Regulated Industries Complaints Office
State of Hawaii
In Hawaii, it’s your choice whether you manage your vacation rental yourself or hire a property manager. There are important requirements in vacation rental management, and the State of Hawaii Department of Consumer and Corporate Affairs has provided information to assist property owners who rent or lease property in Hawaii. The following Question and Answer information (Q&A) is drawn from this helpful Department of Consumer and Corporate Affairs resource and expanded upon to provide further clarification – click here.
When is a real estate license required?
In the State of Hawaii, a real estate license is required to sell, buy, lease, and manage real property.
Can a property owner manage his/her own property without a license?
Yes. A property owner can sell, buy, lease, and manage his/her own property without a real estate license, regardless of the owner’s place of residence.
Can a property owner hire a custodian or caretaker to manage their property?
Yes. A property owner can hire a custodian or caretaker to manage or care for his/her property. The “custodian” or “caretaker” doesn’t need a real estate license so long as he/she is employed by the owner. The exemption is limited to managing property for one owner. There is a deemed employer-employee relationship between the owner and the custodian / caretaker.
Must a property owner comply with Hawaii’s Residential Landlord-Tenant Code?
Yes. A property owner who rents or leases their own property must comply with Hawaii’s Residential Landlord-Tenant Code. Among other things, the Code requires owners and landlords who reside outside of the state or on another island to designate an on-island agent to act on the owner’s behalf. The designated on-island agent must be licensed if engaging in any activity for which a real estate license is required.
Must a property owner comply with state and county tax laws?
Yes. A property owner must comply with applicable state and county tax laws. State tax law requires persons who operate transient accommodations to designate a local contact or agent who resides on-island, in case of an emergency or natural disaster, or to answer any questions, concerns, or property issues that arise about the transient accommodation. The on-island local contact or agent must be licensed if engaging in any activity for which a real estate license is required.
For questions about when a real estate license may be required, contact the Hawaii Real Estate Commission’s Real Estate Branch at: (808) 586-2645.
To report unlicensed real estate activity, call the Regulated Industries Complains Office’s Consumer Resource Center at (808) 587-4272. To check licensing status or for information about hiring a licensed professional, call or visit the RICO website at cca.hawaii.gov/rico.
To obtain a copy of the Office of Consumer Protection’s Handbook for the Hawaii Residential Landlord-Tenant Code, contact the Office of Consumer Protection at (808) 586-2634 or download it online. This informative guide covers rental agreements, security deposits, repairs, prohibited practices, termination of tenancy, landlord obligations, tenant obligations, and remedies.
Hawaii State Tax
What Hawaii taxes must be collected from guests and remitted to the State?
- General Excise Tax. This is a tax assessed on all business activities. It is 4.5% on Oahu and 4% on all other islands. For more information: http://tax.hawaii.gov/faq/#get
- Transient Accommodations Tax. The TAT is imposed on gross rental income derived from renting transient accommodations in Hawaii. It is 9.25% for most rentals, 7.25% for time shares. For more information (note: the rates in this link are outdated): http://files.hawaii.gov/tax/legal/taxfacts/tf96-02.htm
What Hawaii forms do I need to file?
- File your Hawaii non-resident N-15 State Tax Return.
- File GE-45 taxes quarterly or monthly as well as your Annual GE-49 form. This is required by both Act 326 (which expires on December 31, 2015) and Act 204 (which takes force on January 1, 2016) [download document].
- File TA-1 taxes quarterly or monthly. This is required by both Act 326 (which expires on December 31, 2015) and Act 204 (which takes force on January 1, 2016). [download document]
- File your Annual TA-2 form. This is required by both Act 326 (which expires on December 31, 2015) and Act 204 (which takes force on January 1, 2016). [download document]
To access these forms and their instructions visit the State of Hawaii Department of Taxation page providing the “Alphabetical list of Hawaii Forms and Publications” [view site].
What other requirements arise from the Hawaii Department of Tax?
Act 204, effective January 1, 2016, continues the following requirements of Act 326.
Operators of transient accommodations are required to do the following, for which there are steep penalties for failure to comply, including the possibility of being found guilty of a misdemeanor:
- Designate a local contact residing on the same island as the transient
- Include the local contact’s name and phone number in any contract or written rental agreement and post clearly in the vacation rental property.
- Include the TAT registration identification number (also called the TAT license number) on all websites and advertisements. Please note that for some taxpayers the TAT license number may contain a different suffix from the taxpayer’s GET license number, so make sure you post the TAT number.
When do I file my GE (General Excise) and TA (Transient Accommodations) taxes?
This depends on how much rental income you collect. Please see the Hawaii Department of Taxation outline on how to determine the measure and rate of taxes due. Includes when reports of taxes due are to be filed. [download document]
Who must file an N-15
As a nonresident or part-year resident of the State of Hawaii, the taxpayer is required to file a Hawaii income tax return if any of the following apply:
- The taxpayer or spouse is doing business in Hawaii during the taxable year regardless of whether the taxpayer or spouse derives any taxable income from that business. “Doing business” includes all activities engaged in or caused to be engaged in with the object of gain or economic benefit, direct or indirect, except personal services performed as an employee under the direction and control of an employer. Example: Every person receiving rents from property owned in Hawaii is “doing business” and must file a return whether or not the person’s expenses exceed the gross rental income.
