Maui halts new construction of vacation rentals, hotels

Maui has banned new construction of transient accommodations, including short-term rental properties, timeshares, and hotels, for up to two years. The Maui County Council voted to approve the moratorium on January 7, overriding Maui Mayor Michael Victorino’s veto of the measure in December.

The moratorium on new construction permits for visitor units will be in place for two years, unless the county approves new legislation to address tourism management before then. In the meantime, a county council tourism investigative group has been studying ways to address issues of overtourism, affordable housing, and economic diversification for the island and compiling recommendations for action. The investigative group’s final report is due later this month.

The challenge of balancing the economic benefits of tourism with the needs of permanent residents has been a hot topic of debate.

One response to this on Maui has been a crackdown on illegal vacation rentals. The state as a whole has also increased taxation on visitor units. A state law that went into effect this past summer allows counties to levy their own transient accommodation tax (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 imposing a county tax.

Maui County’s TAT of 3% went into effect November 1, 2021. Hawaii, Honolulu, and Kauai counties have also passed their own TAT surcharges. Vacation rental operators must pay the tax based on their gross rental proceeds, but can pass these taxes on to guests.

In addition to the county tax, short-term rental income in Hawaii is subject to state TAT and general excise tax (GET), which can also be passed on to guests. Hosts must register with the state tax authority, file regular tax returns, and collect and pay the taxes.

Maui 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 stated 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 Maui hosts are responsible for taking care of all tax obligations, including registering, filing lodging tax returns, and paying taxes to both the state and the county.

MyLodgeTax can help Maui 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.