Vacation-rental tax: Conflicts exists outside Hawaii

Honolulu is not alone with its struggle to accommodate unconventional accommodations in its tourism sector.

Cities such as New Orleans and Chicago have moved ahead to collect taxes from these businesses and managed to subsequently create a regulatory system for them, said Cynthia Wang, public policy manager for AirBnB.

The unresolved conflicts over legalizing vacation rentals at the county level, however, was one reason Gov. David Ige cited in his veto of House Bill 1850, which would have allowed AirBnB and other online rental sites to collect taxes on behalf of the state.

Honolulu has not legalized any new vacation rentals since 1989 and has not settled on any way to do so. Even a new law to require businesses to file their business tax number with any online listing, Act 204, has not been fully implemented because of a lawsuit AirBnB filed over a similar program in San Francisco.

Like the Hawaii law, the San Francisco ordinance required brokers to get the government’s identifying number of the business as part of the information it collects from the operator of the rental. In this case, it’s the number the city issues when the short-term rental operation registers legally with the city.

In November, U.S. District Court Judge James Donato denied the company’s requested injunction against the San Francisco ordinance. Among other findings, he rejected the claim that the measure violated a federal communications statute by making the broker responsible for the content of the posting.

The judge found that, because the final version of the ordinance required the registration number to be collected only at the point of the rental booking rather than in the ad listing, there was no violation of the communications statute.

David Louie, former Hawaii attorney general, supported HB 1850 on behalf of an internet business group last session. Despite the San Francisco ruling, he said Hawaii’s requirement is linked to the advertisement itself and maintained it still violates the federal statute.

The San Francisco parties are now in court-ordered mediation to resolve remaining issues. Kevin Guy, director of San Francisco’s Office of Short Term Rentals, could not comment on the dispute. But he did say having online brokers check for registration numbers is more practical than the city chasing them down individually.

“Getting all those horses back in the barn, it can be done,” he said, “but it would take a lot more time.”