Short-term rentals and cruise ships in Hawaii face new tax to fund environmental projects

Lodging taxes on short-term rentals (STRs) in Hawaii will rise as a new statewide “green fee” — the first of its kind in the U.S. — is scheduled to go into effect next year. 

According to a bill passed by the Hawaii State Legislature, the state Transient Accommodations Tax (TAT) will rise from 10.25% to 11% starting January 1, 2026, with the extra revenues dedicated to an  environmental fund. A new 11% tax will also be levied on cruise ship cabins based on the amount of time a cruise ship is docked at Hawaii ports. Hawaii has not previously taxed cruise ship trips.

The law specifies that TAT is intended to be applied fully and equitably whenever a transient accommodation is furnished within the state, including for STRs. Governor Josh Green has said he will sign the measure, which he must do by July 9.

The fee is expected to raise $100 million annually to be used for environmental projects such as conservation, renewable energy, and disaster mitigation efforts. This could include clearing invasive grasses that pose a fire risk, such as those that burned in the deadly Lahaina wildfires in 2023. Those fires, which killed more than 100 people and caused an estimated $13 billion in damages, were the catalyst for the new fee. 

The fee could also fund projects such as shoring up eroding beaches on Waikiki or funding the use of hurricane clips to help homes withstand strong storms.

“Given the devastation we saw on Maui in August of 2023, this measure is crucial because it will help us to deal with wildfire risk resulting from the climate change crisis. It is a small increase in taxes travelers pay, and therefore, the impact from travel to Hawaiʻi will cover our needs for climate change. It is foundational to our ability to provide a safe and secure Hawai‘i for our children, our residents, our visitors and the environment,” Green said.

Lodging When the new fee goes into effect in 2026, the TAT rate will change, but tax compliance obligations will remain the same for STR operators. 

Income from STR operations is subject to state TAT and general excise tax (GET). STR business owners may pass GET and TAT on to their guests. For tax purposes, STRs in Hawaii are defined as stays of less than 180 consecutive days.

In some counties, STR proceeds are also subject to a state GET surcharge. Hawaii counties may also levy their own transient accommodations tax (TAT) surcharge in addition to the state’s TAT. Hawaii, Honolulu, Kauai, and Maui counties have all established TAT surcharges since the law allowing them to do so was passed in 2021.

Hawaii STR operators are required to register with the Hawaii Department of Taxation for GET and TAT licenses/Tax ID numbers. For state-administered TAT and GET, as well as county GET surcharge taxes, operators must file lodging tax returns with the state and pay at the time of filing. For county TAT surcharge taxes, hosts file returns with the state, but pay the taxes to county tax authorities.

While STR marketplaces such as Airbnb and Vrbo collect taxes on behalf of their hosts in many states, they’re not allowed to do so in Hawaii. Operators are responsible for collecting and remitting them to state and local tax authorities.

Avalara MyLodgeTax can help vacation rental hosts automate and simplify lodging tax compliance on the local and state level, including tax registration and filing. For more on vacation rental lodging taxes in Hawaii, see our state vacation rental tax guide. If you have tax questions related to vacation rental properties, drop us a line and we’ll get back to you with answers.