Hawaii governor rejects proposed tax agreement with Airbnb

HONOLULU — Gov. David Ige rejected a proposed agreement with Airbnb that would have authorized the company to collect vacation rental taxes on behalf of the state.

Ige’s rejection effectively pushes the issue back to the state Legislature, the Honolulu Star-Advertiser reported Wednesday.

Lawmakers considered bills in each of the past three years to allow Airbnb to collect taxes from vacation rentals on behalf of the state. Ige vetoed a bill to accomplish that in 2016 and last year the state Department of Taxation began negotiating directly with Airbnb to try to resolve the issue.

The outcome of those negotiations was a memorandum of agreement that was submitted to Ige, but Ige said it contained provisions similar to the 2016 bill that he vetoed.

He said the proposed agreement and 2016 bill both would have exacerbated the problem of illegal vacation rentals.

“I’m not only focused on collecting taxes owed, although that’s a very, very important part,” Ige said. “I think we need to have transparency. We need to ensure that the properties being utilized for short-term vacation rentals are appropriately zoned and regulated.”

Ige said he hopes to work out a new proposal for collecting taxes on transient vacation rentals with lawmakers in time for him to introduce an administration bill by Monday. While House Finance Chairwoman Sylvia Luke said lawmakers are already crafting their own proposals to address the issue.

Matt Middlebrook, public policy manager for Airbnb in Hawaii, said it is “frustrating” that the Ige administration expressed interest in negotiations with Airbnb late in the 2017 session of the Legislature but that Ige refused to sign off on the final proposal.

“Unfortunately, as a result of the governor’s flip-flop, the state will lose out on $30 million in tax revenue that would have been generated by Airbnb hosts,” Middlebrook said. “Despite the governor’s decision, we are committed to being a good partner with Hawaii and will continue our discussions with key decision makers at the state and county level to enact common sense short-term rental regulations and tax policies.”