Reactionary reaction to resort fees

One of the bills that has come out of the recently concluded legislative session is SB 2699, which proposes to make “resort fees” subject to our Transient Accommodations Tax (TAT).

A “resort fee,” which also goes on your bill if you stay at a hotel, and not only in Hawaii but around the world, is to pay for other amenities such as use of the hotel’s weight room, or pool, or Wi-Fi internet service.

“Oh?” you might say. “I thought those things were included in the room rate.”

That’s precisely the point, both for the hotels and the Tax Department. The TAT is 10.25 percent of the gross room rate. Our supreme court has said, “in determining tax liability it is fundamental that substance, rather than the form of the transaction, governs.

Actualities and consequences of a commercial transaction, rather than the method employed in doing business, are controlling factors in determining such liability.” In re Kobayashi, 44 Haw. 584, 358 P.2d 539 (1961).

Thus, if a “resort fee” is actually a piece of the room charge, by any other name, then it’s taxable as a room charge.

One of the tests that the department is now using to figure out if a resort fee is a room charge with another name is whether the charge is “mandatory.” If the fee is not part of the room charge, then a guest staying at a hotel should be able to opt out of it.

Some of the bills that were going through the session, such as HB 2432 SD 1, would define a “resort fee” subject to the TAT as: “any mandatory charge or surcharge imposed by an operator, owner, or representative thereof on a transient for the use of the transient accommodation’s property, services, or amenities.” That definition doesn’t seem to be different from what the department was already enforcing, so there wouldn’t be much harm in enacting that version. That bill died.

SB 2699, the one that passed, defines a resort fee as “any charge or surcharge imposed by an operator, owner, or representative thereof to a transient for the use of the transient accommodation’s property, services, or amenities.”

Whoa there! Wouldn’t that make pretty much anything on the hotel bill a resort fee? Suppose you watch an in-room movie and get billed for it. Isn’t that a charge for one of the hotel’s amenities, namely the in-room TV and movie system? What about a charge for a meal? If you were to eat in your room, or even in the hotel restaurant, for that matter, isn’t the meal charge for the hotel’s property (food), services (servers), and amenities (in your room, or in the hotel restaurant)?

This certainly was not the intent of the TAT when it was enacted, and it would be far different from most hotel room taxes across the country and internationally if the tax is applied in this manner.

Apparently, some lawmakers were unhappy that the TAT was not being applied to resort fees even if they were shown to be truly optional charges for things other than a transient room rental. So, this bill lurches in the other direction. It’s a reactionary reaction. Is this really what we want for our TAT system?


Tom Yamachika is president of the Tax Foundation of Hawaii.

  1. rk669 May 15, 2018 5:57 pm Reply

    Tax and Spend Democrats,cannot get enough of your Hard Earned $$’s! The poor and middle class pay more in taxes than the Wealthy! Only because we are greater in Participation!

  2. No_They_Didn't May 17, 2018 4:30 pm Reply

    Originally democrats that of the earlier years of USA, were for agricultural settings and opposed to any big city business designed to take away that part of a family’s existence. This definition of a Democrat, for the rural ag life, still holds true today. Kansas.
    Increase in the TAT would create a better substance to service all the hotel guest. Therefore making mandatory that TAT be included in the room rate. And it applies to all services the hotel has provided. Wi-Fi for one thing. Prices will be passed on to the guest.

  3. Reverend Malama Robinson May 21, 2018 7:09 am Reply

    Opt out! This is not AMERICA….

Your email address will not be published. Required fields are marked *


By participating in online discussions you acknowledge that you have agreed to the TERMS OF SERVICE. An insightful discussion of ideas and viewpoints is encouraged, but comments must be civil and in good taste, with no personal attacks. If your comments are inappropriate, you may be banned from posting. To report comments that you believe do not follow our guidelines, send us an email.