Honorable Robert Bunda

President of the Senate

Twenty-Third State Legislature

Regular Session of 2005

State of Hawaii

Sir:

Your Committees on Tourism and Intergovernmental Affairs, to which was referred S.C.R. No. 42 entitled:

beg leave to report as follows:

The purpose of this measure is to request the Department of Taxation (DOTAX) to enforce the collection of the transient accommodations tax on unregistered vacation rentals, and requesting the counties to enforce the zoning laws against illegal operations of vacation rentals.

Your Committees received testimony in support of this measure from DOTAX and Hawaii Government Employees Association. Comments were submitted by the Maui Vacation Rental Association.

All transient accommodations are required under section 237D-4, Hawaii Revised Statutes, to register with the Department of Taxation and to obtain a transient accommodations tax (TAT) license to legally operate. Transient accommodations include "bed and breakfast" operations, which are located in private residences in residentially zoned neighborhoods and in which the owner also occupies the same premises.

Your Committees find that many bed and breakfast operations are unregistered and unlicensed, and operate illegally. Your Committees further find that some operators of bed and breakfasts and of transient residential vacation rentals are in violation of county zoning laws as they lack the required permit. Any loss of revenue from the TAT has a wide-ranging effect on broad categories of programs and county revenues that depend on the TAT. This measure would enhance collections of the TAT.

Your Committees have amended the fifth whereas clause to clarify that many bed and breakfast operations are unregistered, unlicensed, and operate illegally, and that this is not necessarily typical as the original measure had previously stated.

As affirmed by the records of votes of the members of your Committees on Tourism and Intergovernmental Affairs that are attached to this report, your Committees concur with the intent and purpose of S.C.R. No. 42, as amended herein, recommend that it be referred to the Committee on Ways and Means, in the form attached hereto as S.C.R. No. 42, S.D. 1.