THE SENATE

S.B. NO.

704

TWENTY-NINTH LEGISLATURE, 2017

S.D. 2

STATE OF HAWAII

H.D. 1

 

 

 

 

 

A BILL FOR AN ACT

 

 

RELATING TO VACATION RENTALS.

 

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 


SECTION 1. The legislature finds that, under certain circumstances, allowing a private person to act as a tax collection agent is likely to ease the burden of collecting taxes. Section 237-9(e), Hawaii Revised Statutes, allows a person engaged in network marketing, multi-level marketing, or other similar business to enter into an agreement with the department of taxation to act as a tax collection agent on behalf of its direct sellers. The legislature finds that similarly allowing a transient accommodations broker to act as a tax collection agent on behalf of providers of transient accommodations, such as vacation rentals, that utilize the services of the transient accommodations broker may facilitate the collection of transient accommodations taxes and general excise taxes.

The purpose of this Act is to enable a transient accommodations broker to register as a tax collection agent with respect to transient accommodations taxes and general excise taxes for its operators and plan managers in a manner that recognizes the dynamic changes occurring in the vacation rentals sector. This Act is not intended to preempt or otherwise limit the authority of counties to adopt, monitor, and enforce local land use regulations, nor is this Act intended to transfer the authority to monitor and enforce such regulations away from the counties.

SECTION 2. Chapter 237, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"237-   Transient accommodations broker as tax collection agent. (a) The director may permit a transient accommodations broker to register as a tax collection agent on behalf of all of its operators and plan managers by entering into a tax collection agreement with the director or by submitting a transient accommodations broker tax collection agent registration statement to the director.

The director may deny an application for registration as a transient accommodations broker tax collection agent under this section for any cause authorized by law, including any violation of this chapter or rules adopted pursuant thereto, violation of any prior tax collection agreement, or failure to meet minimum criteria that may be set forth by the department in rules adopted pursuant to chapter 91.

Execution of a tax collection agreement shall not be a requirement for registration as a transient accommodations broker tax collection agent.

The director shall issue a certificate of registration or letter of denial within thirty days after a transient accommodations broker submits to the director a completed and signed transient accommodations broker tax collection agent registration statement, in a form prescribed by the department. The registration shall be valid only for the transient accommodations broker tax collection agent in whose name it is issued, and for the website or platform designated therein, and shall not be transferable.

A registered transient accommodations broker tax collection agent shall be issued separate licenses under this chapter with respect to taxes payable on behalf of its operators and plan managers in its capacity as a registered transient accommodations broker tax collection agent and, if applicable, with respect to any taxes payable under this chapter for its own business activities. A registered transient accommodations broker tax collection agent shall file with the department monthly or other periodic returns as required by section 237‑30. The required reporting information shall include gross transient accommodations rentals, exemptions, and taxable income from the registered transient accommodations broker tax collection agent's business activity.

(b) In addition to its own responsibilities under this chapter, a registered transient accommodations broker tax collection agent shall report, collect, and pay over the taxes due under this chapter on behalf of all of its operators and plan managers from the date of registration until the registration is canceled as provided in subsection (h); provided that the registered transient accommodations broker tax collection agent's obligation to report, collect, and pay taxes on behalf of all of its operators and plan managers shall apply solely to transient accommodations in the State that are arranged or booked directly through the registered transient accommodations broker tax collection agent.

(c) The registered transient accommodations broker tax collection agent's operators and plan managers shall be deemed licensed under this chapter; provided that the licensure shall apply solely to the business activity conducted directly through the registered transient accommodations broker tax collection agent from the date of registration until the registration is canceled as provided in subsection (h). For purposes of any other business activity, the operators and plan managers are subject to all requirements of title 14 as if this section did not exist.

