Proponents of vacation rentals claim their businesses help drive our local economy. Opponents of vacation rentals claim these businesses reduce housing opportunities for residents. The vast majority of vacation rentals on Oahu operate illegally because the City and County of Honolulu has not permitted new vacation rentals since 1989. Regulation and enforcement of this activ1ity is the kuleana of the counties, but business taxation is a state function.
During my term as State Representative, I sat in hearings where proponents boldly testified that, except for operating without permits, they are law abiding, good neighbors, pay their taxes and are big economic drivers. That made me wonder what objective statistics are available to support these statements, so I contacted the State Department of Taxation (DoTax).
To my surprise, DoTax responded to my inquiries that they cannot calculate the amount of Transient Accommodation Tax (TAT) and General Excise Tax (GET) paid by vacation rentals; neither can they calculate how much TAT is generated on Oahu, outside of Waikiki. Nobody knows how much, or how little, TAT is paid by vacation rentals operators.
In preparation for this upcoming legislative session, I learned that state law requires any operator that conducts short term rentals (less than 180 days) to register each unit with DoTax. Hotels charge visitors the 9.25% TAT and the 4.5% GET (on Oahu), but do the operators of vacation rentals?
I am submitting legislation that would require DoTax to manage an online database of registered short term rental units that is searchable by property address and owner name. This database will allow the public and government agencies to quickly identify if any property is registered for short term rentals. A second provision would require TAT filers to indicate in which ZIP code the taxes were generated.
It is my hope that this legislation will give better oversight to DoTax so that vacation rentals compete for visitor dollars on a level playing field by collecting and submitting the appropriate taxes. I also hope these new reporting requirements will provide counties with relevant economic statistics and identification of vacation rentals.
I have a rather diverse set of bills this year, ranging from environmental issues to traditional Hawaiian burials to farmers markets on agricultural lands, and more. Of course, I remain fully engaged in solving long range challenges like traffic congestion and deferred maintenance, and working with residents to solve other concerns. Regular updates will be posted at FaceBook/SenatorGilRiviere.