Maui County is intensifying efforts to collect millions in overdue transient accommodations taxes from property owners who have failed to comply since the tax was implemented in November 2021. The county has sent out over 1,200 letters urging prompt payment or exemption requests.
Key Takeaways
- Maui County is attempting to recover millions in overdue transient accommodations taxes.
- Property owners received letters demanding payment within 15 days.
- The county may seek court injunctions against non-compliant vacation rentals.
- The tax was introduced after the state removed counties’ share of the statewide tax.
Background on the Tax
In November 2021, Maui County began charging a 3% transient accommodations tax (TAT) after the state eliminated the counties’ share of the statewide tax revenue. Each county was allowed to impose its own tax on top of the state’s rate of 10.25%. However, the county has struggled to collect these taxes, leading to significant delinquencies.
Recent Actions by Maui County
Recently, the county sent out 1,223 letters to property owners who have not paid the tax. These letters demand payment within 15 days or the submission of exemption requests for reservations made before the tax took effect. Failure to comply may result in the county seeking court injunctions to prevent owners from operating vacation rentals.
Maria Zielinski, Deputy Director of the Department of Finance, stated that these letters are part of a series of communications aimed at addressing delinquent taxes. The county is also preparing to consider a proposal to phase out short-term rentals to address housing shortages exacerbated by the 2023 wildfires.
Financial Implications
A December report by Maui County Auditor Lance Taguchi revealed that over $9.3 million in transient accommodations taxes was delinquent as of June 30, 2022. The county had anticipated over $56.9 million in tax revenues for fiscal year 2022 but only collected $40 million, necessitating corrections to financial statements.
The county’s initial approach labeled the tax as “voluntary,” which contributed to the collection issues. Additionally, the county lacked the necessary staffing and software to effectively manage tax collection when the tax was implemented. As of April 2023, only two of the eight positions designated for tax collection were filled, but this has since improved to six.
Impact on Property Owners
Property owners are feeling the pressure as they receive notices of overdue taxes. Kari Alexander, an accountant, reported that some of her clients owe thousands in taxes for bookings made in late 2021. Many property owners are now seeking exemptions and providing necessary documentation to address their tax obligations.
Tom Croly, who operates a bed and breakfast, noted that the new tax has increased the overall tax burden on his bookings, which now approach 20%. He expressed concern over declining bookings, attributing the downturn to both the new tax and the aftermath of the wildfires.
Future Considerations
The county’s efforts to collect overdue taxes come at a critical time as it navigates the potential phasing out of short-term rentals. A study estimated that the county could lose between $128.3 million to $280.9 million in various taxes if short-term rentals are eliminated. However, the mayor has questioned the accuracy of these figures, and the county is conducting its own analysis.
As Maui County continues to address its financial challenges, property owners are reminded of their responsibilities regarding tax compliance. The county’s actions reflect a broader effort to stabilize its revenue streams while managing the impacts of recent disasters on the local economy.
