Yes. You are subject to, at a minimum, Hawaii Transient Accommodations Tax and General Excise Tax. You should also be filing a Hawaii non-resident income tax return.
Transient Accommodations Tax, or TAT, is a tax imposed on short-term rentals by the State of Hawaii. In common terms, it’s a “hotel tax” that also applies to vacation rentals.
(2020) 10.25% on the gross rental or gross rental proceeds (with some exceptions.) See, HRS Chapter 237D-2. In earlier periods, the TA rate was 9.25%, 8.25%, and 7.25%.
General Excise Tax, or GET, is a tax imposed on every business or commercial transaction subject to the tax by the State of Hawaii. See, HRS Chapter 237. GET is a “super sales” tax that applies to virtually every transaction including retail sales, personal services, rents, etc. There are extremely limited exceptions and some narrow special rates.
(2020) 4% state-wide plus a surcharge of up to .5% in depending on the county, for all gross receipts subject to the tax. Honolulu currently has a .5% county surcharge.
Best guess: You have probably been identified by a computer search based on federal tax returns. Second guess: you have applied for a refund of your HARPTA withholding and the DoTax recognized you did not file GE and/or TA returns. Other reasons could be as varied and include simple bad luck.
Its possible but unlikely unless you have specifically made this arrangement with them (in which case you probably would not be reading this Q & A). Your property manager has probably collected TA and GE from your short-term renters but probably has not remitted it to the State of Hawaii (they probably sent it to you.)
Yes. Hawaii has a penalty for not having a license. Its also unlikely that you have been paying GE and TA taxes in the absence of a license. Hawaii has a range of (most likely) civil and criminal sanctions for failure to comply with the tax laws.
Tax licenses can be applied for with the State of Hawaii Department of Taxation.
You can be criminally charged with failure to file if you wilfully failed to file these returns, maximum penalties are $25,000 fine and up to one year incarceration, per unfiled year (fines for corporations are higher). Civil penalties can include 25% failure to pay plus 25% failure to file, based on amount due, for unfiled and unpaid returns.
There is no statute of limitations for unfiled returns, barring an assessment by the State. See more on this subject elsewhere on this website.
Penalties can be reduced based upon "reasonable cause" and pursuant to regulations and directives issued by the Department of Taxation. Potential penalty (and interest) reduction is highly dependent on facts and circumstances.
TA is a tax on gross rental receipts. GE is a tax on gross receipts. Both taxes apply whether or not your unit produces a “profit.”
The State Department of Taxation can file a tax lien, which will attach to any real property you own in Hawaii. Hawaii has a centralized Bureau of Conveyances that permits a single tax lien filing to attach to properties in each county.
The Department of Taxation can then wait for you to sell your property or, possibly, seek to foreclose the tax lien. Also, the Department of Taxation can attempt to levy your property manager or rental agent to intercept any net proceeds of rental activity.
Depending upon your financial institution, the DoTax could attempt to levy your financial accounts. Depending upon your employer, the DoTax could garnish your wages.
The DoTax could also refer your tax matter to the Civil Recoveries Division of the Attorney General’s Office to pursue a civil judgment. In theory, once a judgment was obtained, the State could hire a debt collector in your state to pursue the judgment.
