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Hawaii stays out of tax collection on short-term vacation rentals, for now

Harold-L-Lyon-Arboretum-Hawaii
Mother Nature gives her colorful imprimatur to the beauty of Hawaii. (Rainbow over Harold L. Lyon Arboretum, a research and community resource of the University of Hawai’i at Mānoa)

It's vacation season and lots of folks plan to spend their days off in other folks' homes.

I'm not talking bunking on a friend's couch or in a relative's guest room. I'm looking at private residences leased to a series of strangers in cities across the country (and world).

The popularity of private accommodations for vacationers has prompted many state and local jurisdictions to enact regulations and tax collection policies on these short-term rentals.

Hawaii is bucking that trend.

At least at the state level. For the time being.

State rental tax complications: The Aloha State's governor has indicated that he will veto a measure that would require entities like Airbnb and Expedia to register as tax collection agents and collect general excise and transient accommodation taxes from their clients.

Those clients, of course, would add those taxes to their asking prices for their homes' temporary leasing.

It's not that Gov. David Ige is against more tax revenue for America's Paradise.

Short-term rentals in the state, which are those that are leased for less than 180 days, are by state law subject to both Hawaii's 4.5 percent general excise and a transient accommodations tax of 9.25 percent. But as in many locations, not all renters follow the law. 

The state proposal would have set up a system to register, track and collect the due taxes. 

Ige has decided to veto it, though, because the state bill might interfere with a measure recently passed by lawmakers in the 50th state's largest city.

New local rental tax system enacted: The City of Honolulu has created its own transient accommodation enforcement provisions.

Ige said any similar state temporary accommodation strategy should be complementary to more local short-term rental registration and taxation efforts.

Honolulu's action, noted Ige in his intent to veto message, could affect certain logistics in the collection of state accommodation taxes.

He added that "further review is required to ensure there are no adverse unintended consequences" with any state proposal and it's effects on other tax collection efforts.

Illegal rentals still a concern: Another unintended effect is the potential defacto legitimization of illegal rentals.

"While the taxation of illegal transient accommodation uses would not legalize these operations, there is concern that the collection of taxes on illegal transient accommodations could be viewed as legitimizing these operations," Ige noted.

That was the same reason Ige gave three years ago when he vetoed a statewide transient lodgings tax then.

Future state Airbnb taxes possible: Ige, however, left the door open for possible future state taxation of private vacation rentals.

"I think knowing that the [Honolulu] City Council is going to create a registration process for the (transient vacation units) … allows us to craft a proposal that specifically acknowledges that, and allows us to incorporate that into our tax collection efforts," Ige told the Honolulu Star-Advertiser.

Do you stay in private rentals when you vacation? If so, is your choice driven by personal lodging preferences or price? Would added taxes affect your choice?

Or are you like the hubby and me, preferring housekeeping services, concierge assistance and late-night room service meals at traditional hotels?

Clarified to note Hawaii does tax short-term rentals, but has no specific mechanism in place to ensure they are paid.

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Lucas

could be fun to go with yellowstone bus to see more around me.

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