Hawaii vacation rental tax guide

With a bounty of popular destinations including Honolulu, Maui, and Kauai, the Aloha State offers ample opportunity for short-term rental (STR) businesses.

But these opportunities come with tax obligations. Like hotel stays, STR stays in Hawaii are subject to lodging taxes. Failure to comply with state and local tax laws can result in fines and penalties. Tax jurisdictions are increasingly making STR tax compliance a priority, so it’s important to address compliance before tax authorities address it for you.

Avalara MyLodgeTax put together this guide to help you comply with Hawaii lodging tax laws at the state level. Local jurisdictions may have their own lodging tax rules. For more information on the tax rates and jurisdictions that apply to your rental’s specific location, use our lodging tax lookup tool.

No lodging 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.

In Hawaii, lodging taxes operate a bit differently than in most other states. Lodging taxes are levied on gross rental proceeds from transient accommodations. STR business owners may pass the taxes on to their guests.

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

Stays of less than 180 consecutive days are subject to lodging taxes in Hawaii

Who’s required to collect and file lodging 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 lodging taxes to Hawaii tax authorities.

Location is key to compliance

The location of your rental is a crucial piece of information for lodging 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.

Local short-term rental regulations

STR operators in Hawaii should be aware of the local regulations that apply to them, including rules covering:

• Legality
• Permits, licenses, and registration
• Zoning
• Advertising
• 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 STR policies that apply to your property.

Before you can begin collecting taxes on your STR 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 to receive Hawaii Tax ID Numbers for GET and TAT licenses.

Once you’ve registered with tax authorities, you’re ready to start collecting lodging taxes, which you’ll add to your guest’s bill when they pay for their stay.

Which lodging taxes apply to Hawaii short-term rentals?

In Hawaii, STR businesses are subject to state and county general excise tax (GET) and transient accommodations tax (TAT). These may be passed on to guests.

Tax rates

Before you can begin collecting lodging taxes, you need to know the correct rate to charge to avoid compliance issues. Our lodging tax lookup tool can give you a rate report specific to your Hawaii address.

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 GET. However, GET that is visibly passed on is included in taxable income subject to GET.

What happens when my short-term rental marketplace (such as Airbnb or Vrbo) collects lodging taxes for me?

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 lodging taxes to state tax authorities.

Are guests ever exempt from lodging 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 employed for summer work
• Foreign diplomats or consular officials

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. You’ll need to enter information on how much you charged for your rentals and 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:

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

Yes. STR operators registered with the Hawaii Department of Taxation are required to file returns each assigned filing period, regardless of whether you had any STR income or collected lodging taxes. Such returns are commonly known as “zero dollar returns.”

Are there penalties for filing taxes late?

Whether you choose to offer STRs 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 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 lodging 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 an STR but not collecting lodging 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.

STR 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. Many STR hosts in Hawaii file several lodging tax returns every year. Filing solutions such as Avalara MyLodgeTax can relieve this burden.