Earlier this year, the State of Hawaii made the controversial move to cut all of the countys’ allocation of transient accommodations tax they collect. Instead, they’re allowing counties to levy their own tax. Well, that time has come, and Kauai County is the first to boost hotel tax with its own surcharge.
As I covered in the past, the state typically shared some of the transient accommodations tax it collects to the various counties. Originally, the thought was that doing so helped counties pay for extra wear on infrastructure caused by visitors. However, that thought process was turned upside down earlier this year when state officials sought to help plug a budgetary hole by eliminating the county cut. In place of the allocation, state lawmakers passed a measure allowing counties to access a hotel surcharge of up to 3%. And, at the time, nearly every county said they were looking into it. They had no choice, really, since a significant portion of their budget vanished. But, now, we’re seeing the first such surcharge go into effect.
Kauai County is the First to Boost Hotel Tax
Last Friday, Kauai Mayor Derek Kawakami signed Bill 2829 into law. Under the new law, Kauai is adding a 3% surcharge on top of the state’s 10.25% transient accommodations tax. That makes the overall hotel tax on the island 13.25%. Or, in monetary terms, you’ll pay $13.25 for every $100 you pay for your room. However, like Oahu, Kauai County also has a 4.712% general excise tax. So, overall, you’re looking at a total tax liability of 17.962%. Or, put another way, nearly $18 in taxes for every $100 you spend on your room. Fun.
Oh, and the new surcharge goes into effect on October 1. And, yes, it does apply to existing reservations.
No one likes paying more taxes. But, without the allocation from the state, the counties were left high and dry. In fact, as I’ve said before, this entire setup was a move by the state to raise taxes but make the counties look like the bad guys. Unfortunately, that’s exactly what’s happening. It’s just that Kauai County is the first one to admit that it needs to do this and pull the trigger. I fully expect the other three to do the same.