(d) Under this section, a registered transient accommodations broker tax collection agent shall assume all obligations, rights, and responsibilities imposed by this chapter upon its operators and plan managers with respect to their business activities conducted directly through the registered transient accommodations broker tax collection agent from the date of registration until the registration is canceled as provided in subsection (h).

(e) A transient accommodations broker tax collection agent collects taxes imposed by this chapter on behalf of operators and plan managers, but if the agent does not report or pay the taxes due, then the agent shall be personally liable, together with penalties and interest as provided by law.

(f) All returns and other information provided by a registered transient accommodations broker tax collection agent, including the application for registration as a transient accommodations broker tax collection agent or any tax collection agreement, shall be confidential, and disclosure thereof shall be prohibited as provided in section 237-34; provided that:

(1) No disclosure of returns or information provided by the transient accommodations broker tax collection agent with respect to its operators and plan managers shall be made pursuant to section 237-34(b)(9), (10), or (11); and

(2) All returns and the names and addresses provided by a registered transient accommodations broker tax collection agent shall be disclosed to a duly authorized county tax official for the limited purpose of real property tax administration.

(g) A registered transient accommodations broker tax collection agent shall notify all of its operators and plan managers in the State that it has been designated to collect, report, and pay over the tax imposed by this chapter on their behalf.

The director may require the transient accommodations broker tax collection agent, as a condition of obtaining a license, to furnish with an annual return, a list including the federal tax identification number of all operators and plan managers for the taxable year to whom the transient accommodations broker tax collection agent has provided information returns required under the Internal Revenue Code, and any other information that is relevant to ensure proper payment of taxes under title 14.

A transient accommodations broker tax collection agent shall provide the names or addresses of any of its operators and plan managers to the director when such a request is made through a lawful and valid administrative process or upon waiver by the operator or plan manager.

(h) The registration provided for under this section shall be effective until canceled in writing.

A registered transient accommodations broker tax collection agent may cancel its registration under this section by delivering written notice of cancellation to the director and each of its operators and plan managers furnishing transient accommodations in the State no later than ninety days prior to the effective date of cancellation.

The director may cancel a transient accommodations broker tax collection agent's registration under this section for any cause authorized by law, including any violation of this chapter or rules adopted pursuant thereto, or for violation of any applicable tax collection agreement, by delivering written notice of cancellation to the transient accommodations broker tax collection agent no later than ninety days prior to the effective date of cancellation.

(i) All registered transient accommodations broker tax collection agents shall:

(1) Prior to placing an advertisement, including an online advertisement, on the availability of a property for lease or rent on behalf of an operator or plan manager, notify the operator or plan manager that the subject property is required to be in compliance with applicable land use laws prior to retaining the services of the transient accommodations broker; and

(2) Require the operator or plan manager to attest that the subject property is in compliance with applicable land use laws by using the following language: "By accepting the Terms of Service, I agree and attest that I have reviewed all applicable laws and regulations and that my listing is in compliance."

(j) Nothing contained in this section shall limit the authority of the department under section 231-7 to conduct audits, investigations, and hearings, and to issue subpoenas. This shall include the authority to obtain transaction-level data for specific transactions from a transient accommodations broker tax collection agent.

(k) In addition to all other reporting requirements under title 14, each transient accommodations broker tax collection agent shall report annually to the director on an aggregate basis:

(1) The total number of operators and plan managers by county on whose behalf the transient accommodations broker tax collection agent collected and remitted taxes imposed by this chapter; and

(2) The total taxes by county imposed by this chapter so collected and remitted.

(l) For the purposes of this section:

"Operator" has the same meaning as in section 237D-1.

"Plan manager" has the same meaning as in section 237D-1.

"Transient accommodations broker" has the same meaning as in section 237D-1."

SECTION 3. Chapter 237D, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"237D-   Transient accommodations broker as tax collection agent. (a) The director may permit a transient accommodations broker to register as a tax collection agent on behalf of all of its operators and plan managers by entering into a tax collection agreement with the director or by submitting a transient accommodations broker tax collection agent registration statement to the director.

