Update for Hawaii Transient Vacation Rental Rules

Hawaii’s Tax Act 326 – Transient Accommodations; Operators; Relevant Information. Hawaii Department of Taxation ruling 2013-02 supersedes 2012-13.

• Ruling 2013-02
• HB457 (relating to Act 326)

 
This act affects anyone who owns property in Hawaii that is used as a short-term rental and they do not live on the island that the property is on. Taxpayers now have until January 1, 2014 to comply, after that, there may be a penalty assessed.

What is Hawaii’s Tax Act 326?

Tax Act 326 requires any operator of a transient accommodation to furnish “relevant information” concerning the operator. Modifies the duties of non-government entities regarding “relevant information” pertaining to operators of transient accommodations. Effective 7/1/2112. (HB457 HD1).

To bring some of you up to date on Tax Act 326 and other additional Hawaii requirements, there are many owners of vacation rental property that live and manage their own units from a location other than Hawaii. Hawaii requires anyone not living on the island of their rental unit to have an on-island contact person for the property in case of emergency. This does not apply to owners who use a property management company to manage their unit – the property management company would be your on-island agent.

Anyone who does rent their property out on a short term basis is required to:

1. Obtain a business license (BB-1 application)
2. Collect and pass on the (GET) General Excise Tax and (TAT) Transient Accommodations Tax to the State of Hawaii
3. File a Hawaii state income tax return (may be as a resident or non-resident)

 
You will have to submit the GET and TAT taxes to the state either monthly, quarterly, or semi-annually depending on the amount of your total taxes due for the year.

• Short-Term Rentals (less than 180 days) – You will need to collect TAT (9.25%) in addition to the General Excise Taxes.
• Long-Term Rentals (180 days or more) – You only need to collect the GET (4%) (Oahu 4.5%).

Updated Requirements for Transient Vacation Rental Operators

Act 326 requires that operators of transient rentals:

1. Designate a local contact residing on the same island as the transient accommodation. The local contact can be any individual residing on the island, or any entity with its principal place of business on the island. The contact need not be a licensed real estate broker, or be accredited in any other manner.

2. Provide the local contact (agent/person) information to any entity with covenants, bylaws or administrative provisions operational with respect to the property on which the transient accommodation exists (e.g. an association of apartment owners). Such information must be updated within 60 days of any change. For example, if your property is a condo that is managed by a management company, you must advise them how you are using your condo.

3. Include the local contact’s name and phone number in any contract or written rental agreement.

4. Provide on a website or by online link and display in all advertisements and solicitations on websites the taxpayer’s registration identification number (GET and TAT #).

Please Note: To clarify #2, it means that condo owners must provide the on-island contact information to their AOAO (owners association); it is then the association’s responsibility to provide that information to the State of Hawaii. The owners do not provide this information directly to the state and there is no means to do so at this time.

Hawaii Transient Vacation Rental Rules Recap

To clarify or restate the information above, the following are the rules for Hawaii transient vacation rentals:

1. If you are a non-resident of the island that your rental is on, you must provide a contact person (who is on the same island) to the homeowners association and on the rental contract.

2. Everyone is required to have a GET and a TAT license (TAT for rentals less than 180 days), collect and pass those taxes on to the state.

3. Everyone is required to file a state income tax return whether you owe taxes or not (the tax computation is only on Hawaii source income for non residents). The taxpayer or spouse is doing business in Hawaii during the taxable year regardless of whether the taxpayer or spouse derives any taxable income from that business.

“Doing business” includes all activities engaged in or caused to be engaged in with the object of gain or economic benefit, direct or indirect, except personal services performed as an employee under the direction and control of an employer.

4. You must show your Tax ID# (GE T and TAT) in any advertising.

5. File a 1099-Misc if you pay any vender, such as a contractor, attorney, or any other for any services of $600 or more.

Hawaii Transient Vacation Rental Instructions & Forms

• BB-1 – Basic Business Application
• G-45 – Instructions for General Excise Taxes
• G-45 Form
• G-49 – Annual Reconciliation
• TA Instructions – Transient Accommodations Instructions
• TA-1 Form
• TA-2 Annual Reconciliation