Kauai approves new county accommodations tax

The Kauai County Council has passed a 3% county accommodation tax that will apply to short-term rentals as well as other tourism businesses, including hotels, resorts, and travel agencies.

Under the measure, which goes into effect October 1, vacation rental operators must pay the taxes, but they can pass them on to guests. County transient accommodations tax (TAT) taxpayers must only file a return with the state, not the county, but must make separate tax payments to the state and the county.

Businesses that pay state TAT on a monthly basis will need to make their first payment for Kauai County TAT on or before November 20. For quarterly filers, the first payment will be due January 20, 2022, for the fourth quarter.

A new state law that went into effect July 1 allows counties to levy their own TAT surcharge of up to 3% in addition to the state’s current 10.25% TAT. Previously, counties received a portion of the state tax. Under the state law, counties will no longer receive state TAT money, but will be able to raise their own funds once they implement the new county tax. Under the old system, Kauai County received around $15 million per year from the state tax.

Some other counties in the state have recently explained that they may get off to a slower start in administering their county TAT because they’ll have to collect it themselves rather than rely on the state’s infrastructure. The state tax office does not have the authority to collect the taxes for counties, the state Attorney General’s office recently stated.

In Kauai, the administration has been discussing the burden collecting the new tax would place on the county’s Finance Department. However, the department has indicated it can take on the new responsibility.

An agreement on tax collection between the state and counties may still be worked out, and if not, legislators could take action in a special session.

In addition to county TAT, short-term rental income in Hawaii is subject to state TAT and general excise tax (GET). Vacation 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 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. That means hosts are responsible for taking care of tax obligations. MyLodgeTax can help Hawaii short-term rental hosts automate registration and filing for TAT and GET.

For more on lodging taxes in Hawaii, see our state Vacation Rental Tax Guide. If you have tax questions related to vacation rental properties, drop us a line and we’ll get back to you with answers.

Photo by Alex Wolfe on Unsplash