Bill Text: HI HB2551 | 2018 | Regular Session | Introduced

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Bill Title: Relating To The Transient Accommodations Tax.

Spectrum: Partisan Bill (Democrat 8-0)

Status: (Introduced - Dead) 2018-01-29 - Referred to TOU, FIN, referral sheet 9 [HB2551 Detail]

Download: Hawaii-2018-HB2551-Introduced.html

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HOUSE OF REPRESENTATIVES	H.B. NO.	2551
TWENTY-NINTH LEGISLATURE, 2018
STATE OF HAWAII

A BILL FOR AN ACT

 

 

RELATING TO THE TRANSIENT ACCOMMODATIONS TAX.

 

 

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

 

     SECTION 1.  The legislature recognizes on that on March 17, 2015, the supreme court of Hawai'i held in Travelocity.com, L.P. v. Director of Taxation, 135 Hawaii 88, 346 P.3d 157 (2015), that online travel companies are not subject to the State's transient accommodations tax, which is imposed on the gross proceeds derived from furnishing transient accommodations.

     In the case before the court, the department of taxation attempted to recover approximately $430,000,000 in transient accommodation taxes and penalties based on the argument that the online travel companies were operators subject to the tax.  The supreme court disagreed, and held that online travel companies are not operators and, therefore, not subject to the transient accommodations tax.

     As a result of the supreme court's decision, the amount of the transient accommodations tax owed to the State when a person stays in a guest room may differ based on the method of booking.  If a guest books a guest room directly though a hotel, the transient accommodations tax is imposed on the gross amount charged to the customer.  However, if a guest books a room through an online travel company, the transient accommodations tax is only imposed on the net amount that the hotel receives from the online travel company for the room.  This means, for example, that if the advertised rate for a hotel room is $100 for one night, the transient accommodations tax imposed is $9.25 if the guest booked the room with the hotel directly, but the transient accommodations tax may be only $7.40 if the guest booked the hotel room through an online travel company.  The latter can occur because the online travel company may collect a fee of $20 and pass the remaining $80 to the hotel.  Thus, the transient accommodations tax is based only on the amount actually collected by the hotel and not the total amount of the sale.  The legislature believes that the transient accommodations tax should also be imposed on the travel company.

     Accordingly, the purpose of this Act is to create parity in the taxation of transient accommodations by imposing the transient accommodations tax on the portion of the booking sale kept by the online travel companies.  As a result of this Act, the legislature intends for the transient accommodations tax to be imposed on the gross proceeds collected from the customer, regardless of whether a guest books a hotel room directly through a hotel or through an online travel company.

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

     "§237D-     Application to travel agencies and tour packagers.  If a travel agency or tour packager enters into an agreement to furnish transient accommodations at noncommissioned negotiated contract rates, this chapter shall apply to the travel agency or tour packager in the same manner as it applies to an operator, except as otherwise provided.

     §237D-     Certificates of registration for travel agencies and tour packagers.  (a)  Each travel agency or tour packager, as a condition precedent to entering into an arrangement to furnish transient accommodations at noncommissioned negotiated contract rates, shall register with the director.  The travel agency or tour packager shall make a one-time payment of $15 for each registration, upon receipt of which the director shall issue a certificate of registration in the form determined by the director, attesting that the registration has been made.  The registration shall not be transferable and shall be valid only for the travel agency or tour packager in whose name it is issued.

     (b)  The registration provided for by this section shall be effective until canceled in writing.  The director may cancel any license issued under this chapter for cause as provided by rules adopted pursuant to chapter 91.  Any application for the reissuance of a previously canceled registration identification number shall be regarded as a new registration application and shall be subject to the payment of the one-time registration fee.

