Gov. Ige vetoes vacation rental tax collection bill

Governor worries bill would legitimize illegal short-term rentals


The Associated Press

HONOLULU — Gov. David Ige on Tuesday said he would veto a bill that would require websites like Airbnb to collect and pay taxes on behalf of short-term vacation rental hosts, saying he wanted the state to coordinate with counties like Honolulu that have new regulations.

Ige said he’s concerned the bill, if enacted, would legitimize illegal vacation rental operations. This is an issue across the state where property owners have been renting homes in residential areas to tourists on a short-term basis without permits. The popularity of the practice has surged with the emergence of websites like Airbnb and HomeAway.com.

On Oahu, home to Honolulu and the state’s most populated island, only about 800 vacation rental and bed-and-breakfast operators have permits to rent to tenants for less than 30 days but there are an estimated 8,000 to 10,000 vacation rentals.

Honolulu recently enacted a law that aims to crack down on the illegal activity. The law allows for a small number of additional permits for vacation rentals but a property owner must live on site to obtain one. The law requires vacation rental operators to present evidence that they’ve paid their taxes to get a permit. It also mandates that operators post their permit number on any advertisement or listing.

The Legislature passed the tax collection bill, SB1292, before Honolulu enacted its law, so these issues weren’t considered by lawmakers, Ige said.

“I do believe it would be in our best interest to craft a measure to collect taxes owed from the platforms in a way that would complement the action taken by the city council here on Oahu,” Ige told reporters at a news conference on his vetoes.

Advocates of the legislation touted the revenue the measure would raise. But critics said it will hamper county efforts to tackle illegal rentals and exacerbate the state’s housing shortage.

Senate Ways and Means Committee Chairman Sen. Donovan Dela Cruz said in April the bill would raise $46 million a year if it became law. He told his fellow lawmakers they would have to cut funding for programs if the state didn’t get the revenue the bill would generate.