Did you get a letter form Hawaii saying that you owe General Excise Tax and/or Transient Accommodations Tax? Here’s what to do about it.
Disclaimer: The information presented on this website is only a basic introduction to Transient Accommodations tax (TA Tax) and General Excise Tax (GE Tax). We strongly recommend that you hire a professional to help you. The information provided here does not replace the Hawaii instructions for filing taxes. Incorrect filings could lead to large tax bills and penalties. Please hire a CPA or an EA to prepare and file the required TA and GE tax returns.
Do you owe General Excise and/or Transient Accommodations Tax?
Let’s clear up some facts about GE Taxes:
- If you have income from self employment (including, contracting, free-lancing, and pretty much any income that shows up on a 1099), you are generally subject to Hawaii General Excise Tax. Business income is also generally subject to GE Tax.
- Property rental activity is subject to Hawaii GE Taxes.
- If you have proceeds form Air B&B or other short term rentals, you are probably subject to both General Excise Tax and Transient Accommodations Tax.
- These taxes are TOTALLY SEPARATE from income taxes. Just because you filed your income tax does not mean you are in compliance with GE or TA taxes.
- There are exemptions to Hawaii General Excise and Transient Accommodations tax, but qualifying for them are generally rare.
- These taxes are imposed on “gross” income. That means the total amount collected before expenses. So you probably owe this tax even if your activity operated at a loss.
Hawaii is “Going After” Unpaid General Excise and Transient Accommodations Taxes
Some landlords are not aware of these taxes or the filing requirements for them. Others “kind of knew” but didn’t do anything about it.
Because there are so many rental operators not paying these taxes, Hawaii recently added a special enforcement task force to find individuals and business that are not in compliance.
Using information from Air B&B, the IRS, and other sources, they have been very effective at sniffing out those who are not in compliance. Assessment letters have been going out accordingly, and they can be very painful and stressful to those receiving them.
If you have not been filing and paying your TA or GE taxes, it is very likely that you will soon receive (or have already received) such a letter.
I can empathize that getting slammed with a bill of thousands of dollars for a tax that you have never even heard of (or sort of knew about) really stinks, I’m sorry to hear if you are in such a situation.
Let me say that while it is certainly bad news, it’s not the end of the world. You can make a payment plan and get caught up.
How to Respond to a TA and/or GE Tax Assessment letter?
First of all, be sure to contact the examiner who’s contact information is on the letter before the due date. If you let this slide, it will become very difficult, expensive, or impossible to fight any resulting assessment.
The next thing you will need to do is to ask what is required of you from the examiner. Most will request that you file your delinquent tax returns for the period in which you had these rentals. They will also want to see that you will be compliant going forward.
Either of these will require a GE and a TA tax license. This form can be found here (opens in a new tab).
One you have the license accounts set up, you can file your late GE and TA tax forms.
At some point, you will likely be facing a tax balance. When you receive a letter from the State of Hawaii with a tax bill on it, there will be a number to call to make a payment plan, if needed.
Unfortunately, other than the help given in this content, we can’t give advice to non-clients on how to deal with any of these issues. We’re sorry about that, it’s not that we don’t want to help – it’s due to liability, etc.
Late filing penalties for Transient Accommodations and/or General Excise Tax
In addition to the tax, there will be penalties and interest.
Penalties include the failure to file penalty, which generally caps out at 25%, and possibly a “willful neglect” penalty, which also mostly caps out at an additional 25%.
If you do not have the money to pay, you may be able to make a payment plan with the state.
You might be able to negotiate with the state for lower penalties.
Success with this requires some sort of leverage, such as being able to pay your balance in a lump sum and right away.
We can prepare and file your GE and TA tax returns for you, but negotiation and representation before the state is not a service we are currently able to provide. If you would like, we can refer you to a local and reasonable GE Tax lawyer if you think that is best for you.