     (c)  Any:

     (1)  Person required by this section to register as a condition precedent to entering into an arrangement to furnish transient accommodations at noncommissioned negotiated contract rates but who enters into that arrangement without registering pursuant to this section shall be guilty of a misdemeanor; and

     (2)  Director, president, secretary, or treasurer of a corporation or other business entity who permits, aids, or abets that corporation or other business entity to engage or continue in business without registering pursuant to this section shall be guilty of a misdemeanor and subject to one or any combination of the following:

          (A)  A fine of not more than $25,000;

          (B)  Imprisonment of not more than one year; or

          (C)  Probation."

     SECTION 3.  Section 40-81.5, Hawaii Revised Statutes, is amended by amending subsection (e) to read as follows:

     "(e)  For the purposes of this section, "rapid transportation authority" means any entity established by a county in the State for the purpose of constructing, operating, or maintaining a locally preferred alternative for a mass transit project and that receives moneys from a surcharge on state tax established pursuant to section 46-16.8, transient accommodations tax revenues pursuant to section [237D-2(e),] 237D-2(f), or both.

     SECTION 4.  Section 237D-1, Hawaii Revised Statutes, is amended by amending the definitions of "gross rental" and "gross rental proceeds" to read as follows:

     ""Gross rental" or "gross rental proceeds" means the gross receipts, cash or accrued, of the taxpayer received as compensation for the furnishing of transient accommodations or entering into arrangements to furnish transient accommodations and the value proceeding or accruing from the furnishing of [such] transient accommodations or entering into arrangements to furnish transient accommodations without any deductions on account of the cost of property or services sold, the cost of materials used, labor cost, taxes, royalties, interest, discounts, or any other expenses whatsoever.  Every taxpayer shall be presumed to be dealing on a cash basis unless the taxpayer proves to the satisfaction of the department of taxation that the taxpayer is dealing on an accrual basis and the taxpayer's books are so kept, or unless the taxpayer employs or is required to employ the accrual basis for the purposes of the tax imposed by chapter 237 for any taxable year in which event the taxpayer shall report the taxpayer's gross income for the purposes of this chapter on the accrual basis for the same period.

     The words "gross rental" or "gross rental proceeds" shall not be construed to include the amounts of taxes imposed by chapter 237 or this chapter on operators of transient accommodations, travel agencies, and tour packagers and passed on, collected, and received from the consumer as part of the receipts received as compensation for the furnishing of transient accommodations[.] or entering into arrangements to furnish transient accommodations.  [Where transient accommodations are furnished through arrangements made by a travel agency or tour packager at noncommissionable negotiated contract rates and the gross income is divided between the operator of transient accommodations on the one hand and the travel agency or tour packager on the other hand, gross rental or gross rental proceeds to the operator means only the respective portion allocated or distributed to the operator, and no more.]  For purposes of this definition, where the operator maintains a schedule of rates for identifiable groups of individuals, such as kamaainas, upon which the accommodations are leased, let, or rented, gross rental or gross rental proceeds means the receipts collected and received based upon the scheduled rates and recorded as receipts in its books and records."

     SECTION 5.  Section 237D-2, Hawaii Revised Statutes, is amended to read as follows:

     "§237D-2  Imposition and rates.  (a)  There is levied and shall be assessed and collected each month a tax of:

     (1)  Five per cent for the period beginning on January 1, 1987, to June 30, 1994;

     (2)  Six per cent for the period beginning on July 1, 1994, to December 31, 1998;

     (3)  7.25 per cent for the period beginning on January 1, 1999, to June 30, 2009;

     (4)  8.25 per cent for the period beginning on July 1, 2009, to June 30, 2010; and

     (5)  9.25 per cent for the period beginning on July 1, 2010, and thereafter;

on the gross rental or gross rental proceeds derived from furnishing transient accommodations[.] or entering into arrangements to furnish transient accommodations as described in subsection (c).

     (b)  Every operator shall pay to the State the tax imposed by subsection (a), as provided in this chapter.

