Hawaii Senate passes vacation rental bill requiring Airbnb to collect taxes

The Hawaii Senate has passed a bill that would require hosting platforms such as Airbnb and HomeAway to collect lodging taxes from guests of short-term rentals. The bill originally failed to pass last week, but was revived and garnered enough votes on the latest round.

The bill now goes to Governor David Ige for his signature and would become effective upon approval. The legislation is estimated to generate about $46 million in tax revenues for the state in its first year.

The bill requires hosting platforms to register with state taxation authorities, collect and pay transient accommodation tax (TAT) and general excise tax (GET) on behalf of their hosts, and file regular tax returns with the state.

The legislation also requires vacation rental operators to register with the state Department of Taxation and to include state registration numbers in all advertisements. It changes the penalty for violation of state short-term rental law from a criminal misdemeanor to a citation process, with fines starting at $500 per day for a first offense.

While hosting platforms must report host information such as names and addresses to the state tax authorities under the bill, the state will not share that information with counties, which are responsible for regulating short-term rentals. Some lawmakers have maintained that this provision will contribute to shielding illegal short-term rentals from local enforcement.

Counties have been busy working on new rules for short-term rentals. On the Big Island, the Hawaii County Council recently approved new short-term rental regulations that restrict them to hotel, resort, and commercial zones. On Oahu, the City Council will soon vote on two bills that would make major changes to Honolulu’s land use law regarding vacation rentals. And on Maui, voters approved a ballot initiative last year that dramatically increases penalties for short-term rentals operating illegally.

Ige has not indicated whether he will sign the state bill. In 2016, he vetoed a bill that would have authorized short-term rental platforms to collect lodging taxes, stating that such a law would encourage illegal short-term rentals. He expressed the same concerns in 2018 when he rejected a proposed deal between the state and Airbnb that would allow the short-term rental platform to collect lodging taxes.

In Hawaii, short-term rental income is subject to TAT as well as GET. Rental hosts can pass these taxes on to guests. Previously, hosting platforms have not been allowed to collect taxes for their hosts. If the law passes, they will do so, but individual operators will still be required to register with the state and are considered ultimately responsible for tax collection. MyLodgeTax can help vacation rental hosts simplify and automate short-term rental tax registration and reporting.