Barefoot Technologies Blog- Vacation Rental Industry News

New Bill Aims to Increase Tax Collection on Hawaii Vacation Rentals

Posted by Adam Zippin on Feb 1, 2012 9:55:00 AM

               In Hawaii, a bill is currently under legislation that will allow the state to collect an additional $35 million in tax revenue.  Currently, if a Hawaiian property is owned by a non-resident and additionally, rented by an out-of-state company the taxes due from the rental are difficult to track down.  With states looking for additional revenue, this has been low hanging fruit and a loop hole in many states lodging tax models.  Barefoot has written a blog about several cases in Colorado where VRBO homes have been rented without paying the proper taxes, seriously limiting the money collected.  For example, Breckenridge Colorado has estimated that it has lost over $1 Million in taxes and fees based over the past few years because of this loop hole.

                For years out of state owners have rented out their properties under the radar of state lodging tax laws, but with the introduction of large online travel agencies and vacation rentals becoming more main stream these transactions are now out in the open.   The taxes structured around all lodging   are designed to help with the wear and tear on the environment and infrastructure in the area as  well as to pay for tourism marketing programs.  The question  is how does a state manage this efficiently.


Hawaiian Countryside

                This new law, if passed in Honolulu, would allow the government to collect up to $35 million dollars in taxes.  To do this, non-resident owners must work with licensed real estate brokers and salespeople on the island.  This will ultimately help the island maintain its beautiful landscape and continue to draw in the tourist economy that helps the entire islands economy.

                Even more important is the timing of this legislation, as the Wall Street Journal has reported that Hawaii is back up to its 2007 vacation levels including an average length of stay of 8 days. This travel increase comes despite air travel reductions, departures of cruise ships, and a drop off in Japanese tourism.  Fueled by new attractions like the Pearl Harbor Visitors Center, Hawaii has remade itself into a must travel destination. Many major tourism players agree, Disney opened its first Hawaiian property in 2011, Aulani as Did Donald Trump.   Many Americans now see Hawaii as our nation’s most exotic destination, which in part has been fashioned around a marketing campaign paid for by those lodging tax dollars.  It is only fair that all that benefit, should pay their fair share. 


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