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Transient Accommodations Tax: What Should Hawaii Vacation Rental Owners Know about Act 326?

  |  Legislative Updates: State of Hawaii

HB2078 HD2 SD2 CD1: RELATING TO TAXATION

Requires any operator of a transient accommodation to designate a local contact residing on the same island as the transient accommodation. Requires that all advertisements and solicitations on websites for transient accommodations display registration identification numbers. Effective July 1, 2012. Repealed on December 31, 2015. (HB2078 CD1)

Source: capitol.hawaii.gov

Read Governor’s Message 1443 and Act 326

Act 326: Transient Accommodations Tax and Web Advertising

Transient AccommodationsVacation rental owners in Hawaii should be aware that House Bill 2078, now known as Act 326, became law without the Governor’s signature earlier this month. This bill, which was designed to encourage greater compliance with the transient accommodations tax, includes provisions that directly impact how vacation rental owners advertise their properties.

Briefly, the law requires operators of transient accommodations (rentals for less than 180 days) to designate a local contact residing on the same island as the rental and to post the name of this contact person on any rental agreement as wells as in the unit. The name of the contact person must also be reported to the Homeowner’s Association. Further, Act 326 requires that all internet advertising for the property contain the registration identification number for the operator. Failure to abide by this law subjects the operator to a fine of up to $25,000.

The tax department is required to turn over this information to county for enforcement of real property tax laws. While the primary purpose of this law is to assist in the fair enforcement of the transient accommodation tax, it is anticipated that associations will additionally use the law to enforce prohibitions against transient accommodations within their subdivisions or condominiums. Owners and future buyers who anticipate renting out units for less than 180 days should carefully review this new legislation along with other relevant sections of the law for more detail and to ensure compliance.

Additional Details and Facts to Know about Act 326

Current law states that transient accommodations are generally defined as rentals of less than 180 days (some exemptions apply).

Transient accommodations that are for more than a day-to-day basis are also covered by Hawaii’s Landlord Tenant Code, which already requires an on-island agent (not required to be licensed) to act on behalf of off-island owners.

Under the new law, all transient accommodations operators must:

  • Designate a local contact residing on the same island as rental
  • Report the local contact information (name, address, contact information), as well as Tax ID, and website addresses where property is advertised to all relevant community and condo associations and any changes to this information must be reported within 60 days
  • Include their local contact’s name, phone and operator’s tax ID in all rental agreements
  • Prominently post local contact’s name and phone number in the rental unit
  • Post their Tax ID number or a link to the ID on all web or online advertising (does not apply to print advertising)

Reporting Responsibilities and Penalties for Failure to Comply

  • Associations that maintain any records regarding transient accommodations must report this information by December 31 of each year and all changes in information within sixty days of the change
  • Information collected by the state tax department will be reported back to the county for their enforcement of property tax laws
  • Failure by an operator or an association to report information and relevant changes is punishable up to $25,000 for an individual and $100,000 for a corporation.

Governor’s Message 1443

Act 326 took effect July 1, 2012 and sunsets Dec 31, 2015.  Governor Abercrombie’s stated objection was “to make it explicitly clear that the law is not intended to subject condominium associations to penalties for not providing information that it does not maintain or collect from its owners.” For further detail, read Governors Message Number 1443.

Please note: This material is for informational purposes. It is not intended as a substitute for legal advice. Please consult a Hawaii attorney specializing in real estate and tax law for questions related to Act 326.

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