Hawaii governor vetoes Airbnb tax collection deal; Senate offers new bill

Hawaii Governor David Ige has rejected the latest proposed deal with the state to allow vacation rental platform Airbnb to collect lodging taxes on behalf of its hosts — but the state Senate has already come up with a new measure to address the issue.

Along with allowing short-term rental platforms, including Airbnb, to collect taxes for hosts, the new bill would require platforms to turn over rental operator information and property details so that counties could verify the legal status of short-term rental operators. Airbnb has said it has concerns about passing on digital information about hosts due to federal laws.

The bill also requires platforms to take down ads for illegal short-term rentals within seven days, gives counties more leeway to crack down on short-term rentals  (particularly in residential neighborhoods), and creates a one-time amnesty program for certain rental operators who have not been paying lodging taxes.

The tax collection issue has been debated in the Legislature for the past three years. Ige vetoed one such bill in 2016, and Airbnb and the state Department of Taxation have been negotiating the new memorandum of agreement since last year. Ige said he vetoed the latest agreement because of provisions similar to those in the 2016 bill.

In Hawaii, short-term rental income is subject to a 10.25 percent transient accommodations tax (TAT), as well as a 4 percent general excise tax (GET). Rental hosts can pass these taxes on to their guests, but must collect the taxes and remit them to the proper tax authorities. Many Hawaii short-term rental operators use MyLodgeTax, a managed tax filing service, to simplify and manage lodging-tax compliance.

If the new Senate bill passes, it would allow short-term rental platforms to automatically collect and file state taxes for their hosts. However, short-term rental operators could still need to collect and remit local taxes not covered by the state law and any lodging taxes not collected by the platform they use for bookings.

In fiscal year 2017, Hawaii collected $508.4 million in lodging taxes, an increase of 13.8 percent. This year, lodging tax collections are expected to increase 7.3 percent to $545.9 million, helped by a 1 percent TAT rate increase that went into effect January 1.