Hawaii Administrative Rules
Title 18 - DEPARTMENT OF TAXATION
Chapter 237D - TRANSIENT ACCOMMODATIONS TAX
Section 18-237D-1-02 - "Fair market rental value", defined
Current through February, 2024
As used in this chapter, "fair market rental value" means an amount equal to one-half the gross daily maintenance fees that are paid by the owner, are attributable to the time share unit, and include maintenance costs, operational costs, insurance, repair costs, administrative costs, taxes, other than transient accommodations taxes, and other costs including payments required for reserves or sinking funds. The taxpayer shall use gross daily maintenance fees, unless the taxpayer proves or the director determines that the gross daily maintenance fees do not fairly represent fair market rental value taking into account comparable transient accommodation rentals or other appraisal methods.
Example 1. A, a time share interval owner, pays $700 annually in maintenance fees for a time interval period of seven days. The daily fair market rental value is calculated as follows:
(1) Divide the annual maintenance fees for the time interval period by seven days to obtain the gross daily maintenance fee ($700 ÷ 7 days = $100).
(2) Divide the gross daily maintenance fee by two to obtain one-half the gross daily maintenance fee ($100 ÷ 2 = $50).
To determine the total fair market rental value for the interval period, the daily fair market rental value is multiplied by seven (the number of days that the resort time share vacation unit is occupied by the time share interval owner or by some other person but not rented).
Example 2. Assume the same facts as in Example 1, except that A only occupied the resort time share vacation unit for five days. To determine the total fair market rental value, the daily fair market rental value is multiplied by five days (the number of days that the unit was occupied).
Example 3. B, a time share interval owner, has a time interval period of fourteen days. B occupied the resort time share vacation unit for seven days and in violation of the rules of the time share vacation plan, rented the remaining seven-day period to someone else. The plan manager is liable for the transient accommodations tax on the daily fair market rental value of the unit for the fourteen days. B is not liable for the transient accommodations tax.
Example 4. C, a time share interval owner, has a time interval period of seven days. C was charged an additional amount by X for the rental of the unit for three additional days. Although C occupied the unit for ten days, the daily fair market rental value would be multiplied by seven days to obtain the total fair market rental value that is subject to the transient accommodations tax on time share occupancy. X is subject to the transient accommodations tax and the four percent general excise tax on the gross rental income received from C for the three additional days. X may visibly pass on these taxes to C.
Example 5. D, a time share interval owner, has the right to use a two-bedroom, two-bath unit for seven days. D occupied the unit for the seven days; however, instead of using the whole unit, D decided to use only one bedroom and one bath. The rest of the unit (one bedroom and one bath) was "locked out" and D can bank this balance and use it another time. D will not be subject to the transient accommodations tax on the occupancy of the whole unit. The portion of the unit which was "locked-out" would not be included in the total fair market rental value subject to the transient accommodations tax on time share occupancy. This allocation may be based on the ratio of the square footage of the "locked out" portion to the total square footage of the whole unit.
