I be assessed a penalty if my tax returns are filed late?

Yes. Failure to file a GET or TAT return on time may result in a penalty being assessed on the outstanding tax revenue at a rate of 5% per month, or part thereof. There is a maximum penalty of 25% on the outstanding tax.

Does the Hawaii Department of Taxation charge interest on an outstanding transient accommodations tax (TAT) balance?

Yes. Interest is calculated at 2/3 of 1% per month or part thereof, on unpaid taxes and penalties. Interest begins accumulating on the the first calendar day after the completion of the month for which the tax was collected.

What should I do if I am unable to file my return on time due to circumstances beyond my control.

Assessed penalties for late filing or paying of GET or TAT returns may be waived if short-term vacation rental operators can show circumstances beyond their control prevented them from filing returns or remitting tax on time. Examples include illness, natural disaster, accident, etc.

I have rented my home for years without collecting taxes. What options do I have?

Short-term vacation rental operators in Hawaii who have failed to collect GET or TAT in the past may be able to take advantage of a voluntary disclosure agreement (VDA). A VDA offers an opportunity for to proactively disclose prior period tax liabilities in accordance with a binding agreement with the Hawaii Department of Taxation.

VDAs are offered to encourage cooperation with state tax laws and may result in some or all monetary penalty and interest payments being waived.

For more information, please contact Avalara MyLodgeTax at (877) 589-0207.

What is the difference between income tax and GET or TAT?

Income taxes are reported and paid annually to federal and many state governments on "taxable" income, which is income after allowed expense deductions. GET and TAT are levied by the Hawaii Department of Taxation and require short-term vacation rental operators to collect tax on the gross amount collected from your guests renting your vacation property — there are no deductions.

Does the 14-day rule apply to Hawaii transient accommodations tax?

No, the 14-day rule applies to income tax and does not affect a vacation rental homeowner's responsibility to collect and file GET and TAT returns in Hawaii.

 

Legal Details


Disclaimer: This guide to Hawaii lodging tax compliance should be considered an asset to help you understand and prioritize your vacation rental tax challenges. It should not be considered a substitute for professional tax advice.