Hawaii Administrative Rules
Title 18 - DEPARTMENT OF TAXATION
Chapter 237D - TRANSIENT ACCOMMODATIONS TAX
Section 18-237D-1-07 - "Transient accommodations", defined

Universal Citation: HI Admin Rules 18-237D-1-07

Current through August, 2024

(a) In general. "Transient accommodations" means the furnishing of a room, apartment, suite, or the like which is customarily occupied for less than one-hundred-eighty consecutive days for each letting by a hotel, apartment hotel, motel, condominium property regime or apartment as defined in chapter 514A, HRS, cooperative apartments, or rooming house that provides living quarters, sleeping, or housekeeping accommodations, or other place in which lodgings are regularly furnished to transients for a consideration.

(b) Applicable presumptions. If the room, apartment, or the like is customarily occupied by transients and the hotel or condominium regularly furnishes such accommodations to transients, the following apply:

(1) It shall be presumed that accommodations are transient accommodations if the accommodations are let for a period of less than one-hundred-eighty consecutive days; and

(2) No presumption applies if the accommodations are let for a period of one-hundred-eighty consecutive days or longer.

(3) See section 18-237D-15-01 for further discussion of the one hundred-eighty day presumption set forth in section 237D-15(b), HRS.

(c) "Customarily", defined. "Customarily" means:

(1) By virtue of common usage, the hotel room, apartment, suite, and the like is occupied for less than one-hundred-eighty consecutive days, such as the following:
(A) Hotel rooms which are customarily rented to guests who stay for short periods of time, such as periods of consecutive days and nights which are generally less than a week; or

(B) Condominium apartments which are customarily rented to guests who occupy the apartments for longer periods, such as thirty consecutive days or more.

(C) There may be situations where a hotel room or a condominium apartment is customarily rented to transients, but also is periodically rented for more than one-hundred-eighty consecutive days. For example, a hotel room or condominium which is customarily rented to tourists for periods averaging thirty days, but at times is rented to a construction company for temporary housing of its employees. This temporary housing may last for one year or more whenever the companies have jobs in the Neighbor Islands and housing is required to be provided. Whether the hotel, condominium, or apartment operator periodically rents the room, apartment, or suite for one-hundred-eighty consecutive days or more shall not change an accommodation from a transient to a non-transient accommodation. For the period in which the hotel or condominium is rented for one-hundred-eighty consecutive days or longer, however, the revenue from the rental is not subject to the transient accommodations tax.

(2) Example. Paragraph (1) is illustrated as follows:

During the past 5 years, Convenient Apartments has rented its apartments to Canadian tourist families who vacation in Hawaii. The rental period has averaged 30 consecutive days. For a 1 year period, however, Convenient Apartments agrees to rent all of its apartments to ABC Construction Company for construction workers who are in need of housing during construction of a neighboring resort hotel. Based on these facts, Convenient Apartments is not liable for the transient accommodations tax for the gross rental income received for the 1 year period the accommodations are rented to ABC Construction Company. Following this 1 year period, Convenient Apartments again returns to its practice of renting the apartments for periods ranging from 2 to 179 consecutive days. In this situation, Convenient Apartments is engaged in the business of furnishing transient accommodations because the apartments are customarily occupied by transients for less than 180 consecutive days, and the apartments are regularly furnished for a consideration. The apartments are transient accommodations even though for the period of time apartments are rented to ABC Construction Company, the revenue from such rental is not subject to the transient accommodations tax.

(d) "Regularly", defined. "Regularly" means that the accommodation is systematically, usually but not necessarily continuously or exclusively, rented to transients, such as the following:

(1) Hotels which usually, but not exclusively, furnish rooms to people who only stay for short periods of time; or

(2) A house or apartment rented for a portion of the year to transients and which is rented for the remainder of each year for more than one hundred-eighty days to residents.

(3) Example. Paragraphs (1) and (2) are illustrated as follows:

Each year the owner of a house on the North Shore of Oahu rents the house to a tourist family for four months. The rest of the year, the owner rents the house for more than 180 days to Hawaii residents. The fact that the owner rents the house to transients for a portion of the year makes the house a transient accommodation which is regularly furnished to transients. The transient accommodations tax; therefore, is to be paid for each period the house is rented to transients. There is no transient accommodations tax for the time period the house is rented to Hawaii residents.

(e) Application of the one-hundred-eighty consecutive day rule.

(1) The one-hundred-eighty day rule shall be applied in determining the following:
(A) Whether the room, apartment, suite, or similar facility falls within the definition of a transient accommodation; and

(B) Whether the revenue derived from the room, apartment, suite, or similar facility is subject to the tax.

