House and Senate leaders will convene an informal working group of lawmakers in the weeks ahead to try to finally develop a viable system for collecting hotel room taxes from Airbnb Inc. and other companies that market transient vacation units across the islands.

Gov. David Ige last year vetoed a bill that would have authorized Airbnb Inc. to collect taxes on behalf of the state from vacation rental owners that market their units on the Airbnb platform. Lawmakers have been trying ever since to fashion a law that is both acceptable to the governor and will allow the state to collect taxes on the vacation rentals.

Testimony during the special session of the Legislature last summer underscored the concerns of the hotel industry, which contends the current arrangement is unfair, said House Speaker Scott Saiki.

Traditional hotels must pay the hotel room tax, while the hotel industry complains that many owners of individual vacation rentals in condos or single-family homes avoid paying the tax.

Ed Case, senior vice president and chief legal officer for Outrigger Enterprises Group, said he believes the state stands to gain tens of millions of dollars if it changes the law to collect vacation rental taxes that are owed but not collected today.

“The hotel industry has no problem with fair, legal competition, and believes that alternative choices in accommodations are good for visitors and good for the industry,” Case said. “But we also believe that it is key that that competition is legal … pays taxes, is safe for the guests, is fair to the employees and plays by the same rules as we do, and that’s not the case by and large with the shadow industry that Airbnb runs.”

Ige’s main objection to the 2016 bill was that it would have allowed Airbnb, Inc. to collect taxes from the rentals it markets and remit them to the state without disclosing the identity of the unit owners. That would provide a “shield” for property owners who run illegal vacation rentals in communities where they are not allowed under city and county codes, he said.

If the counties can determine which homes are operating as vacation rentals, they can use that information to enforce limits on where vacation rentals can operate, and also to ensure that the owners of vacation rentals are paying the proper amount of property taxes.

“My interpretation is that an Airbnb tax serves as an enforcement mechanism for the counties — not just for the state but also for the counties — because the counties are not always able to identify property owners who are renting vacation units,” Saiki said. “That’s an issue that needs to be discussed.”

Ige also said he vetoed House Bill 1850 in 2016 because he worried it would encourage property owners to shift from long-term rentals to transient accommodation rentals at a time when the state has an acute shortage of affordable long-term rental housing.

Missing out on money

Airbnb Inc. says it has been trying for three years to reach an agreement with lawmakers and the governor on how the state can collect taxes on Airbnb units, and says the state is missing out on big money.

“We want to pay taxes,” said Matt Middlebrook, Airbnb Hawaii public policy director, in a written statement. “The ability to collect and remit taxes in Hawaii would generate more than $30 million per year just from Airbnb. We now have agreements in place in more than 350 jurisdictions around the globe to remit taxes and hope that we’ll be able to come to a similar agreement with Hawaii in the near term.”

Lawmakers said the working group will include the tourism committee chairmen for the House and Senate as well as Senate Ways and Means Chairman Donovan Dela Cruz and House Finance Chairwoman Sylvia Luke. No meetings have been scheduled yet, and it is unclear if the group will hold any sessions that will be open to the public.

Senate President Ron Kouchi said lawmakers are “just hoping that we can find common ground,” adding, “We’ve tried for a couple of years now and have not been successful, and certainly there are a lot of uncollected tax revenues at play, and the needs of the state are great.”

Kouchi added, “Maybe a conversation now when you don’t have all of the noise of (the legislative) session would be helpful for the chairs to find some areas of common agreement, and maybe we’ll be more successful in the next session.”