     (c)  Where transient accommodations are furnished through an arrangement made by a travel agency or tour packager at noncommissioned negotiated contract rates and the gross income

is divided between:

     (1)  The operator of transient accommodations; and

     (2)  The travel agency or tour packager,

the tax imposed by subsection (a) shall apply to each party to the contract with respect to the party's respective portion of the proceeds.

     [(c)] (d)  There is levied and shall be assessed and collected each month, on the occupant of a resort time share vacation unit, a transient accommodations tax of:

     (1)  7.25 per cent on the fair market rental value until December 31, 2015;

     (2)  8.25 per cent on the fair market rental value for the period beginning on January 1, 2016, to December 31, 2016; and

     (3)  9.25 per cent on the fair market rental value for the period beginning on January 1, 2017, and thereafter.

     [(d)] (e)  Every plan manager shall be liable for and pay to the State the transient accommodations tax imposed by subsection (c) as provided in this chapter.  Every resort time share vacation plan shall be represented by a plan manager who shall be subject to this chapter.

     [(e)] (f)  Notwithstanding the tax rates established in subsections (a)(5) and (c)(3), the tax rates levied, assessed, and collected pursuant to subsections (a) and (c) shall be 10.25 per cent for the period beginning on January 1, 2018, to December 31, 2030; provided that:

     (1)  The tax revenues levied, assessed, and collected pursuant to this subsection that are in excess of the revenues realized from the levy, assessment, and collection of tax at the 9.25 per cent rate shall be deposited quarterly into the mass transit special fund established under section 248-2.7; and

     (2)  If a court of competent jurisdiction determines that the amount of county surcharge on state tax revenues deducted and withheld by the State, pursuant to section 248-2.6, violates statutory or constitutional law and, as a result, awards moneys to a county with a population greater than five hundred thousand, then an amount equal to the monetary award shall be deducted and withheld from the tax revenues deposited under paragraph (1) into the mass transit special fund, and those funds shall be a general fund realization of the State.

     The remaining tax revenues levied, assessed, and collected at the 9.25 per cent tax rate pursuant to subsections (a) and (c) shall be distributed in accordance with section 237D-6.5(b)."

     SECTION 6.  Section 237D-6.5, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

     "(b)  Except for the revenues collected pursuant to section [237D-2(e),] 237D-2(f), 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 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.

     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 7.  Section 237D-16, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

     "(a)  The director of taxation shall administer and enforce this chapter.  In respect of:

     (1)  The examinations of books and records and of taxpayers and other persons,

     (2)  Procedure and powers upon failure or refusal by a taxpayer to make a return or proper return, and

     (3)  The general administration of this chapter,

the director of taxation shall have all rights and powers conferred by chapter 237 with respect to taxes thereby or thereunder imposed; and, without restriction upon these rights and powers, sections 237-8, 237-9.3, and 237-36 to [237-41] 237-41.5 are made applicable to and with respect to the taxes, taxpayers, tax officers, and other persons, and the matters and things affected or covered by this chapter, insofar as not inconsistent with this chapter, in the same manner, as nearly as may be, as in similar cases covered by chapter 237."

     SECTION 8.  Section 248-2.7, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

     "(b)  For the period beginning on January 1, 2018, to December 31, 2030, transient accommodations tax and surcharge on state tax revenues allocated to the mass transit special fund pursuant to sections [237D-2(e)] 237D-2(f) and 248-2.6 shall be deposited into the special fund.  All interest earned on the moneys in the special fund shall be credited to the general fund.  The mass transit special fund shall be exempt from the central service expenses deduction under section 36-27 and departmental administrative expenses deduction under section 36-30."

     SECTION 9.  This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

     SECTION 10.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 11.  This Act shall take effect on July 1, 2018.

 

INTRODUCED BY:	_____________________________

 

 

Report Title:

TAT; Travel Agencies; Tour Packagers

 

Description:

Provides that transient accommodations tax is imposed on gross proceeds collected from a customer whether the customer booked a room directly through a hotel or through an online travel company.

 

 

 

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.