(2) If it is determined that the facility falls within the definition of a transient accommodation, then the next determination is whether or not the gross rental proceeds results from the rental of the facility for less than one-hundred-eighty consecutive days. The law creates a presumption that if a facility is let for less than one-hundred-eighty consecutive days, the accommodation is furnished for a transient purpose. If the taxpayer is able to prove to the director's satisfaction that the facility is not let for a transient purpose, there shall be no tax imposed. If the facility is let for one-hundred-eighty consecutive days or more, there is no presumption and the burden of proof remains with the taxpayer to prove that the facility is not let for a transient purpose. See section 18-237D-15-01 for further discussion.

(f) Lease of six months or longer broken before one hundred-eighty days have expired.

(1) In general. Where a tenant breaches a lease of one hundred-eighty days or longer by moving out before one hundred-eighty days have expired, the owner may not be deemed to be the operator of a transient accommodation insofar as this particular facility is concerned.

(2) Example. Paragraph (1) is illustrated as follows:

Landlord enters into a lease of 6 months or longer with Tenant. Tenant breaches the lease by moving out after living in the apartment for 60 days. Landlord is not deemed to be an operator of transient accommodations regarding this particular apartment because the lease is for a period in excess of 180 consecutive days.

(3) Tax avoidance scheme. If the department finds that a landlord is continuously entering into leases of six months or longer and the tenants are continuously breaking these leases after one or two months, the burden is upon the landlord to show that the operation is not a tax avoidance scheme and subject to the transient accommodations tax.

(g) Application to time sharing plans. For the period beginning on January 1, 1999, and thereafter, the occupant of a resort time share vacation unit shall be subject to the transient accommodations tax under section 237D-2(c), HRS. Every plan manager shall be liable for and pay the transient accommodations tax as provided under section 237D-2(d), HRS; provided that if the unit is rented the transient accommodations tax under section 237D-2(c), HRS, is not applicable and the operator of the transient accommodations shall be liable for the transient accommodations tax as provided in section 237D-2(b), HRS.

Example. A, a time share interval owner, has use of a time share unit in Waikiki for two weeks at the beginning of August. In 1999, A occupies the unit for the two weeks in August. The plan manager is liable for the transient accommodations tax. In 2000, A exchanges the occupancy of the unit for the two weeks in August for occupancy of a time share unit in California. For 2000, A is not subject to the transient accommodations tax. The plan manager, however, shall be liable for the transient accommodations tax under section 237D-2(d), HRS, if the unit is occupied. The plan manager shall be liable for the transient accommodations tax under section 237D-2(b) if the unit is rented out by the plan manager.

In 2001, A rents the time share unit during the two weeks in August to Mr. Tourist for a consideration. In 2001, the time share unit is being furnished as a transient accommodation and the plan manager is liable for the transient accommodations tax for the two weeks under section 237D-2(d), HRS. A is not liable for the transient accommodations tax.

(h) Application of the transient accommodations tax to gross income received pursuant to a long-term rental agreement. The transient accommodations tax does not apply to transient accommodations that are occupied by a party pursuant to a long-term rental agreement (e.g., over 180 consecutive days) and used by its employees as an integral part of conducting its business operations. A party entering into a long-term rental agreement with an operator is not a "transient" under section 18-237D-1-06(a), because the contracting party is not occupying the premises for a "short and temporary period", but has agreed to rent the accommodations for an extended period. The fact that a contracting party allows its employees to occupy the hotel rooms or apartments for a shorter period of time is irrelevant because the contracting party is considered the occupant of the accommodations under the long-term rental agreement. In addition, transient accommodations that are occupied by a party pursuant to a long-term rental agreement and used by its employees as an integral part of conducting its business operations are not being furnished for a transient purpose.

Example 1. An airline enters into a one-year contract with a hotel operator to rent several rooms for use by its crew members who regularly lay over in Hawaii. The transient accommodations tax does not apply to the gross income received by the hotel operator because the hotel rooms are occupied by the airline for an extended period of time and used by the airline's employees as an integral part of the airline's flight operations.

Example 2. A construction company enters into a nine-month contract with the owner of an apartment complex to rent several units to house its employees at a job site. The transient accommodations tax does not apply to the gross income received by the owner of the apartment complex because the apartments are occupied by the construction company for an extended period of time and used by the construction company's employees as an integral part of conducting the company's construction operations at a particular job site.

Example 3. A corporation enters into a one-year contract with a hotel operator to rent several rooms for use by its employees as part of its bonus/incentive plan. The transient accommodations tax does not apply to the gross income received by the hotel operator because the hotel rooms are occupied by the corporation for an extended period of time and used by the corporation's employees as an integral part of the corporation's bonus/incentive plan.

Example 4. A tour wholesaler enters into a one-year contract with a hotel operator to rent a block of rooms to resell to its customers. The transient accommodations tax applies to the gross income received by the hotel operator despite the fact that the hotel rooms are occupied by the tour wholesaler for an extended period. The accommodations are being furnished for a transient purpose because the rooms are being resold by the tour wholesaler to its customers who will occupy the hotel rooms for a short and temporary period, rather than occupied by the tour wholesaler's employees for some purpose integral to its business operations..

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