Tourism is the largest industry in Hawaii, and it is paramount we support it.
This is particularly true for a new and growing sector of the industry — the alternative accommodations or vacation rental market.
Demand has grown as independent travelers increasingly seek a different experience beyond the traditional resort setting.
Platforms such as Airbnb, VRBO and Homeaway fill this very important niche in the market and complement the more traditional resorts, hotels and timeshares here in the islands.
These platforms, led by Airbnb, are committed to being responsible partners to the industry and our local community. They’re seeking approval from the Legislature to collect and remit general excise (GET) and transient accommodation taxes (TAT) on behalf of their hosts. In doing so, they would be able to ensure tax compliance and provide an estimated $15 million in annual revenue to the state.
We believe this would be a win-win. The state would receive badly needed funds while the tourism industry and broader community would be assured that platform users are paying their taxes and operating on a level playing field with hotel operators.
Similar tax programs have been adopted in cities across the country and even around the world.
Surprisingly, some have opposed this legislation. Much of their concern, however, seems to be based on an inaccurate understanding of the measure, House Bill 1850.
Here are some things that we believe are important to consider:
>> This measure would not pre-empt or usurp the authority of the counties to establish and enforce rules on vacation rentals.
In fact, counties could and should continue to have robust discussions on and adopt rules governing how and where vacation rentals should occur.
>> This measure would ensure compliance by allowing any platform to register as a tax broker, thereby making it responsible for hosts’ taxes.
Every single transaction would be automatically taxed. There simply would be little room for hosts to hide their income and even if they could, the platform would be responsible for that host’s tax burden.
In addition, the state Department of Taxation could administratively subpoena tax records at any time if there is a hint of impropriety.
This would serve as an additional safeguard to ensure there are no scofflaws.
>> Without this legislation, the Tax Department will have the difficult task of tracking compliance for thousands of individuals.
Under the current law, all that’s required is to simply post a tax ID for each listing. Unfortunately, this doesn’t necessarily ensure that taxes are paid and it certainly doesn’t ease the regulatory burden for the department.
On the other hand, HB1850 would make registered tax brokers liable for all users’ tax liabilities while allowing the department to more easily monitor just the brokers and, if necessary, subpoena all records for individual users if problems were to arise.
This is a great opportunity for Hawaii to take a step forward by passing this bill.
We can support our economy, provide revenue for the state, and still continue the important discussion at the county level of how to create balance in our communities with the emergence of vacation rentals.
We are the Aloha State, renowned for embracing people of all backgrounds and varying views. Let’s live up to that reputation and help our neighbors renting their homes and the visitors who choose to stay there.