New County Transient Accommodations Taxes
On December 14th, the City and County of Honolulu became the last of the four counties to implement a county transient accommodations tax ("TAT"). Since 1986, the State of Hawaii has allocated a portion of its TAT revenues to the counties. The State TAT is levied at a rate of 10.25% on all gross rental, gross rental proceeds, and fair market rental value derived from furnishing transient accommodations (collectively, "taxable value"). In the First Special Session of 2021, the Hawaii State Legislature enacted Act 1, 1st Special Session 2021 (House Bill 862, H.D. 2, S.D. 2, C.D. 1) ("Act 1"), which terminated the TAT allocation to the counties on July 1, 2021. Act 1 also enabled the counties to, by ordinance, adopt their own transient accommodations taxes at a maximum rate of 3%.
Accordingly, all four counties have adopted ordinances establishing transient accommodations taxes at a rate of 3% of all taxable value. Every operator, plan manager, and every transient accommodations broker, travel agency, and tour packager who arranges transient accommodations and is subject to the State TAT, is or will also be required to pay the county TAT to the county in which the property is located. In the administration of a county TAT, each county's applicable director of finance has all the rights and powers of the State of Hawaii's Director of Taxation, which powers are set forth in Chapter 237D of the Hawaii Revised Statutes ("Chapter 237D").
The following ordinances implemented each county's TAT:
- County of Kaua'i: Bill 2829, Draft 1 was enacted as Ordinance 1099 (the ordinance can be found on the Kaua'i County Code "CodeAlert" page). The TAT is levied as of October 1, 2021.
- County of Maui: Bill No. 101, Draft 1 was enacted as Ordinance No. 5273. The TAT is levied as of November 1, 2021.
- County of Hawai'i: Bill 81, Draft 2 was enacted as Ordinance 21-89. The TAT will be levied beginning on January 1, 2022.
- City and County of Honolulu: Bill 40, CD2, FD1 was enacted as Ordinance 21-33. The TAT is levied as of December 14, 2021.
Passing on of County Transient Accommodations Taxes in Contracts
County transient accommodations taxes are levied on the taxable value of all written contracts that require the passing on of a TAT imposed under Chapter 237D.
- The taxable value of written contracts entered into before the adoption of the relevant ordinance, which do not require the passing on of increased rates of taxes, if received beginning in the taxable year in which the applicable county TAT becomes effective, is not subject to the county TAT.
- The taxable value of all contracts entered into on or after the adoption of the applicable ordinance is subject to the county TAT, regardless of whether the contract allows for the passing on of any tax or any tax increase.
Owners and/or operators of properties used for transient accommodations purposes should familiarize themselves with the transient accommodations tax procedures of the county the property is located in and anticipate an increase in the expense of furnishing their transient accommodations.