Vacation-rental tax bill advances at Legislature

A state proposal is back to allow vacation-rental hosting platforms like Airbnb, VRBO and Home­Away to collect tens of millions of dollars in state taxes generated by transient accommodations while making it illegal for them to do business with any rental operators who are breaking county laws.

An amended version of Senate Bill 1292 on Wednesday passed out of the Senate committees on Energy, Economic Development, and Tourism and Commerce, Consumer Protection, and Health. The measure is similar to a bill last year that aimed to strike a balance between collecting vacation rental taxes and deterring illegal operations. This is the fourth time since 2016 that state lawmakers have sought a legislative remedy for transient vacation rentals.

Gov. David Ige vetoed House Bill 1850 in 2016 saying that it hid illegal rentals. State lawmakers couldn’t agree on a measure to advance in 2017 so Ige and staff unsuccessfully sought to broker a private tax agreement with Airbnb. Last year, Senate Bill 2999 made it out of the Senate, but didn’t advance in the House.

Mufi Hannemann, president and CEO of the Hawaii Lodging &Tourism Association, told legislators, “We’ve been before you several times. We hope the fourth time is the charm.”

“We are paying taxes. We want everyone else to pay taxes that is in the lodging business. But it’s not just about hotels. It’s really communities that are being impacted more and more. We’re seeing it on Oahu and throughout the neighbor islands,” he said.

However, David Louie, an attorney representing Airbnb, suggested the measure conflicted with federal laws, including the Communications Decency Act and the Stored Communications Act. He also raised privacy concerns.

“If you are going to do a bill like this, you need to be mindful of doing it in a way that doesn’t violate laws,” Louie said.

Louie made similar arguments when he defeated the Hawaii Department of Taxation’s attempt to subpoena rental records from online vacation rental booking site Airbnb.

The state had wanted Airbnb’s Hawaii booking invoices, receipts, statements and confirmations from 2008 to now. It also wanted personal host information, including names, user IDs, taxpayer IDs, Social Security numbers, addresses and booking activity and charges.

State Sen. Kurt Fevella (R-Ewa Beach, Ocean Pointe) told Louie that privacy concerns were only an issue for illegal operators and that the legal technicalities he raised seemed like “mumbo-jumbo.”

“Who are they to be different than anyone else that wants to be in the visitor industry?” Fevella said.

Hannemann also reiterated the importance of collecting transient vacation rental taxes later Wednesday when the Senate committee on Energy, Economic Development, and Tourism heard hotel tax measures. Lawmakers advanced amended versions of Senate Bill 380 and Senate Bill 714, which would apply the state transient accommodation tax to mandatory resort fees.

But not before Hannemann told them that the state could have collected $135 million in taxes from transient vacation rentals last year if there had been a means to collect them. He urged lawmakers to go after illegal vacation rentals before passing measures that would increase the cost of a hotel stay.