Hawaii vacation rentals are back in the news again as House Bill 820 is making its way through the state legislature. The bill, introduced on January 25 and going through committees, calls for a combined tax rate of 33% on Hawaii vacation rentals. Hawaii already has the dubious honor of the highest accommodation tax in the country.
The bill’s authors are working with the Hawaii Department of Taxation to “Ensure that the language in this measure would tax transient vacation units at a rate of twenty-five percent and not 35.25 percent (as originally proposed).” But wait, those aren’t the only taxes on vacation rentals.
Currently the counties each have their own charge of 3%, which brings the total accommodation tax to 13.25%. In addition, there is a 4.17% GST on Maui and 4.712% GST elsewhere in Hawaii. The combined tax on hotels and vacation rentals is now approximately 18%. Based on what Quinlan said about the bill’s intention, it would seemingly increase the total tax on vacation rentals to 33%.
This comes while Honolulu is still in the midst of legal wrangling after a judge blocked for now the city’s desire to convert minimum 30-day rentals to a minimum of 90-days.
House Bill 820, in its entirety, is attached below. One of its authors, Representative Sean Quinlan, wrote:
“Transient vacation rentals continue to be a problem for the State as public discourse and perception have grown more critical of the increasing number of visitors and the impacts of over-tourism. Your Committee believes that the State needs to take a strong stance on holding the tourism industry accountable for the impacts on the State’s resources and residents, such as the lack of housing for residents, as many units that may have housed residents are instead used as transient vacation rentals. This measure will ensure that transient vacation rentals that host visitors for less than thirty days pay their share to address the impacts of the tourism industry on the State.”
This Bill violates the United States Constitution as well as the Hawaii State Constitution. It disenfranchises a certain category of taxpayer. — Hawaii Tax Foundation.
Second, HB820 was initially set to implement the new tax rate effective July 1, 2023. Testimony from the Hawaii Director of Taxation, however, indicated that it would not be feasible to do so and that even an effective date of January 1, 2024, might not be achievable. In the interim, the date was set to June 30, 3000, until this implementation issue can be resolved.
[Hawaii intends to] limit and regulate short-term vacation rentals in neighborhoods and other sensitive areas in our communities. We are generally supportive of state and county efforts to advance that priority.” — Hawaii Tourism Authority.
Misguided and likely not legal.
This pro-hotel and anti-vacation rental bill is clearly discriminatory against legal Hawaii vacation rentals. Many vacation rentals are second homes or investment properties managed by large companies.
The Hawaii Tax Foundation, which is a private, nonprofit educational organization dedicated to informing the public… about the finances of our state and local governments in Hawaii, also testified. They are opposed to the bill on several counts.
1. First, this extra 25% charge is being assessed against only vacation rentals and not hotels.
2. Hawaii’s accommodation tax is, at this time, evenly levied across hotels, timeshares, condos, hotels, and vacation rentals.
3. Additionally, HB820 “only assesses the 25% additional tax on ‘short term vacation rentals’ where the operator is not present (unhosted) and specifically omits all other providers of transient accommodations including a short term vacation rental with a hosted operator (Bed and Breakfast).
4. The position of the Hawaii Tax Foundation is that “This Bill violates the United States Constitution as well as the Hawaii State Constitution. It disenfranchises a certain category of taxpayer from those that are similarly situated. It is discriminatory in that it does not treat all providers of transient accommodations the same.”
Hawaii Tourism Authority testimony.
John DeFries, the state’s Hawaii Tourism Authority head, testified regarding HB820 that “Our community-driven Destination Management Action Plans across Hawaiʻi clearly articulate a desire to manage visitor accommodations – specifically, taking steps to limit and regulate short-term vacation rentals in neighborhoods and other sensitive areas in our communities. We are generally supportive of state and county efforts to advance that priority.”
BOH: What DeFries has issues with, as far as we know, are only vacation rentals in private neighborhoods. This bill seeks to tax even those in approved visitor areas, which is confusing.
Testimony for and against the bill has started.
One person testified that it “Sure looks like Rep. Holt is looking for a career in/by the Hotel industry. Throwing local small businesses under the bus. This bill is dead on arrival. To even suggest such prejudicial and punitive taxation will be challenged in court for sure.”
Another said, “I am vehemently opposed HB 820 becoming law. This motion will only hurt homeowners who supplement their income with renting out rooms in their house by making rental costs so prohibitively expensive for potential renters. We are already charging guests 17.962% and I hear from visitors that the cost of staying in my home with such high tax has made traveling to Hawai’i almost out of reach. I think that the revenue could be raised by taxing hotels at the same rate as STVR’s rather than targeting individual homeowners.”
(BOH: In reading this Bill, it does not apply to bed and breakfast homes).
“You are taxing us to death… The intention of this bill is to further encumber and burden an underserved and marginalized community who provide housing to support our community and our people. We are property owners who provide housing equally to all. By raising the tax and taking away our homeowners exemptions, and not putting a cap on our property taxes, like everyone else has, you have already made it impossible for us to contribute to our community and our families’ survival. We are the locals, the mom-and-pop people who are providing housing to the visitors who support your shops, your schools, our cultural programs, our non-profits, our artists and carriers of culture and your local businesses. With this tax, you are chasing the people of Hawaii away from our land and generations of those before us who hold our culture dear.”