Who do I contact in Hawaii to get registered to pay taxes?
You can register by going to the following website and follow the Wizard for step-by-step instructions hbe.ehawaii.gov
Where do I find information on the rental of residential real property?
Please refer to the Hawaii Department of Taxation document “Information on the Rental of Residential Real Property” available for download at [download document].
What is a 1099 — MISC
Form 1099-MISC is used to report certain types of payments made in the course of a trade or business. If you’re in business or self-employed, you may need to submit this report to both the Internal Revenue Service and the person or business whom you paid.
When is Form 1099-MISC required?
Businesses will need to fill out a Form 1099-MISC for persons, vendors, subcontractors, independent contractors, and others to whom $600 or more per year is paid for services (including parts and materials). Reporting such payments is required if the recipient of the payment is not a corporation — for example, when the recipient is an individual, partnership, a limited liability company treated as a partnership or sole proprietorship. Payments made to corporations are required in the case of legal fees paid to attorneys.
Tax liabilities for unreported rental income:
“The State of Hawaii Department of Taxation has long considered non-filing rental property owners and vacation rental operators as a potential source of additional tax revenue.
At a recent workshop, the Department described its efforts to identify non-filing rental real property landlords and vacation rental operators. In addition to on-going data sorting, the Department is availing itself of third-party information generated (from the AOAO) by Act 326 of 2012 and is collaborating with Hawaii’s county governments.
Hawaii’s Department of Taxation is following a national trend of actively developing information to identify additional sources of tax revenue. Computer data sorting techniques applied to federal and state tax data should be readily able to identify potential non-compliant taxpayers for audit and investigation.
There is no statute of limitations for unfiled general excise and transient accommodations tax returns. This makes the identification of delinquent General Excise Tax (GET) and Transient Accommodations Tax (TAT) revenue particularly productive as an audit could look back a considerable period. Typical penalties for failure to file and failure to pay are 50% along with interest at 8%.
Persons with past or on-going rental activity in Hawaii and unfiled returns (or unreported income) should strongly consider seeking professional advice as soon as possible. The potential for criminal prosecution and/or the imposition of substantial civil penalties can be mitigated or reduced through appropriate and timely actions, potentially including a “voluntary disclosure.”
- A detailed discussion of Act 204 relating to transient accommodation taxes can be found here.
What is a transient vacation rental (TVR)?
A TVR is any rental of a housing unit for less than 180 days.
Is there a difference between a transient vacation rental (TVR) and a bed and breakfast (B&B)?
Yes. A Bed and Breakfast business involves the rental of rooms in the same house in which the owner or manager lives. A transient vacation rental involves all other types of short-term (less than 180 days) rentals, including ohana units. The County Council is considering amending the definition of a B&B to require that the owner live on-site but allow the renting an ohana unit.
What laws affect the operating of a Transient Vacation Rental and a Bed and Breakfast?
The Maui County Code Chapter 19.27 prohibits transient vacation rentals outside the hotel district. The Maui County Code Chapter 19.64 allows for Bed and Breakfast operations within the business district as well as the residential districts with a permit. The conditional permit process is used by owner/operators to establish either a TVR or B&B outside of these allowed districts.
What is the penalty for operating an illegal TVR or Bed and Breakfast?
Operating an illegal TVR is subject to an initial fine of $1,000 along with a daily fine that can progress up to $1,000 per day. A trial is not necessary. There is an appeal process that could include the court system to resolve the appeal.
What is the definition of HOTEL RESORT classification for property Tax?
On Maui, the hotel/resort class means that “Units occupied by transient tenants for periods of less than six consecutive months . . . shall be classified as hotel resort” (Maui County Code 3.48.305 C(4)). If you are not in the rental pool or do not rent for six months or less, you should submit a Condominium Classification Declaration attesting to the actual use of your unit.
Do I need a Business or Tax license if I collect money for renting my property as a TVR?
Yes, you need a business license. The BB-12 State of Hawaii Basic Business Application, Instructions and Payment Vouchers, and information which contains BB-1 (Rev. 2010), VP-1 (Rev. 2010), and NEW VP-2 (Rev. 2011), can be accessed through this link: [Download packet].
What are the property tax rates and categories for the State of Hawaii?
In Hawaii the Counties determine the tax rate information. For more information, please visit the following sites:
Is everything I need to know about operating a vacation rental in Hawaii on this website?
The statutes and regulations governing operation of a vacation rental property in Hawaii are complex and, at times, vague. There are specific federal, state, and county laws, bylaws, and regulations in respect of operating a vacation rental property in Hawaii. Except where noted, this website presents State of Hawai’i laws, regulations, and requirements, not those of the federal government, counties, or localities. It is always prudent to verify your specific responsibilities for your individual situation with your legal and tax advisors, and to consult with federal, state, and county officials to ensure you have the current information regarding your responsibilities in operating your Hawaii vacation rental business.