In Hawaii, short-term vacation rental taxes are administered by the state, while counties govern the rental operations. But that longstanding division of responsibility could change if Gov. David Ige signs off on House Bill 862, which allows counties to raise their own transient accommodations tax (TAT) up to 3 percentage points for as long as 10 years.

If the bill becomes law, Hawaii’s mayors may find it necessary to raise county TAT levies. Per the measure, the state would stop sending counties an annual share of TAT revenues it collects. Maui Mayor Michael Victorino already has said he wants to raise the levy by 30% if allowed.

TAT funding is used to help offset tourism’s wear and tear on everything from parks and road maintenance to police and fire protection. Without it, counties would likely be hard-pressed to keep pace with the financial impacts of tourism, which are increasing as pandemic-related restrictions loosen and lift.

Meanwhile, the state reports an encouraging increase in revenue since it stepped up enforcement against vacation rental owners who owe back taxes. If those efforts can help counties make their own tax collections more productive, and get better control of the illegal market, perhaps it could reduce the amount of TAT increases the counties need — a good thing, as the tax affects B&Bs and hotel rooms alike.

Oahu, which now gets the largest cut of TAT revenues — 44% of an annual draw limited to $103 million — gets the most visitors. Moving forward, tourism’s impact here is poised to expand as Honolulu Hale prepares to issue permits to about 1,700 homeowners for operation of bed-and-breakfast units.

Oahu’s current inventory of permitted hosted B&Bs and unhosted transient vacation units is estimated at about 800. But two years ago, when the City Council backed Bill 89 (Ordinance 19-18) as a means to toughening up weak rules and enforcement, the estimated count of long-proliferating illegal units was between 8,000 and 10,000.

Under the new city law, which strikes a firm but fair oversight balance, online platform companies are required to file booking reports that make it easier for the city to ensure operators hold permits and are properly taxed. Reports provided by Airbnb and VRBO, an Expedia subsidiary, must include: tax map key, unit and TAT numbers for each property listed online.

At the state level, prior to a 2019 First Circuit Court ruling, enforcement of laws for collection of TAT and general excise tax on short-term rental income was hobbled by a lack of data on the rentals as platforms resisted providing individualized operator information. The ruling established a much-needed data- sharing agreement through which the state is making encouraging strides in collecting millions of dollars in owed back taxes.

The need to maintain effective controls over the vacation rental industry is underscored by occupancy rates, which show that the rentals are topping Hawaii hotels. According to the latest state report, in March, the average unit occupancy at a vacation rental was more than 62%, compared with 43% for hotels.

Both the city and the state are rightly imposing hefty fines for violations of their respective regulations, which is prodding gains in compliance. The industry’s outlaw element could be further reined in through state-county data sharing. While the state’s tax information is classified as confidential, there’s an effort underway to look for viable workarounds, according to Isaac Choy, the state Department of Taxation’s director.

That’s a sensible move. As Choy pointed out, “We all live in this state together, so if we can all work together, that would be … a good thing for us.”