You’re already paying a lot more than the base rate for a car rental in Hawaii. At Honolulu recently, our rental total came to $176.86 for two days. The base rate was $115.56. Taxes and fees added another $61.30, roughly 35% of the total before any add-ons or upgrades.
On the Big Island, a one-week rental recently totaled $613.79. The advertised weekly rate was $475. After customer facility charges, concession recovery, vehicle licensing fees, general excise tax, county tax, and the $7 per day surcharge, the bill jumped by more than $140 in visible fees alone. That didn’t include drop charges built directly into the base rate, which made the math even harder to follow.
That’s before Hawaii considers piling on $100 million more per year by changing the taxes it assesses on fleet vehicles and adding new daily surcharges.
A bill under debate would add a 4% increase for fleet purchases.
This month, Sen. Jarrett Keohokalole walked the Hawaii rental car industry through its own numbers for the public to hear in a Senate meeting we listened in on. He started with the basic contrast: when you buy a car in Hawaii, you pay a 4.5% general excise tax. Rental car companies importing fleet vehicles currently pay just 0.5% under the wholesale rate.
The bill under debate would move those fleet purchases from 0.5% to that same 4.5%. Opponents describe it as a 4 percentage-point increase. That’s also a ninefold jump in the rate applied to fleet purchases.
Keohokalole then quoted earlier remarks from American Car Rental Association treasurer Mike de Lorenzo, who had described rental cars as a “cashflow game” built around buying vehicles, renting them out for 10 to 24 months, and then selling them. He also cited comments from ACRA explaining how car rental companies use depreciation and full expensing to reduce their taxable income, in some cases down to “zero taxes” for a given year.
The senator’s next question was simpler than the tax language. After those cars are rented and depreciated, where are they actually sold? He said he could not find evidence that major operators resell large portions of their fleet in Hawaii. He asked whether the vehicles are instead shipped to the mainland and sold there.
The point is that if that resale happens outside Hawaii, the state never collects the 4.5% retail general excise tax on the sale. The cars come in at 0.5%, earn rental income while they are here, and then leave the state before the full retail rate is ever paid locally.
Industry representatives responded that raising acquisition costs would directly increase car rental prices. The president of the American Car Rental Association acknowledged that higher costs would be passed on to consumers.
Supporters say this type of change is not unique.
Maryland repealed a similar fleet purchase exemption in 2025 and projected roughly $240 million in new tax revenue per year.
Hawaii’s estimate of up to $90 million annually is based on roughly 44,000 rental vehicles statewide. A wholesale rate that once applied to fleet imports would be replaced by the full retail rate.
When other states have made this move, the tax revenue has followed. The only question remaining is how much of that ultimately shows up in the daily price at the Hawaii car rental counter.
Separate Hawaii legislation would also add new daily surcharges.
The change to the fleet purchase would not appear as a new line item on your receipt. It would be embedded in the daily base rate itself, and before taxes and surcharges are added.
Separate Hawaii legislation advancing this session would also add new daily surcharges tied to highway projects. Maui and Kauai would see an additional $3 per day. Oahu and the Big Island would see an additional $5 per day. On Maui, the surcharge is tied specifically to the Lahaina Bypass North project, which is critical for post-wildfire emergency access and evacuation capacity.
Combined with the fleet tax proposal, the total new revenue from rental car visitors across all bills moving through this session approaches $100 million.
The Virginia angle and the Turo backdrop.
The Chamber of Progress, a Virginia-based lobbying group backed by Uber, Lyft, and Turo, submitted written testimony in support of raising the Hawaii car rental fleet purchase tax. They did not appear at the February 6 hearing to answer questions. One senator noted their absence and said he had wanted to question them directly.
While traditional rental car companies purchase fleets at wholesale and lease those vehicles to customers, peer-to-peer platforms rely on individual hosts who buy vehicles at retail and already pay the full general excise tax.
When the American Car Rental Association argued during the hearing that peer-to-peer hosts use the same exemption, Keohokalole corrected that point. Hosts in Hawaii who resell locally pay general excise tax on that sale.
The bill is framed as tax fairness that also reshapes competition in a market that exploded during the pandemic shortage and then swung back once traditional car rental fleets returned.
Where the money would go.
Depending on which version survives, the projected tax increase would flow to different destinations. One proposal directs it to the state general fund. Another channels it toward the Department of Hawaiian Home Lands to address the beneficiary wait list.
