Hawaii vacation rental tax guide
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Airbnb and Vrbo have changed the way vacationers travel. More and more guests are choosing to rent private homes rather than book hotels. With a bounty of popular destinations including Honolulu, Maui, and Oahu, the Aloha State offers prospective short-term rental hosts the opportunity to bring in extra income and meet new people.
But new income opportunities bring new tax implications. Like hotel and B&B stays, short-term rentals in Hawaii are subject to tax. Tax authorities require short-term vacation rental hosts to collect applicable short-term rental taxes from their guests and remit them to the proper authorities.
Failure to comply with state and local tax laws can result in fines and interest penalties. These may not catch up with vacation rental operators in the short term, but the sharing economy is under increasing scrutiny, so it’s important to address compliance before tax authorities address it for you.
Avalara MyLodgeTax has put together this guide to help you comply with Hawaii short-term rental tax laws. For more information on the tax rates and jurisdictions that apply to your rental’s specific location, use our lodging tax lookup tool.
No short-term vacation rental tax guide is a substitute for professional tax advice. Consider this an asset to help you understand and prioritize your vacation rental questions and concerns. Questions pertaining to specific situations or out-of-the-ordinary conditions are best solved with a certified tax professional familiar with Hawaii tax laws.
Short-term rental tax basics
When you start operating a short-term rental, while you might not have experience with lodging taxes, you’re probably familiar with income tax. It’s important to understand the difference between the two.
Income taxes are reported and paid annually to the federal government and many state governments on “taxable” income, which is income after allowed expense deductions. You pay this tax directly to the government.
In Hawaii, lodging taxes operate a bit differently than in most other states. Lodging taxes are levied on gross rental proceeds from transient accommodations. Short-term rental business owners may pass the taxes on to their guests.
What’s the definition of “short-term rental” in Hawaii?
For tax purposes, short-term rentals in Hawaii are defined as stays of less than 180 consecutive days.
Who’s required to collect and file taxes on short-term rentals in Hawaii?
If you collect payment from short-term guests renting out a room, apartment, house, or other dwelling, you’re likely responsible for collecting, filing, and remitting short-term rental taxes to Hawaii tax authorities.
Location is key to compliance
The location of your rental is a crucial piece of information for short-term rental tax compliance. Your address determines which tax jurisdictions you’re required to report to, which taxes you need to collect, and the appropriate tax rates.
Use our lodging tax lookup tool to get a rate report specific to your Hawaii rental’s address. The report includes the estimated total tax rate to collect from guests, number of required registrations, number and frequency of returns per year, and minimum number of rented days to qualify as a taxable stay.
It should be noted that tax rates and the rules governing them change frequently. Please consider your tax rate report to be informative rather than authoritative.
Registering with state tax authorities
Before you can begin collecting taxes on your short-term rental in Hawaii, you’re legally required to register with the Hawaii Department of Taxation for both general excise tax (GET) and transient accommodations tax (TAT) licenses. You can register online and once you’ve registered, you’ll receive Hawaii Tax ID numbers for GET and TAT licenses, as well as instructions on filing your lodging taxes.
Do I need to form an LLC?
In Hawaii, you don’t need to form an LLC to register with tax authorities.
Local short-term rental regulations
Short-term rental operators in Hawaii should be aware of the local regulations that apply to them, including rules covering:
- Permits, licenses, and registration
- Neighborhood notification
- Building and housing standards
Homeowner associations (HOAs), condominium communities, co-ops, and landlords may also have specific rules regarding vacation rentals. It’s your responsibility to be aware of short-term rental policies that apply to your property.
Collecting short-term rental tax
Once you’ve registered with tax authorities, you’re ready to start collecting rental tax, which you’ll add to your guest’s bill when they pay for their stay.
Which taxes apply to Hawaii short-term rentals?
In Hawaii, short-term rental businesses are subject to state general excise tax (GET) and transient accommodations tax (TAT) and county TAT. These may be passed on to guests.
|Tax name||File and remit to|
|State general excise tax (GET)||Hawaii Department of Taxation|
|State transient accommodations tax (TAT)||Hawaii Department of Taxation|
|County general excise tax (GET) surcharge||Hawaii Department of Taxation|
|County transient accommodations tax (TAT)||File return with Hawaii Department of Taxation, remit payment to county|
Before you can begin collecting short-term rental taxes, you need to know the correct rate to charge. Rates can and do change frequently, so it’s critical to make sure you have the latest rate to avoid over- or undercharging your guests and running into compliance issues.
