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With the state poised to keep millions of dollars in hotel bed tax funds from its counties, Maui County officials will consider adding a 3% surcharge on each room in hotel, motel, and vacation rental rooms to help make up for funding lost to the state.
Maui County’s move, if pursued, would take advantage of a related state action to let counties add a 3% bed tax surcharge, on top of the existing 10.25% per room rate charged by the state.
Revenue from the 10.25% is traditionally shared by the state, with significant portions going to the counties, to address impacts from tourists who use the rooms. For instance, of the roughly $640 million collected in 2019, about $100 million was shared by the state with the counties.
Maui County’s take of the revenue sharing historically was 22.8% ~ meaning the loss of revenues to the state this year will amount to losing millions of dollars for county programs.
State lawmakers approved a measure earlier this week to keep what are officially called Transient Accommodation Tax (TAT) revenues, monies it has shared with the counties since 1990. However, due to the pandemic emergency and response, tax revenues for the state will fall far short of projections, hence the legislature’s action.
However, state legislators Tuesday approved a related measure, to let the counties recover some of the lost funding by tacking 3% onto the current 10.25% TAT charged room occupants currently.
While Maui County Mayor Michael Victorino was not in favor of the state’s decision to keep the TAT revenues, he announced Wednesday his consideration of potential new revenue from the 3% surcharge to offset some financial impacts of tourism.
“I’d like to see 1% go toward the development of affordable and attainable workforce housing, 1% for emergency services including ocean, land and air rescues, and 1% to fund visitor education and cultural restoration throughout Maui County,” Victorino said in a statement via the county website.
“The loss of TAT funding is a blow, especially since the counties provide services for millions of visitors each year including police and fire protection, parks and road maintenance, and waste disposal. A new County tax surcharge can help to offset some of these costs. I look forward to working with the Maui County Council on this initiative.”
If enacted, the 3% Maui County TAT tax surcharge would be levied on all stays in hotel rooms, licensed vacation rental units, and other short-term accommodations.
The state bill passed by the legislature earlier this week removes allocation of some of the overall TAT revenues to the counties. The second action allowing the new 3% surcharge, also eliminates some TAT funding for the Hawaii Tourism Authority.
With passage of the second measure, some state lawmakers expressed concern that counties could have different total tax charges per room, up to a potential high of 13.5% total. Hotel bed tax rates vary across the nation. The rate in Los Angeles County is 12%, while San Diego County charges just 10% per room.
Both the state House and Senate passed the bill’s final readings this week. It will now be forwarded to the governor, who has a June 21 deadline to announce which bills he plans to veto. The second bill this week must be signed by the governor before hotel, motel, or vacation rental visitors can be charged the additional 3%.
For more information about the history of the TAT in Hawaii, see this report by the University of Hawaii at Manoa.
