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.