The director may deny an application for registration as a transient accommodations broker tax collection agent under this section for any cause authorized by law, including any violation of this chapter or rules adopted pursuant thereto, violation of any prior tax collection agreement, or failure to meet minimum criteria that may be set forth by the department in rules adopted pursuant to chapter 91.

Execution of a tax collection agreement shall not be a requirement for registration as a transient accommodations broker tax collection agent.

The director shall issue a certificate of registration or letter of denial within thirty days after a transient accommodations broker submits to the director a completed and signed transient accommodations broker tax collection agent registration statement, in a form prescribed by the department. The registration shall be valid only for the transient accommodations broker tax collection agent in whose name it is issued, and for the website or platform designated therein, and shall not be transferable.

A registered transient accommodations broker tax collection agent shall be issued separate certificates of registration under this chapter with respect to taxes payable on behalf of its operators and plan managers in its capacity as a registered transient accommodations broker tax collection agent and, if applicable, with respect to any taxes payable under this chapter for its own business activities. A registered transient accommodations broker tax collection agent shall file with the department monthly or other periodic returns as required by section 237D-6, reporting information including gross rentals or gross rental proceeds, exemptions or deductions, taxable proceeds, and taxes, each separated by taxation district.

(b) In addition to its own responsibilities under this chapter, a registered transient accommodations broker tax collection agent shall report, collect, and pay over the taxes due under this chapter on behalf of all of its operators and plan managers from the date of registration until the registration is canceled as provided in subsection (h); provided that the registered transient accommodations broker tax collection agent's obligation to report, collect, and pay taxes on behalf of all of its operators and plan managers shall apply solely to transient accommodations in the State arranged or booked directly through the registered transient accommodations broker tax collection agent.

(c) The registered transient accommodations broker tax collection agent's operators and plan managers shall be deemed registered under this chapter; provided that the registration shall apply solely to the business activity conducted directly through the registered transient accommodations broker tax collection agent from the date of registration until the registration is canceled as provided in subsection (h). For purposes of any other business activity, the operators and plan managers are subject to all requirements of title 14 as if this section did not exist.

(d) Under this section, a registered transient accommodations broker tax collection agent shall assume all obligations, rights, and responsibilities imposed by this chapter upon its operators and plan managers with respect to their business activities conducted directly through the registered transient accommodations broker tax collection agent from the date of registration until the registration is canceled as provided in subsection (h).

(e) A transient accommodations broker tax collection agent collects taxes imposed by this chapter on behalf of operators and plan managers, but if the agent does not report or pay the taxes due, then the agent shall be personally liable for the taxes due and penalties and interest as provided by law.

(f) All returns and other information provided by a registered transient accommodations broker tax collection agent, including the application for registration as a transient accommodations broker tax collection agent or any tax collection agreement, shall be confidential, and disclosure thereof shall be prohibited as provided in section 237D-13; provided that:

(1) No disclosure of returns or information provided by the transient accommodations broker tax collection agent with respect to its operators and plan managers shall be made pursuant to section 237D-13(a)(9), (10), or (11); and

(2) All returns and the names and addresses provided by a registered transient accommodations broker tax collection agent shall be disclosed to a duly authorized county tax official for the limited purpose of real property tax administration.

(g) A registered transient accommodations broker tax collection agent shall notify all of its operators and plan managers in the State that it has been designated to collect, report, and pay over the tax imposed by this chapter on their behalf.

The director may require the transient accommodations broker tax collection agent, as a condition of obtaining a license, to furnish with an annual return, a list including the federal tax identification number of all operators and plan managers for the taxable year to whom the transient accommodations broker tax collection agent has provided information returns required under the Internal Revenue Code, and any other information that is relevant to ensure proper payment of taxes under title 14.