Our lodging tax lookup tool can give you a rate report specific to your Hawaii address. The report includes the estimated total tax rate to collect from guests, required registrations, frequency of returns per year, and minimum number of rented days to qualify as a taxable stay.
What charges are taxable?
Hawaii imposes GET on business activity in the state. The tax is applied to the gross income received by the person engaging in the business activity. TAT is applied to gross rental proceeds, (charges for accommodations), including mandatory resort fees and maintenance fees, such as cleaning fees and management fees. Gross rental proceeds do not include charges for guest amenities such as meals, telephone calls, and laundry services.
TAT that is visibly passed on to the guest is exempt from the GET. However, GET that is visibly passed on is included in taxable income subject to the GET.
What happens when my short-term rental marketplace (such as Airbnb or Vrbo) collects taxes for me?
Before collecting any short-term rental taxes from your guests, you need to be aware of whether any taxes have already been collected for you. While short-term rental 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. If taxes aren’t being collected for you, you’re responsible for collecting and remitting them to state tax authorities.
Marketplaces regularly add new jurisdictions to the list of locations where they collect lodging taxes on hosts’ behalf. Check with your marketplace for the latest information on which taxes it collects in your jurisdiction.
Are guests ever exempt from taxes?
There are situations in which you aren’t required to collect lodging taxes in Hawaii. For example, a guest who rents for a long term rather than a short term is exempt from short-term lodging taxes.
In Hawaii, guests who meet the following qualifications may be exempt from TAT:
- Military personnel with temporary lodging allowances
- Low-income renters who receive a rental subsidy from the government and whose rental period is less than 60 days
- Full-time students enrolled in postsecondary educational institutions or working at summer employment
- Foreign diplomats or consular officials
Filing short-term rental tax returns
After you’ve collected taxes from your guests, it’s time to file your tax returns with the Hawaii Department of Taxation. In Hawaii, you can file paper or online returns. In order to file, you’ll need to enter information on how much you charged for your rentals. You’ll also need to pay the tax amount due.
Take the time to double-check your returns prior to submitting. Simple mistakes such as typos, missing signatures, and incorrect tax information can lead to unwanted delays.
When do I need to file my returns?
You’ll be assigned a filing frequency and due dates when you register with the tax authority. At the state level, due dates are as follows:
|Filing frequency||Due date|
|Monthly||Due the 20th day of the month following the end of the filing period|
|Quarterly||Due the 20th day of the month following the end of the filing period|
|Semiannually||Due the 20th day of the month following the end of the filing period|
|Annually||Due the 20th day of the fourth month following the close of the taxable year|
I didn’t rent my property during this filing period. Am I still required to file a tax return for my short-term rental with the Hawaii Department of Taxation?
Yes. Short-term rental operators registered with the Hawaii Department of Taxation are required to file returns each assigned filing period, regardless of whether there was any short-term rental income or any short-term rental taxes were collected. Such returns are commonly known as “zero dollar returns.” Local tax authorities may have their own requirements.
Are there penalties for filing taxes late?
Whether you choose to offer short-term rentals through a marketplace like Airbnb or Vrbo or directly to guests, you open the door to tax liability at the state and local level. As tax revenue is a major source of local funding, tax authorities are becoming more aggressive in their efforts to identify individuals and businesses not in compliance with tax laws. Failure to register with tax authorities and file short-term rental tax returns in Hawaii on time may result in late fees, interest payments, and in extreme cases, legal action.
I’ve been offering short-term rentals without collecting lodging tax. What options do I have?
If you’re already operating a short-term rental but you’re not collecting short-term rental taxes, 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 tax.
Short-term rental hosts in Hawaii may be able to take advantage of a voluntary disclosure agreement (VDA). A VDA offers an opportunity for hosts 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 penalty and interest payments being waived.
Are there options for outsourcing lodging tax filing?
Yes. Numerous short-term rental hosts in Hawaii file several state and local lodging tax returns every year. For many, filing solutions such as MyLodgeTax can relieve this burden.