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The proposed agreement that Gov. David Ige’s administration has been negotiating with Airbnb to collect taxes on vacation rentals would not allow the state to disclose rental property owners’ names or rental locations to the city for enforcement purposes, according to an Airbnb representative.
Matt Middlebrook, head of policy for Hawaii for Airbnb Inc., said the proposed agreement would allow state tax officials to audit Airbnb transactions in Hawaii, but Hawaii law does not allow the state to share any taxpayer information with the city.
That means the data collected by the state Department of Taxation under the proposed new administrative agreement could not be mined for information to assist the city in a crackdown on the many illegal vacation rentals operating on Oahu.
Ed Case, senior vice president and chief legal officer for Outrigger Enterprises Group, said that arrangement would be “in no way acceptable” to the hotel industry in Hawaii.
Case said Airbnb “is trying to ignore the question of whether the units that it lists are legal or not,” adding, “It’s pretending that that’s somebody else’s business, and it’s everybody’s business, including Airbnb.”
Airbnb executives Monday issued a public statement and circulated a memo to lawmakers describing the major features of the “voluntary collection agreements” it has entered into with other jurisdictions, which presumably would be similar to the proposed agreement with the Ige administration.
The company says such an agreement would have allowed the state to collect $70 million in tax revenue from Airbnb transient vacation rentals from the beginning of 2015 through the end of this year. Of that amount, $30 million would have been collected in 2017 alone, the company said.
Middlebrook said in a written statement that such an agreement “protects the right of local jurisdictions to enforce and enact short-term rental regulations.”
“Airbnb has reached agreements with over 300 jurisdictions around the U.S., covering 55 percent of our bookings from coast to coast,” the company said. “These agreements have generated more than $500 million in hotel and tourist taxes in the U.S.”
A voluntary collection agreement allows Airbnb to collect taxes for booking transactions completed on its platform and deliver the money to the state in the aggregate on a single return. Owners of rentals cannot opt out of the agreements if they use the Airbnb system for bookings, according to the company.
Lawmakers have considered bills in each of the past three years to allow Airbnb to collect taxes from vacation rentals on behalf of the state. Ige vetoed a bill to accomplish that in 2016, and then told lawmakers and Airbnb representatives during the session this year he would prefer to negotiate directly with Airbnb, Middlebrook said.
Lawmakers then shelved the bills they had been considering, and Airbnb then began negotiations in May with the state Department of Taxation to try to reach an agreement, Middlebrook said. Earlier this month administration officials publicly acknowledged those negotiations.
Ige has not yet announced whether he will sign the agreement, but his chief of staff, Mike McCartney, noted Monday that the governor has said publicly that “people should be paying taxes now if they’re doing this.”
It is unclear how a voluntary collection agreement with Airbnb would square with Ige’s past public statements on the issue.
At the start of the 2015 session of the state Legislature, Ige told reporters he wanted a solution that both collects taxes from operations such as Airbnb and supports enforcement of city and county zoning and permitting.
“We need to ensure that we can collect the taxes that are already owed, but I am concerned if we are facilitating illegal rental activity in our community, and so I’m committed to finding a way that we can collect the taxes and ensure that the properties are appropriately zoned and permitted for that use, whatever that use is,” Ige said at the time.
The following year Ige vetoed House Bill 1850, which was strongly supported by Airbnb, its lobbyists and the state Tax Department. That measure also would have allowed short-term rental brokers such as Airbnb to act as tax collection agents for the state, but opponents argued it would undermine efforts to crack down on Hawaii’s pervasive illegal vacation rentals.
Ige acknowledged the state would have enjoyed a tax revenue windfall if he had signed the bill, but said the measure would have encouraged the illegal vacation rental market “at a time when affordable rental housing is in such short supply in our communities.”
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