Lingle calls for
tax check of B&Bs

Industry reps respond
that the state unfairly
taxes an illegal activity

Gov. Linda Lingle is asking the state Tax Department to make sure bed-and-breakfast vacation rentals are paying their fair share of taxes.

The action concerns industry representatives who say vacation rentals are paying taxes, but worry that many of the units are not sanctioned by city law.

In a speech to the Kailua Chamber of Commerce on Wednesday, Lingle said the state used the Internet to look up vacation rentals in Hawaii, then turned the names over to the Tax Department.

"Now, with our integrated state tax system, we are able to cross-reference those names with whether people in fact paid the transient accommodations tax and paid the general excise tax," Lingle said.

"That is all going on right now."

However, Kurt Kawafuchi, state tax director, said he was not sure if the project had been implemented yet. He said it was definitely in the planning stage.

According to Kawafuchi, the Tax Department is waiting for information from the hotel industry before moving to prosecute B&B owners for not paying their taxes.

"We are working with the hotel industry. They have compiled a pool of bed-and-breakfast rentals. I asked them to give us a few good leads," Kawafuchi said.

Gary Slovin, representing the B&B/TVU Licensing Committee, said he did not think Lingle's concerns were justified.

In her speech at the Mid-Pacific Country Club, Lingle said she had asked Marsha Wienert, state tourism adviser, to look into the situation after receiving many e-mails from upset Kailua residents.

"Most of the e-mail came from those who don't like bed-and-breakfasts in Kailua because it is turning their nice residential community into one where people come and they are partying all day and night," Lingle said. "People ask whether they are paying their appropriate taxes."

Slovin called it ironic that the state wants people to pay taxes on an operation on Oahu that is not allowed.

He said the city stopped issuing new B&B zoning about 20 years ago, so any B&Bs opened since then are not legal.

"Government is saying, 'We won't let you be legal, but we want you to pay taxes on it,'" Slovin said.

A bill requested by the B&B committee that would give the state power to direct the counties to draft rules for all vacation rental operations failed to win support in the Legislature this year.

"There are a substantial number of people in the business, and on Oahu and other counties (the B&B business) is essentially illegal," Slovin said.

Wienert said the B&B operators and vacation rental names were gathered in a joint project between the Hawaii Tourism Authority and the state Department of Business, Economic Development and Tourism.

The search of Internet listings found 9,000 vacation units in Hawaii, with 333 in Kailua.

Tonic Bille, chairwoman of the B&B committee, attended Lingle's speech and said the criticism in Kailua "is coming from a small, vocal group."

"I was disappointed that she (Lingle) didn't present the other side. The majority pay both their GET and TAT taxes," Bille said.

Lingle said that besides checking to make sure the B&B operators are paying the 7.25 percent tourist accommodation tax and the 4 percent general excise tax, she thought the counties should check on whether the vacation rentals were in homes with a homeowner exemption.

"Because I come from a county government background, on the Council and as mayor, I said, 'You should cross-reference whether these people are claiming a home exemption and yet are listed on the Internet charging $7,000 a week to stay in Lanikai," Lingle said.

Wienert said the names of vacation rental owners and bed-and-breakfast operators have also been sent to the four county mayors.

Lingle and Wienert stressed that they did not want the state to get involved in regulating vacation rentals.

The Hawaii Tourism Authority announced last month that 9,000 vacation rentals and B&B units were added to 2,500 units already accounted for.