A legislative bill supported by Airbnb would allow the online vacation rental giant and similar companies to collect and remit general excise and transient accommodation taxes on behalf of hosts and pay it to the state.

SB 2693, introduced by Sen. Rosalyn Baker, allows transient accommodations brokers like Airbnb to register as tax collection agents.

“This bill … will enable Airbnb to pay TAT and GET (taxes) on behalf of hosts. It’s a proactive step by Airbnb to pay the taxes and ensure there’s an easy system that the state can rely on to ensure compliance,” said Shane Peters, a Hawaii-based lobbyist for Airbnb.

The company said it has contributed $42.6 million to cities around the world by establishing programs to collect and remit hotel, occupancy and tourist taxes on behalf of its hosts and guests.

Some of the cities and other locations where Airbnb said it collects and remits taxes include Amsterdam; Chamonix-Mont-Blanc and Paris, France; Washington, D.C.; Florida; Chicago; Phoenix; Jersey City, N.J.; Malibu, Oakland, Palo Alto, San Diego, San Jose, Santa Clara, San Francisco and Santa Monica, Calif.; Multnomah County and Portland, Ore.; North Carolina; Philadelphia; Rhode Island; and Washington state.

The company estimates that if the 50 largest U.S. cities had partnered with it in 2015, these destinations could have collected $200 million in hotel, tourist and occupancy taxes. Airbnb also estimates that if it remained at its current level, over a 10-year-period, hosts in the 50 largest U.S. cities would pay $2 billion in taxes.

Mallory C. Fujitani, spokeswoman for the state Department of Taxation, said the department supports SB 2693 and is following up on other vacation rental compliance issues.

“From a tax administration perspective, as proposed in SB 2693, collection of taxes at the source is much easier for the Department of Taxation,” Fujitani said.

While Airbnb is taking the initiative on tax remittance legislation, ironically the online vacation rental site still has not complied with Act 326, which took effect Jan. 1, requiring owners and managers of Hawaii vacation rentals to post their transient accommodations tax identification numbers on their online advertisements or face stiff fines. Earlier this week Hawaii Airbnb ads were still running without the required tax numbers.

While the department is aware that a number of sites are in violation of Act 326, Fujitani said it won’t begin enforcement until the Governor’s Office approves a temporary version of administrative rules.

“The fine amounts are fairly stiff, so we want to make sure that people are aware of the requirements,” Fujitani said. “Our objective isn’t to collect citations, but rather to get taxpayers into compliance.”

Enforcement is key

Adam Leamy, who owns a permitted legal vacation rental in Kihei, Maui, says the department needs to get tougher since new laws won’t make up for shoddy enforcement.

“I used to have two vacation rentals in Maui. I sold one of them last year because the amount of illegal operators made the business model financially risky for me,” Leamy said. “Everything they pass makes it harder for me to operate but makes no difference to the illegal operators. A state that will not get tough on illegal operators is a state that doesn’t care about the people who live there or visit there. Act 326 went into effect on Jan. 1. How can Airbnb still be posting ads without tax identification?”

Sen. Laura Thielen (D, Kailua-Waimanalo-Hawaii Kai) said she introduced Act 326’s identification requirement so the state could collect its fair share of taxes and quit issuing TAT license numbers for unpermitted vacation rental operators.

“It’s not our responsibility to enforce county code, but the state should not be undermining enforcement efforts by issuing TAT numbers to illegal operators,” Thielen said. “It’s important that they follow up on Act 326 and start issuing fines.”

The troubles that SB 2693 and Act 326 aim to fix are playing out in Hawaii and communities across the nation.

A study released last month by the American Hotel & Lodging Association and researchers from Penn State University’s School of Hospitality Management showed that many Airbnb operators are renting space year-round, effectively becoming hotel operators. Researchers found that in the nation’s top 12 metropolitan areas, nearly 30 percent, or $378 million, of Airbnb revenue came from owners renting their units full time. These full-time operators, with rentals available 360 days a year, averaged more than $140,000 in revenue from September 2014 to September 2015. According to the study, multi-unit operators drove nearly 40 percent of the revenue in the 12 markets, which equates to more than half a billion dollars a year.

“Unfortunately, this report shows a troubling trend as a growing number of residential properties are being rented out on a full-time, commercial basis in what amounts to an illegal hotel, and using Airbnb as a platform for dodging taxes, skirting the law and flouting health and safety standards,” said AH&LA President and Chief Executive Officer Katherine Lugar.

Airbnb contends that the AH&LA study is flawed because it relied on Airdna, a website that scrapes public data and cannot accurately calculate availability.

“Their calculation for a listing’s availability is misleading — it overlooks how most hosts use their calendars. Many hosts, particularly those who rent their home occasionally, do not keep their calendar up to date,” said Peters, the Airbnb lobbyist. “An open calendar date does not mean it’s available to book.”

Condo conflicts

Barry Wallace, executive vice president for Hospitality Services at Outrigger Enterprises, and other tourism industry leaders say that Hawaii’s market mirrors study findings from New York, Chicago, Los Angeles, Philadelphia, Miami, Houston, Dallas, Phoenix, San Antonio, San Diego, San Francisco and Washington, D.C.

“Sites like Airbnb don’t want you to know that they have operators that are making $200,000-plus a year,” Wallace said.

“Condominium managers are finding the owners are using sites such as Airbnb to directly connect with visitors and avoid paying condominium management fees. The condominium hotels that we manage, we’ve encountered individual owners who have 20 units that they have chosen not to put into our hotel rental pools,” he said. “This trend has definitely limited the number of jobs that we can offer to associates at our condominium hotels.”

Wallace notes that Hawaii hotels aren’t seeing increases that correspond with the higher monthly and year-to-date arrivals because more visitors are choosing to stay in privately owned short-term rentals.

Mufi Hannemann, president of the Hawaii Lodging & Tourism Association, said leveling the playing field so that online short-term vacation rentals are paying their fair share of taxes and abiding by local regulations is HLTA’s top legislative priority.

“If Hawaii had been included (in the AH&LA study), I think those numbers would be even higher,” Hannemann said. “We’re in our fourth straight year of visitor arrivals increases, but we are seeing spending leveling off. The hotels are indicating that a lot of folks are coming to Hawaii and staying at Airbnb and at listings they found on other online sites. If these owners aren’t paying their fair share of hotel transient accommodations taxes, we could be losing millions.”