As many property owners may be aware,
there has been some new rules regarding renting your vacation rental. Many owners who own vacation rental condos have heard many myths and some factual information over the past couple of years on the new Transient Accommodations rules, as it was being developed.
Transient Accommodations Rules Myth
The most common myth I have heard is that if you live off island and own a vacation rental condo, you will be required to hire a property management company on the island that the condo is on. This is far from the truth. Many owners who rent their condos on their own through websites like VRBO went into panic mode. But as I said, that is a myth. The rules are really not as intimidating as it may sound.
What is the Reason for New Transient Accommodation Rules?
The primary reason for this addition to the rules was because of the concern by the State of Hawaii to collect the Hotel taxes (TAT-transient accommodations taxes) when you do rent it out on your own. The state also wanted to make sure that there was someone on island to be an emergency contact for your guests.
When Do You Need to Collect These TAT?
Anytime you rent out accommodations for less than 6 months is considered short term and you need
to collect not only the TAT, but also the GET (General Excise Tax). If you rent out a dwelling for 6 months or longer then you only need to collect the GET.
These taxes I am talking about are taxes that you collect from the renters, then you pass it on to the State of Hawaii. So there is no expense to the owner, just a little extra paperwork when you pass it on. There is a one time license fee of $25.00
New Transient Accommodations Rules for Hawaii
These new rules are effective 7-1-2012. The following information was taken from the State of Hawaii Department of Taxation Announcement No. 2012-13. The Act requires operators of transient accommodations to do the following:
1.) Designate a local contact residing on the same island as the property.
2.) Provide the local contacts information to any entity with covenants, bylaws, or administrator (AOAO-Association of Apartment Owners) and (HOA-Home Owners Associations).
3.) Include the local contact name and phone number in any contract or written rental agreement.
4.) Provide on a website or by online link and display in all advertisements and solicitations on websites the registration identification number issued under HRS 237D-4, also known as the Transient accommodations tax license number
This act also requires the associations of condos to collect from the owners and to provide to the department of taxation the relevant information related to operators leasing transient accommodations on its property.
The relevant information includes the operators name, address, contact information, registration identification number (TAT license number), and website address if advertising or soliciting the transient accommodations on the Internet. This is to be provided once a year or within 60 days of each change.
So in a nutshell, if you are going to rent on your own:
- Get your TAT and GET license
- Hire an on island agent
- Document your TAT and GET license number in any advertising
- Provide the on island agent information to your guests in any contracts
- Provide your on island agent information to your association if your property belongs to one
The Department will provide a transition period to allow taxpayers to meet the requirements of this Act. No penalties will be imposed on taxpayers who fail to provide to the Department before April 1, 2013 relevant information related to operators leasing transient accommodations on their property.