Hawaii's tax department will begin obtaining information from Airbnb regarding hosts renting out homes in the state now that a court has approved the department's petition to subpoena the information.
The First Circuit Court of Hawaii on November 6 approved the Department of Taxation’s petition to subpoena Airbnb for the data, a decision that followed the court's October 28 approval of an agreement between Airbnb and Hawaii governing the sharing of host information.
The tax department's win follows its unsuccessful 2018 effort to more broadly and forcefully subpoena Airbnb for information about its Hawaii hosts, which the first circuit court rejected in February. The state filed a revised petition in June and reached an agreement with Airbnb.
“We are pleased to have reached a compromise with the Hawaii Department of Taxation that provides adequate data to help them enforce against individuals who they suspect may have skirted tax laws, while including safeguards to protect hosts' privacy,” Airbnb said in a statement emailed to Tax Notes.
According to the agreement, within 28 days of the subpoena’s issuance, Airbnb will provide the identities and a variety of other information regarding the "1,000 Airbnb hosts with the highest combined revenues for Hawaii listings for the calendar years 2016 through 2018." Hosts will be notified 14 days in advance that their information is being turned over to the tax department, except for those already complying with state tax laws, who will only have their tax registration numbers furnished to the state. For hosts that sue to prevent their data from being turned over, Airbnb won’t disclose their data until the suit is resolved.
Airbnb will also turn over “anonymized information" on all other hosts in the state earning at least $2,000 from Airbnb rentals for any year between 2016 and 2018. And for two years after the subpoena’s approval, the tax department “may submit targeted requests to Airbnb for de-anonymized data” regarding those hosts, subject to conditions similar to the provision of data for the first 1,000 hosts.
The goal of the agreement is to enable the department to better pursue taxes from short-term rental operators — many of which are not paying taxes and are operating in violation of local codes. The deal is less intrusive than the state’s unsuccessful 2018 bid to subpoena 10 years' worth of various records from the company about the short-term home rentals; the company repeatedly cited its desire to protect the privacy of its hosts.
Airbnb in its statement noted that it remains “committed to working with state leaders on an agreement to voluntarily collect and remit taxes on behalf of our host community and generate a projected $64 million annually to the state."
Airbnb has proposed to collect taxes for the state repeatedly and unsuccessfully. Gov. David Ige (D) had vetoed legislation, including in 2016 and 2019, that would have allowed the company to become a de facto tax collector. His most recent veto statement argued that allowing Airbnb to collect and remit taxes on home-rental operations that operate in violation of local laws “could be viewed as legitimizing these operations.”