Are you supportive of legal Hawaii vacation rentals?
We are and think it’s a good option for visitors who want more of a home environment during their stay with a private kitchen and offer additional amenities to guests.
HB820_HD1_
I started visiting kapalua Maui 20 years ago. Today the short-term rental tax is in excess of the total amount I used to pay? Where is all that tax money going?
As an owner of 2 and a half months of Timeshare in Hawaii I pay a lot of property tax to the state yearly. I hope this bill will cause people to realize timeshare owners have deeds and also pay our fair share of Hawaii property tax. What’s the point of property ownership if we’re considered transient and taxed again. I’m afraid the HI government is going to strangle tourism. Mahalo@
I find this funny. Why stop at 25%. Make it 50% so Hawaii gets big spending tourists instead of cheap ones. Isn’t that what they want?
This is one of the best comments I’ve read on this site. It is an illusion that vacation rentals will turn into “affordable housing”. But, politicians gotta politic, and being economically literate is not a qualification.
Let’s talk unintended consequences of HB820. If these vacation rental homes are no longer short term rentals:
1. All the jobs like handyman, cleaners, laundry services, etc are now seriously slowed down or out of jobs for locals.
2. The counties will lose tons in property tax which is one of the few taxes that actually stay in the county. My home is taxed at over 3 times what a homestead rate is. For me to be a licensed vacation rental I must pay the tax rate of a vacation rental and not a second home or homestead. This is an instant reduction of county funds of 1/3. And if you think the new 25% tax will make up for it, think again. Those visitors won’t be coming.
Higher unemployment and lower tax revenues. Way to go.
This is one of the best comments I’ve read on this site. It is an illusion that vacation rentals will turn into “affordable housing”. But, politicians gotta politic, and being economically literate is not a qualification.
If homes are not short term rentals don’t think wear and tear will suddenly disappear. I doubt very much that your item #1 would happen. As for #2, gee whiz your rental home isn’t taxed at the homestead rate given to the poor and elderly, that’s such a bummer.
This bill must have come from the hotel industry as they are the only group who will benefit from it. Short term vacation rentals are already restricted to the hotel zones and have no impact on the price of residential housing. Legally STVRs have to be treated the same way hotels are treated. Hotels are non-hosted, typically owned by out of state companies and put exactly the same demands on infrastructure. Average residents would never be able to long-term rent a typical $700K one bedroom condo – where the cost to own it is more than $6,000 per month. And the owner would never be able to use it with a long-term renter.
If the goal is to manage tourism in Hawaii, why not go directly to the source and require tourists to apply for visas to come here? Limit the number of visas issued and charge for them to support the program.
Don’t punish the vacation rental property owners.
Hawaii is a unique state in that our tourist load can be managed. We’re islands. Tourists can’t drive in.
Because it would be blatantly unconstitutionl!
Susan,
Hawaii is not (at this time) a separate country. States cannot require someone to have a visa to enter the state from another state. Believe me, folks in Eastern Idaho would Love to limit visitors crossing the state line from Utah (there is an unflattering nickname for them). But, not going to happen.
Maybe Hawaii should be a separate country again. Hawexit.
Susan W the Visa idea won’t work, it’s simply Unconstitutional to require US Citizens to have one to visit another State. Possibly putting restrictions on certain International Tourism might be allowed But I highly doubt that too. My recommendation is for the Hotels to pull rooms off of the market, raising the rate for availability, and causing a shift away from times when Tourism is High, deferring them to book during the low times. It would take all of the Hotels to work together but they seem to be on other things so why not this.
I believe that by my previous comments I have taken the side of STVO’S and will continue to support them. Any taxation must effect Every Property, not just one type of rental or vacation property as BOH has pointed out. I am taken back to County/City Council directly Lying to the public over the benefits to them if STR’S were done away with, why the Lies? What is the Quid Pro Quo between the Politicians and the Resort/Timeshare/Hotel Industry? It should be a RICO Concern! Where’s the DOJ? It’s time to Stop blaming Tourists and Start Blaming the Politicians and Industry that Is Responsible. Think about That! Put the Blame Where It Belongs!
We have vacationed in Hawaii every year for the last 25 plus years for at least a week each year and love our time in the aloha state but honestly it cost us $10,000 this year and if the state of Hawaii continues to increase the tax on visitors we will be forced to go elsewhere for vacation and spend our hard earned money there. Please respond and we will be happy to answer any questions.
Agree, my extended family chose San Diego last March for our 2 week get together. We felt so welcome! Great weather, beaches we felt we could go on and enjoy, palm trees, great food etc. Much shorter and cost effective flight! We are planning San Diego this year for a return trip thinking we will never return to Hawaii. Why go where you are not wanted is our view. Hawaii got what it wanted from our 4 families.
Honestly, go someplace else. The only thing cheap about going to Hawaii is airfare. Hotels are really expensive. Car rentals are outrageous. Food costs a lot as well. You can spend a little more on a flight, for example, Bali, but everything else will be much cheaper. It’s beautiful there. Just one example.
Yes, Hawaii does not have a corner on beauty by a long shot, but we seem to think we do, judging by the attitudes.
You just verbalized what is already happening. Cabo for 2 months or Hawaii for a week? I want to know where all the new tax money is going???