Honolulu levies new countywide accommodations tax

Short-term rental hosts in the city and county of Honolulu will need to pay a new transient accommodations tax (TAT) under a law signed by Honolulu Mayor Rick Blangiardi. The 3% tax, which short-term rental operators can pass on to guests, goes into effect immediately.

A state law that went into effect this summer allows counties to create their own TAT surcharge of up to 3% in addition to the state’s 10.25% TAT. Previously, counties received a portion of the state tax. Under the new system, counties no longer receive state TAT money, but can raise their own funds by creating the county tax.

The new Honolulu ordinance requires transient accommodations operators to be registered with the state’s Department of Taxation. They must also file regular TAT returns and pay the taxes to Honolulu tax authorities. Transient accommodations are defined as stays of less than 180 consecutive days.

The county tax is expected to generate from $75 to $85 million for Oahu every year. Previously, the county’s share of the state TAT was capped at $45 million annually. For the first two years that the new tax is collected, one-third of the revenues will help fund the Honolulu Authority for Rapid Transportation (HART). After that, half of the TAT revenues will go toward the rail project. The remainder will go into the city’s general fund, with some earmarked for mitigating “the impacts of visitors on public facilities and natural resources."

In addition to the county tax, 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, file regular tax returns, and collect and pay the taxes.

Other Hawaii counties have already implemented their own TAT surcharges. Maui County’s TAT went into effect November 1, while Kauai County’s new tax went into effect October 1. Hawaii County’s TAT will go into effect January 1, 2022.

In Kauai, Maui, and Hawaii counties, vacation rental operators are considered registered for the county tax when they register with the state for lodging taxes. County taxpayers must only file returns with the state, not the county, but must make separate tax payments to the state and the county. The state tax office doesn’t have the authority to collect the taxes for counties, the state Attorney General’s office said earlier this year.

While vacation 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 all tax obligations, including registering, filing lodging tax returns, and paying taxes on both the state and county levels.

MyLodgeTax can help Hawaii short-term rental hosts automate registration and filing for state and county TAT and state GET. For more on lodging taxes in the state, see our Hawaii 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 Channey Tang-Ho on Unsplash