A transient accommodations broker tax collection agent shall provide the names or addresses of any of its operators and plan managers to the director when such a request is made through a lawful and valid administrative process or upon waiver by the operator or plan manager.

(h) The registration provided for under this section shall be effective until canceled in writing.

A registered transient accommodations broker tax collection agent may cancel its registration under this section by delivering written notice of cancellation to the director and each of its operators and plan managers furnishing transient accommodations in the State no later than ninety days prior to the effective date of cancellation.

The director may cancel a transient accommodations broker tax collection agent's registration under this section for any cause authorized by law, including but not limited to any violation of this chapter or rules adopted pursuant thereto, or for violation of any applicable tax collection agreement, by delivering written notice of cancellation to the transient accommodations broker tax collection agent no later than ninety days prior to the effective date of cancellation.

(i) All registered transient accommodations broker tax collection agents shall:

(1) Prior to placing an advertisement, including an online advertisement, on the availability of a property for lease or rent on behalf of an operator or plan manager, notify the operator or plan manager that the subject property is required to be in compliance with applicable land use laws prior to retaining the services of the transient accommodations broker; and

(2) Require the operator or plan manager to attest that the subject property is in compliance with applicable land use laws by using the following language: "By accepting the Terms of Service, I agree and attest that I have reviewed all applicable laws and regulations and that my listing is in compliance."

(j) Nothing contained in this section shall limit the authority of the department under section 231-7 to conduct audits, investigations, and hearings, and to issue subpoenas. This shall include the authority to obtain transaction-level data for specific transactions from a transient accommodations broker tax collection agent.

(k) In addition to all other reporting requirements under title 14, each transient accommodations broker tax collection agent shall report annually to the director on an aggregate basis:

(1) The total number of operators and plan managers by county on whose behalf the transient accommodations broker tax collection agent collected and remitted taxes imposed by this chapter; and

(2) The total taxes imposed by this chapter so collected and remitted."

SECTION 4. Section 237D-4, Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows:

"(c) Any advertisement, including an online advertisement, for any transient accommodation or resort time share vacation interest, plan, or unit shall conspicuously provide:

(1) The registration identification number or an electronic link to the registration identification number of [the] either:

(A) The operator or plan manager issued pursuant to this section; [and] or

(B) The transient accommodations broker tax collection agent registered under section 237D‑  , if applicable; and

(2) The local contact's name, phone number, and electronic mail address, provided that this paragraph shall be considered satisfied if this information is provided to the transient or occupant prior to the furnishing of the transient accommodation or resort time share vacation unit."

SECTION 5. Section 237D-6.5, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) Revenues collected under this chapter shall be distributed in the following priority, with the excess revenues to be deposited into the general fund:

(1) $1,500,000 shall be allocated to the Turtle Bay conservation easement special fund beginning July 1, 2015, for the reimbursement to the state general fund of debt service on reimbursable general obligation bonds, including ongoing expenses related to the issuance of the bonds, the proceeds of which were used to acquire the conservation easement and other real property interests in Turtle Bay, Oahu, for the protection, preservation, and enhancement of natural resources important to the State, until the bonds are fully amortized;

(2) $26,500,000 shall be allocated to the convention center enterprise special fund established under section 201B-8;

(3) $82,000,000 shall be allocated to the tourism special fund established under section 201B-11; provided that:

(A) Beginning on July 1, 2012, and ending on June 30, 2015, $2,000,000 shall be expended from the tourism special fund for development and implementation of initiatives to take advantage of expanded visa programs and increased travel opportunities for international visitors to Hawaii;

(B) Of the $82,000,000 allocated:

(i) $1,000,000 shall be allocated for the operation of a Hawaiian center and the museum of Hawaiian music and dance at the Hawaii convention center; and

(ii) 0.5 per cent of the $82,000,000 shall be transferred to a sub-account in the tourism special fund to provide funding for a safety and security budget, in accordance with the Hawaii tourism strategic plan 2005-2015; and

