Ige won’t sign proposed Airbnb tax agreement

Gov. David Ige has rejected a proposed agreement with Airbnb that would have authorized the company to collect vacation rental taxes on behalf of the state, a decision that effectively punts the issue back to the state Legislature.

Ige said he hopes to work out a new proposal for collecting taxes on transient vacation rentals with lawmakers in time for him to introduce an administration bill dealing with the issue by Monday, but House Finance Chairwoman Sylvia Luke said lawmakers are already crafting their own proposals to address the issue.

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 last year the state Department of Taxation began negotiating directly with Airbnb to try to resolve the issue.

The outcome of those negotiations was a memorandum of agreement that was submitted to Ige, but Ige said it contained provisions similar to the 2016 bill that he vetoed.

Critics of the 2016 bill said it would have allowed the continued spread of hundreds of illegal vacation rentals that are reducing the supply of housing for local residents and changing the character of residential neighborhoods.

Ige said he rejected both the 2016 bill and the proposed memorandum of agreement because they would have exacerbated the problem of illegal vacation rentals. “My position on short-term vacation rentals hasn’t changed,” Ige said last week.

“I’m not only focused on collecting taxes owed, although that’s a very, very important part,” Ige said. “I think we need to have transparency. We need to ensure that the properties being utilized for short-term vacation rentals are appropriately zoned and regulated.”

Ige also wants an agreement that prohibits Airbnb from promoting Hawaii properties that are not appropriately zoned, something the company has agreed to do in other counties and states, he said.

Matt Middlebrook, public policy manager for Airbnb in Hawaii, said it is “frustrating” that the Ige administration expressed interest in negotiations with Airbnb late in the 2017 session of the Legislature but that Ige refused to sign off on the final proposal.

“Unfortunately, as a result of the governor’s flip-flop, the state will lose out on $30 million in tax revenue that would have been generated by Airbnb hosts,” Middlebrook said in a written statement. “Despite the governor’s decision, we are committed to being a good partner with Hawaii and will continue our discussions with key decision makers at the state and county level to enact common sense short-term rental regulations and tax policies.”

Airbnb said an agreement such as the one it had proposed 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. About $30 million of that would have been collected in 2017 alone, the company said.

Airbnb says it has voluntary collection​ ​agreements in more than 300 other jurisdictions that are similar to the one it proposed for Hawaii.

Those agreements ​​allow​ ​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.​ Rental owners cannot opt out of the agreements if they use the Airbnb system for bookings, according to the company.

House Speaker Scott Saiki said lawmakers’ understanding is that they will need to craft a bill that would be acceptable to Ige if they hope to resolve the issue this year.

“I think it’s going to be important that there be an assurance from the counties that … there will be enforcement,” said Saiki, (D, Downtown-Kakaako-McCully).