Hawaii Vacation Rental Tax Compliance

By November 6, 2019About Hawaii

Hawaii has taken a further step to make sure that they are collecting all of their tax dollars on vacation rentals in the State of Hawaii.  Starting last year the State began to work with websites such as Airbnb to see if their records align with what owners were paying taxes on.  That found that just over the last two years and only with reservations through Airbnb that over $40 million in tax dollars were not paid correctly.  This has been a problem in Hawaii for years with owners renting their own vacation rentals and the State is finally starting to crack down on it.  There are several reasons why this is so.

1- Some owners do not pay any GE and TA taxes at all.  Weather they are just not aware that there are two types of taxes to be collected or weather they just don’t want to pay them and just include that as part of their revenue is unknown, but there are many owners in Hawaii renting their properties out without even having a tax license in the State of Hawaii.

2- Another problem is that the Hawaii tax rates for vacation rentals have increased over 5 times in the last decade.  Off island owners have not been keeping up with the tax changes in the State of Hawaii.  If you search sites such as VRBO and Airbnb you will find a significant amount of owner managed units do not collect the correct amount of taxes.

3- They are finding that some owners are paying taxes on what they choose to pay taxes on.  They are finding that taxes are not paid on all reservations that have been taken.  This is an obvious negligent attempt to avoid paying taxes.

The State of Hawaii is continuing to work with Airbnb and VRBO.  As many people are aware this year Hawaii required vacation rentals to be registered.  While the process of what they require is lengthy it is obvious what they are doing with the registration and the third party sites such as Airbnb.  The State of Hawaii is not gaining access to financial information on bookings from the third party sites, the third party sites are now requiring address information on the property, and much more.  The address information makes it easy for Hawaii to see if there are tax ids that match up with that property as well a short term vacation rental registration number.

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