Hawaii governor plans to veto short-term rental tax bill, while Honolulu mayor signs new regulations

Hawaii Governor David Ige has indicated he’ll veto a bill passed by state lawmakers that would require short-term rental platforms such as Airbnb and VRBO to collect taxes on bookings on behalf of their hosts. Senate Bill 1292 would also require vacation rental operators to include tax license numbers in all advertisements. 

Ige put the bill on a list of legislation he’ll likely veto. He must veto the bill by July 9 or it will become law.

In Hawaii, lodging taxes that apply to short-term rentals are administered by the state, while counties set rules about short-term rental operations. Under SB 1292, state tax officials would not release information about short-term rentals to counties to assist in enforcement. Ige said a stronger law could be created that would allow state tax collection to work in concert with county regulation.

Airbnb is urging Ige to sign the short-term rental tax bill.

“SB 1292 preserves the right of county governments to establish and enforce short-term rental regulations while delivering an estimated $46 million annually for vital state services. State leaders passed this law to require vacation rental platforms to collect taxes so Hawaii can receive this much-needed revenue,” the company wrote.

Expedia Group, parent company of VRBO, said it supports tax collection, but is opposed to providing identifiable information about its hosts to the state.

“We hope a veto will provide us all an opportunity to come together and work with the Governor and state legislators to develop holistic policies that can be enforced while upholding the law to protect our customers,” the company said.

Short-term rental income in Hawaii is subject to transient accommodations tax (TAT) as well as general excise tax (GET). Short-term rental operators can pass these taxes on to guests, but hosts must register with the state, collect and pay the taxes, and file regular tax returns. 

While short-term rental platforms collect taxes for their listings in many states, they do not in Hawaii. This means hosts must carry out tax collection themselves. MyLodgeTax automates lodging taxes to simplify compliance for Hawaii vacation rental operators.

For more on lodging taxes in Hawaii, see our state Vacation Rental Tax Guide.

Meanwhile, Honolulu Mayor Kirk Caldwell has signed Bill 89, which was recently passed by the Honolulu City Council. The ordinance prohibits new permits for whole-home short-term rentals outside of resort areas. It does allow for around 1,700 permits for short-term rental units located in homes where the owner lives, starting in October of 2020.

The new law does not apply to rentals in resort areas, including Waikiki, Ko Olina, and Turtle Bay.

The measure requires short-term rental hosts to obtain permits and include permit numbers in any advertisement. Short-term rental platforms must take down listings that don’t include permit numbers, and they must also report host data, including names, addresses, tax identification numbers, length of stays, and amount paid. 

The new regulations go into effect August 1, and the city plans to start “digital stings” to find illegal short-term rentals shortly thereafter. Listings that don’t include the required permit number will come under scrutiny. Penalties for breaking the law are steep, running up to $10,000 per day.

Caldwell vetoed Bill 85, an even stricter measure passed at the same time as Bill 89, saying the two bills conflicted. Bill 85 would have banned all short-term vacation rentals in residential areas.