Council passes county’s own 3% TAT

LIHU‘E — A 3% transient accommodation tax levied by the county will soon be applied throughout the tourism industry.

On Wednesday, the Kaua‘i County Council passed the creation of this hotel tax that seeks to fill the roughly $15 million per year the state previously gave the county in TAT revenues.

The state typically pulls in about $103 million from its 10.25% TAT, a portion of which was previously dealt out to the counties, but seeing its own budget deficits in the wake of the COVID-19 pandemic, distribution ceased. A new state law gave counties the ability to establish its own visitor-accommodation tax of up to 3%.

Bill No. 2829, which passed unanimously by the council, is just that: a 3% TAT on all gross rentals including hotels, resorts and short-term transient rentals as well as applied to visitor brokers, travel agencies and tour packagers who arrange transient accommodations at noncommissioned contracted rates.

In a previously reported projection, per every 1% TAT, the county would see about $6 million in revenue. To break even, the county would have needed to start the tax at around 2.4%, County Finance Director Reiko Matsuyama said at a previous meeting.

After receiving last-minute testimony from several entities in the tourism industry, the administration requested an amendment to push back the effective start date of the tax from Oct. 1 to Nov. 1.

Those in the tourism industry requested more time to figure out implementation.

County Managing Director Michael Dahilig said the trade-off in pushing back the start date would result in up to $2 million of unearned reveneue, based on 2019, pre-pandemic, tax accruals.

“Understanding there is a challenge in this industry to stand this up properly, we understand and can validate it’s a valid concern,” Dahilig said. “While we’re not necessarily crazy about (pushing it back), we think it is something that needs to be addressed, so we asked for it to be put in as an amendment.”

The bill was first introduced at the council’s July 21 meeting by Council Chair Arryl Kaneshiro, at the request of the county. Unlike the General Excise Tax, the county will have to take care of this tax, rather than have the state collect and distribute, which councilmembers have made comments as being less-than-efficient. The council and administration have engaged in conversations about the strain it would put on the county’s Finance Department, but the department has made it clear the county could handle the new workload.

“The date has been pretty clear since this was introduced two months ago,” Councilmember Luke Evslin said. “I don’t think it’s on the county to realistically spend or waste $1.5 million to $2 million here in giving them (tourism industry) some extra breathing room. I respect the ask, but I will not be supporting it.”

The amendment to push the start-date to November failed, with Vice Chair Mason Chock joining Councilmembers Felicia Cowden, Billy DeCosta and Evslin with a nay-vote. Councilmembers Bernard Carvalho, KipuKai Kuali‘i and Kaneshiro voted in favor of the November date.

The bill, which awaits Mayor Derek Kawakami’s signature, will be in effect on Oct. 1.

14 Comments
  1. Natural September 16, 2021 6:55 am Reply

    They’ll be coming for more of your hard earned money on a federal and statewide basis soon. It’s the only way to pay for socialist/communist programs.
    Aren’t you glad you gave up your rights for a bit of safety?


  2. kauaiboy September 16, 2021 7:16 am Reply

    Out of curiosity, will this 3% County TAT be effective on ALL transient accommodation payments, including those which are already bought and paid for for stays after Oct 1?

    Or will this 3% County TAT be effective on ALL transient accommodation payments arranged AFTER Oct 1?

    One would think that both travelers and accommodation providers would like to know.

    If travel has already been arranged and paid for visits occurring after Oct 1, would accommodation providers have to go back and try to charge 3% more to those already booked? Or would the accommodation providers have to take it in the shorts?

    TGI, please follow up on this story with greater clarity.

    Mahalo.


    1. Koy September 16, 2021 3:29 pm Reply

      It would be for all existing and new bookings.


      1. Lonnie October 1, 2021 4:05 pm Reply

        According to the Hawaii BB 862 is as follows:
        PART III

        SECTION 6. Chapter 46, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

        “§46- County transient accommodations tax. Each county may establish a transient accommodations tax not to exceed the maximum rate set forth in section 237D- . The county transient accommodations tax shall be in addition to any state transient accommodations tax. A county electing to establish a transient accommodations tax pursuant to this section shall do so by ordinance.”

        SECTION 7. Chapter 237D, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

        Ҥ237D- County transient accommodations tax; administration. (a) The county transient accommodations tax, upon the adoption of a county ordinance and in accordance with the requirements of section 46- , shall be levied, assessed, and collected as provided in this section on all gross rental, gross rental proceeds, and fair market rental value taxable under this chapter. No county shall set its transient accommodations tax at a rate greater than three per cent of all gross rental, gross rental proceeds, and fair market rental value taxable under this chapter. With respect to the county transient accommodations tax, the applicable county director of finance shall have all the rights and powers of the director of taxation provided under this chapter.

        (b) The county transient accommodations tax, if adopted, shall be imposed on the gross rental, gross rental proceeds, and fair market rental value of all written contracts that require the passing on of the taxes imposed under this chapter; provided that if the gross rental, gross rental proceeds, and fair market rental value are received as payments beginning in the taxable year in which the taxes become effective, on contracts entered into prior to the adoption of the ordinance pursuant to section 46- , and the written contracts do not provide for the passing on of increased rates of taxes, the county transient accommodations tax shall not be imposed on the gross rental, gross rental proceeds, and fair market rental value covered under the written contracts. The county transient accommodations tax shall be imposed on the gross rental, gross rental proceeds, and fair market rental value from all contracts entered into on or after the adoption of the ordinance pursuant to section 46- , regardless of whether the contract allows for the passing on of any tax or any tax increases.


