Taxes for Short Term Rentals in Hawaii County

When considering owning it is important to understand the management and expenses as well as the taxes.

Hawaii does not have a sales tax; instead, we have the GET (General Excise Tax), which is assessed on all business activities (sales of products and all services). There is also HCTAT (Hawaii County Transient Accommodation Tax) and TAT at the state level. Businesses and property owners can legally pass these taxes directly to the consumer. This is typically done by itemizing these taxes separately on invoices, rental agreements, or receipts, allowing the business to recover the cost of the taxes without it affecting their profit margins.

Transient Accommodation Tax / TAT

• A “transient accommodation” is a room, apartment, house, condominium, beach house, hotel room or suite, or similar living accommodation furnished to a transient person for less than 180 consecutive days. “Gross rental or gross rental proceeds” includes amounts paid to you in the form of cash, goods, or services as compensation for furnishing a transient accommodation without any deductions for costs incurred in the operation of the transient accommodation.

• This tax is at the state level which is currently levied and a rate of 10.25% on every taxpayer that has taxable gross rental proceeds and/or total fair market rental value.

• Hawaii County Transient Accomodation Tax /  HCTAT is an additional county level percentage of 3% for every taxpayer that has taxable gross rental proceeds and/or total fair market rental value attributable to the County of Hawai’i.

  • HCTAT payments are due concurrent with the State TAT returns and payments.  For periodic returns, taxpayers are required to file Form TA-1 on a monthly, quarterly, or semi-annual basis.

  General Excise Tax

  • Hawaii does not have a sales tax; instead, we have the GET, which is assessed on all business activities. The state tax is 4% and the County of Hawaii adds a surcharge making the total tax 4.7120%.

  Property Taxes

  • Renting your home, even if you live there, affects your property tax rate. Your primary home has a lower tax rate of $5.95 per $1000. Renting your home changes your tax rate to the Residential rate of $11.10 per $1000 for the portion valued less than $2 million and $13.60 per $1000 for the portion valued at $2 million and more.

  Management

  If you do not live on the island you are required to have on island management for your rental. This is someone who oversees the property and acts as an on island contact for guests.  The scope of options ranges from large companies that offer extended services, like full linen supply, and have full staffing. There are also companies and individuals that offer different levels of services from basic to mid-range services.  This can range anywhere from 15%-30% of revenue. There are some that offer very minimal services for a flat fees; for example if you choose to manage your own bookings and cleaners, you may just need someone to check on the home between guests, be a contact for guests should they need anything during their stay, and be on call to handle emergencies or urgent issues that might arise during a guest’s stay, such as plumbing issues, power outages, or other unexpected events. This level of service may be available for a flat fee.

  In deciding on management it is important to consider your budget, your level of involvement, the level of service you plan to provide, and is all of that in line with the home and community you desire.

Here is the process for applying for your ITIN / EIN. Because the STVR license is already in place, according to the Hawaii Tax office you can operate the STVR while waiting for the above items. Here is the Form BB1 – Hawaii Business Application. 

As a Canadian operating a short-term vacation rental (STVR) in Hawaii

1. Do You Need an ITIN?

• Yes, you need an ITIN if:
  • You’re an individual (not operating as a business entity like an LLC or corporation).
  • You will be filing U.S. taxes as a non-resident alien to report rental income.
  • The Hawaii Department of Taxation requires an identifying number (ITIN in lieu of SSN) for GET and TAT registration.

2. Do You Need an EIN?

• Yes, you may need an EIN if:
  • You operate your STVR under a business entity (e.g., an LLC or corporation registered in Hawaii or elsewhere).
  • You plan to hire employees or work with contractors who require tax forms like a W-9.
  • You want to establish an EIN for tax reporting purposes even as an individual to separate personal and business activities (optional but recommended in some cases).
• If you plan to operate the rental as an individual, the ITIN is usually sufficient, but an EIN may still be useful if required by certain tax forms or for clarity in your tax reporting.

3. How to Register for GET and TAT with Hawaii Taxation

• If you’re applying as an individual:
  • Use your ITIN when registering for GET and TAT (write “Applied For” in place of an ITIN on the Hawaii Tax Online portal or Form BB-1 until it’s issued).
• If you’re applying as a business:
  • Use your EIN when registering for GET and TAT.

4. Which One to Apply for First?

• If you’re an individual, apply for the ITIN first, as this is essential for reporting rental income.
• If you need an EIN for a business entity, you can apply for it simultaneously or before registering with Hawaii Taxation.

Key Takeaway:

• Individual owners: Usually, an ITIN alone is sufficient for GET and TAT registration.
• Business entities or complex setups: May require both ITIN (for personal tax filings) and EIN (for business tax purposes).

Getting an ITIN (Individual Taxpayer Identification Number) quickly requires careful preparation and following the expedited processing methods where available. Here’s how to speed up the process:

1. Prepare Your Application (Form W-7)

• Download Form W-7: Available on the IRS website.
• Complete the form with the necessary information:
  • Reason for applying (e.g., “a U.S. federal tax filing requirement”).
  • Your personal information (name, address, etc.).
• Include the appropriate supporting documents:
  • A valid passport (preferred) or other government-issued ID proving your identity and foreign status.
  • Documents proving the need for an ITIN (e.g., a U.S. tax return, rental agreements, or other tax compliance requirements).

2. Submit Your Application Through the Fastest Method

• In-Person Processing at an IRS Taxpayer Assistance Center (TAC):
  • Schedule an appointment at an IRS TAC that offers ITIN services. Agents can verify your documents in person, speeding up the process by avoiding mailing delays.
  • Use the IRS’s TAC locator to find a location near you.
• Authorized Acceptance Agents (AA):
  • Work with an IRS-certified Acceptance Agent, who can review and submit your application directly to the IRS. Many agents offer expedited processing and guidance.
  • Search for authorized agents near you on the IRS website.
• Express Mailing:
  • If mailing, send your application via an express or courier service to the IRS ITIN Operations office:

    Internal Revenue Service
    ITIN Operations
    P.O. Box 149342
    Austin, TX 78714-9342
    

3. Request Expedited Processing

• Include a cover letter explaining why expedited processing is necessary (e.g., for legal compliance with Hawaii tax requirements).
• Clearly state any deadlines or urgency related to your application.

4. Follow Up with the IRS

• After submitting, you can call the IRS ITIN line at +1 (267) 941-1000 to check the status of your application.

Processing Time

• Regular ITIN processing takes 7-11 weeks but can be faster if all documents are correct and submitted in person.
• Working through an authorized Acceptance Agent or visiting a TAC in person generally yields the fastest results.