A third version would fund $20K bonuses for public school teachers and other educational officers who worked between March 4, 2020, and March 25, 2022. Under that plan, payments would be made from 2027 to 2030, after which the revenue would be returned to the state’s general fund.
Hawaii car rental customers in 2026 and beyond would be helping pay for bonuses tied to work performed during the early pandemic years. Supporters argue that Hawaii still faces recruitment and retention challenges. Critics question whether the rental counter is the right place and funding source for compensation tied to this.
The state Department of Transportation has also raised concerns about directing rental car-related revenue to non-transportation purposes.
Rental cars remain one of the most unavoidable costs on Oahu, Maui, the Big Island, and Kauai. Once visitors land, alternatives are limited if they want flexibility to explore. The Hawaii car rental counter is already one of the most heavily taxed parts of a Hawaii vacation, and the pressure on those costs is not easing any time soon.
At what daily price does renting a car in Hawaii stop making sense for you?
Photo Credit: Beat of Hawaii at a car rental counter in Honolulu.
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Wait. Raise car rental taxes 4% to pay for school teachers bonuses from March 2020-March 2022. That was roughly 4-6 years ago. How crazy does this sound in that what does this have to do with car rentals. IMO this is another example of tourist’s having to pay for all of Hawaii’s residents needs while the state of Hawaii doles out little or nothing. Beach hotels pay for sand to replenish beaches in which who pays hotel rates? Tourists. Again Unbelievable.
My last stay in Hawaii found reasonable car rental rates but only by booking Way in advance. Of course the constant creep of fees will continue to eat away at middle class visitors while the Elite class will be your only customers. My hotel (paid for by my client – thus the reason for the visit) was US$700nt. after resorts fees and taxes based on a major group discount rate! It was a great stay (Wailea Maui) but who can afford the ‘going’ rate? I guess Hawaii doesn’t need my visits.
Hawaii’s rental car tax is yet another money grab. Pretty soon they will be taxing sunshine. Another reason we probably won’t be returning to Hawaii after 20 straight years. Recently returned from Costa Rica. Beautiful weather, nice beaches, lots of wildlife, much shorter flight, and most of all, they want us to come.
I don’t generally parse line items when it comes to vacation. If I did, I would barely go anywhere these days because everything is through the roof!
I get a discounted rental rate with Budget, it costs me between $450 and $600 for a car for 8 days depending on the island and the car and I suppose the time of year. An unusually high percentage of that is all kinds of taxes and fees, but it’s the same in virtually every vacation spot I’ve been to. It’s literally how it is, the workaround is to stay home in most cases.
Once again the controlling Hawaii believe that they can still tax the state into prosperity! It has never worked anywhere else and never will but then the Greed always creates the Need!
Every week there’s a new tax proposal on the table. This one is worse. I mean, there’s no real clear reason why they’re doing the tax other than to add to the general fund, which is already huge because the general excise tax puts hundreds of millions of dollars in that fund already. The government is just gonna waste it. It was really clear that there’s no benefit of tourism industry gets and more specifically the tourist gets from paying the tax. It’s just another money grab
“Every week there’s a new tax proposal on the table.”
Fortunately not all these proposals will pass. But enough will to help cement Hawaii’s position at or near the top of the “most taxed states” lists.
Rental Car Tax—-yet another reason not to go to Hawaii.
The list is growing.
Hawaii was fun (and relatively affordable) while it lasted.
We’ve made at least 30 trips over the last 20 years.
Last November’s was our last.
B’bye, Hawaii.
I used Turo during the pandemic when there were no rentals available. It was less expensive then. None of these options are cheap anymore and it keeps getting worse. Once I’d have never considered paying $100 a day for a compact car.
As a resident who travels interisland for family events and meetings, this absolutely affects us too. It’s not just tourists who are paying these car rental rates and residents get no discounts.
Those of us seniors who have to fly to Oahu for medical appointments or care not available to us on neighbor islands get suckered with the stupid high hotel rates, taxes , fees and high car rental rates, taxes & fees. We don’t have ohana on Oahu to stay with or borrow a car from. “Dr. Green” and his tax happy cohorts need to do right by the people who elected him.
This is all news to me and I had no idea the wholesale rate was 0.5% for fleet vehicles. The whole thing does make you wonder who’s benefiting from the current car rental setup.
This is exactly why we’ve started splitting stays differently. On Oahu we used to rent the whole week. Now we rent for three days and avoid the rest. The prices and fees just feel endless.