      2. Nancy October 3, 2021 11:40 am Reply

        We paid in full for our upcoming condo stay a while ago and we don’t feel this is fair to pop this on us three weeks before our trip


    2. Greg September 16, 2021 4:31 pm Reply

      Good question, and one I’d have hoped TGI would anticipate. I’m a tourist, one who is lucky enough to visit for a few weeks annually. I have no problem paying taxes to support the island’s needs. I do wonder about something though, perhaps fellow readers can enlighten me?

      Why does DLNR not have a better grip on the blatant violations that have occurred for years out Kalalau? Surely some of this tax could pay ranger wages for a full-time presence out there? The landings by boat, the squatters, the rubbish – its heart breaking.


      1. Nancy October 3, 2021 11:46 am Reply

        I have a feeling these islands have been mismanaged for years – and politics I think has a lot to do with it – Kauai in 1980 is not the Kauai of today – we have visited this island 12. Times since then and have seen the changes and it’s very sad


  3. therealhawaiian September 16, 2021 7:51 am Reply

    Here’s what some don’t understand. Kauai is, arguably, the most beautiful gem in the world. It is unique, beautiful, climate perfection, and great local people. It has everything a tourist would want! Because of that everybody wants it and if we allow them all to come and keep coming Kauai will cease to offer what has made it so special. The solution is to cut the tourist visits by 80%! No more traffic problems, fewer pollution problems, no more dying reefs, and a better quality of life for locals, and vacations for the 20% who come. How would we cut tourism by 80% and still make the money we need as a County/State? Easy. Make the cost of coming here so high that only 20% of the tourists could afford it in a lifetime. Problem solved.


  4. Control September 16, 2021 8:18 am Reply

    Make it like Disneyland the old book system make them buy the books per person and when they come they have a coupon for a Rent-A-Car they have a coupon go to the end of the road they have a coupon for all the other visitor sites and what it does it only allow so many people on the north some people go to the west some people go to the south the coupon books must be pre-paid if they don’t use all of them thank you so much for the extra cash. Also charge one dollar and one dollar out on the plane for visitors of course locals free entry To the parks no dollar tax in an out discounts on rental cars. Highways instead of buying land elevator Road similar to the viaduct in front of the whole airport above Nimitz.


  5. Doug September 16, 2021 10:12 am Reply

    Quit whining, you all in the travel industry knew this was coming when 862 passed. You should have prepared for it. And it should apply to all future travel dates, paid or not. Thank you Mason Chock, Felicia Cowden, Billy DeCosta and Luke Evslin, obviously you guys are not in the pocket of the travel industry. For the rest of you (AND “the administration”) elections are coming!


  6. TaxRus September 16, 2021 11:07 am Reply

    For the record the TAT tax was temporary to help fund the Convention Center, and later the Oahu Rail and State Budget shortfalls. 5% in 1986, then when it reached 9.25% in 2013, they voted to make it a permanent tax. For years Neighbor Island Mayor’s and County Councils went to the State arguing against the Cap, and asking for an increased share of the TAT revenue. (now it is 10.25%) I commended the neighbor island representatives for doing so, but was shocked when the State announced it was going to keep 100% of the the TAT money but allow neighbor islands to create a new optional TAT tax not exceeding 3%. Where was the outrage?


  7. Jjjames September 16, 2021 7:21 pm Reply

    I wonder if the 3% TAT will be calculated as 3% of just the room and other resort costs, or will it also be 3% of the of the other 10.25% TAT? It makes quite a difference and I hope specific directions are provided.
    Also, why aren’t Kauai residents exempt from this extra tax? In fact, all HAWAII residents should be exempt from all the TAT charges.
    TAT money is used by the counties to maintain county and State facilities that are heavily used by the “transients” (tourists). Residents of the State of Hawaii, already pay for all of that through our State income tax? ( which tourists don’t pay); and through our property taxes? (Which tourists don’t pay); and through the GET, which we pay in everything just to live.
    EXEMPT ALL RESIDENTS OF THE STATE OF HAWAII FROM PAYING THE “TRANSIENT ACCOMMODATIONS TAX”.
    I realize that this will surely result in a decrease in TAT revenues, but the shortage can easily be made up with an additional increase in the TAT rate that will affect visitors and not the residents of our state.
    I would bet that any elected official that would propose a bill such as this, and got it passed, would likely guarantee him/her self a re-election for a few years.


  8. MisterM September 16, 2021 7:33 pm Reply

    “M Department has made it clear it can handle the workload”. That’s a laugh. The tax office is like a morgue most of the year with nobody around.


  9. RGLadder37 September 17, 2021 1:10 am Reply

    You’re a good writer. The 3% tax was to be implemented by the hotels and car rental agencies. This pushed the date to implementation to November 1. I can see the view points of businesses. Collecting the tax at a time when tourism and the pandemic will make things much harder to cooperate with the new 3% tax going on the customers pockets. It is bad enough that business may be slowing to put this tax on customers, will make it harder for the businesses to get more customers. Agree. Do what you need to do, and get it settled. From the view points of whoever is affected.


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