CHAIR’S 3 MINUTES
Published in the Maui News, November 19, 2017
By: Mike White
Details of an agreement that Gov. David Ige’s administration negotiated with Airbnb, an online short-term rental site, were released to the public last week.
The news media first reported a deal weeks ago, but the details were slow to be shared. It has now become apparent why talks may have been so secretive.
Under the proposal, appropriate state taxes would be collected by Airbnb and properly remitted to the state Department of Taxation. The caveat, however, is the state would not be able to disclose rental property owners’ names or rental locations to the counties for enforcement purposes.
Airbnb is citing that if this agreement had been in place earlier, it would have allowed the state to collect $70 million in tax revenue from Airbnb transient vacation rentals from the beginning of 2015 through the end of this year, of which $30 million would have been collected in 2017 alone.
What was not said is that the revenue would have been collected from illegal operators from the perspective of the counties and the state would be facilitating illegal activity.
The additional revenue is great news for state coffers, but it comes at the expense of local residential communities.
Over the past five years, the County of Maui has been working diligently to balance the owners’ right to rent their property short term with the desire of other residents to maintain the residential character of their neighborhoods.
To achieve this, a limit on the number of short-term rentals in each community plan area was established, along with a streamlined application process to encourage owners to apply for a permit with the Department of Planning.
Maui County also implemented a series of laws to allow for better short-term rental enforcement. A recent provision now requires any licensed short-term rental in Maui County to display its valid permit number whenever doing any type of advertising. This provision has assisted enforcement staff to better identify illegal rentals.
Despite these efforts, all along, entities such as Airbnb continued to enable short-term rentals to operate without proper licenses and without paying proper taxes.
The county has also been unable to effectively implement the limit on short-term rentals, as online sites do not require a short-term rental permit to operate on their platforms.
County enforcement officers can identify which short-term rentals are not licensed by viewing online listings, but cannot obtain information on a property’s exact location or the identity of owners, as online brokers will not disclose this information.
As a result, illegal operators have no barriers to entry in renting their short-term rental.
Maintaining affordable long-term rentals is a high priority for all four counties. Without appropriate regulation, short-term rentals can and are already likely impacting the long-term housing supply.
At this juncture, without some type of clear cooperation between the counties and the state, the governor must not sign this agreement with a company that has facilitated illegal activity.
The right place and time to consider a far-reaching policy shift is during the upcoming legislative session. Public input and transparency are sorely needed, not secret meetings.
Further, the collection of taxes and information on short-term rentals must also apply to the many other online short-term rental brokers such as VRBO and Homeaway, not just Airbnb.
I understand the desire of the governor to collect additional taxes. At face value, this agreement seems like an easy fix, but like anything else, the “devil is in the details.” If this agreement is signed, users of Airbnb will have a false sense of following the law, while the counties are shut out of properly regulating short-term rentals.
At the end of the day, the short-term rental situation must be improved. This deal would only make it worse.
I manage several licensed vacation rentals on Maui and pay GE and TA taxes for the owners. For the short term rental license renewal we need a tax clearance, all GE and TA taxes have to be paid.
How do we proof that a different entity forwarded the taxes for a specific account?
Who is responsible if the taxes are not paid?
Our home owners will receive a 1099 reflecting the total rent income of the year. This is the same amount claimed on GE and TA yearly tax reconciliation.
How can we reconcile the account if the manager/owner pays only part of the TA/GE taxes?
How will be the AirBnB payment linked to the accounts?
AirBnB is also sending 1099 to hosts. The State tax office is getting a copy of the 1099, they should be able to find out if somebody is not paying their taxes.
Legal places do pay their taxes.
As mentioned in the article, there are other booking platforms. Also visitors book directly with owners or property managers. It seems to be a bookkeeping nightmare.
How did AirBnB calculate the tax revenue not paid to the tax office?
Do they know who is paying and who is not?
What is AirBnB’s motivation?