(C) Of the revenues remaining in the tourism special fund after revenues have been deposited as provided in this paragraph and except for any sum authorized by the legislature for expenditure from revenues subject to this paragraph, beginning July 1, 2007, funds shall be deposited into the tourism emergency special fund, established in section 201B-10, in a manner sufficient to maintain a fund balance of $5,000,000 in the tourism emergency special fund;

(4) $103,000,000 for fiscal year 2014-2015, $103,000,000 for fiscal year 2015-2016, $103,000,000 for fiscal year 2016-2017, and $93,000,000 for each fiscal year thereafter shall be allocated as follows: Kauai county shall receive 14.5 per cent, Hawaii county shall receive 18.6 per cent, city and county of Honolulu shall receive 44.1 per cent, and Maui county shall receive 22.8 per cent; provided that commencing with fiscal year 2018-2019, a sum that represents the difference between a county public employer's annual required contribution for the separate trust fund established under section 87A-42 and the amount of the county public employer's contributions into that trust fund shall be retained by the state director of finance and deposited to the credit of the county public employer's annual required contribution into that trust fund in each fiscal year, as provided in section 87A-42, if the respective county fails to remit the total amount of the county's required annual contributions, as required under section 87A-43; [and]

(5) $3,000,000 shall be allocated to the special land and development fund established under section 171-19; provided that the allocation shall be expended in accordance with the Hawaii tourism authority strategic plan for:

(A) The protection, preservation, maintenance, and enhancement of natural resources, including beaches, important to the visitor industry;

(B) Planning, construction, and repair of facilities; and

(C) Operation and maintenance costs of public lands, including beaches, connected with enhancing the visitor experience[.]; and

(6) $4,000,000 shall be allocated to the counties for compliance and enforcement of the tax under this chapter as follows:

$1,000,000 for fiscal year 2017-2018 to Kauai county, $1,000,000 for fiscal year 2017-2018 to Maui county, $1,000,000 for fiscal year 2017-2018 to Hawaii county, and $1,000,000 for fiscal year 2017-2018 to the city and county of Honolulu.

All transient accommodations taxes shall be paid into the state treasury each month within ten days after collection and shall be kept by the state director of finance in special accounts for distribution as provided in this subsection.

As used in this subsection, "fiscal year" means the twelve-month period beginning on July 1 of a calendar year and ending on June 30 of the following calendar year."

SECTION 6. By January 1, 2018, the director of taxation shall make available to transient accommodations brokers a form of application for registration as a transient accommodations broker tax collection agent under the new section of chapter 237, Hawaii Revised Statutes, added by section 2 of this Act, and under the new section of chapter 237D, Hawaii Revised Statutes, added by section 3 of this Act.

SECTION 7. If any provision of this Act, or the application thereof to any person or circumstance, is held invalid, the invalidity does not affect other provisions or applications of the Act that can be given effect without the invalid provision or application, and to this end the provisions of this Act are severable.

SECTION 8. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 9. This Act shall take effect on July 1, 2117, and shall apply to taxable years beginning after December 31, 2017, and:

(1) Shall be repealed on December 31, 2022;

(2) Shall not apply to taxable years beginning after December 31, 2022; and

(3) Section 237D-4, Hawaii Revised Statutes, shall be reenacted in the form in which it read on the day prior to the effective date of this Act.


 


 

Report Title:

Vacation Rentals; Taxation; Transient Accommodations Brokers; Tax Collection Agents; General Excise Tax; Transient Accommodations Tax

 

Description:

Allows transient accommodations brokers to register as tax collection agents to collect and remit general excise and transient accommodations taxes on behalf of operators and plan managers using their services for vacation rentals. Ensures that the subject property is in compliance with applicable land use laws. Allocates $1,000,000 of TAT revenues to each county for FY 2017-2018. Sunsets on 12/31/2022. (SB704 HD1)

 

 

 

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