State of Hawaii, Department of Taxation
Transient Accommodations Tax on Timeshare Occupancy
Questions and Answers
Effective January 1, 1999, Act 156, Session Laws of Hawaii 1998, provides that the transient accommodations tax is imposed on the occupant of a timeshare unit at the rate of 7.25% of the unit’s fair market rental value.
Note: the 2014 transient accommodations tax on timeshares is currently 9.25%.
Following you will find answers to questions relating to the law from the timeshare interval owner’s perspective as copied from Tax Facts – a publication issued by the Department of Taxation, State of Hawaii.
Why is the occupancy of resort timeshare vacation units being taxed?
The Legislature found that timeshare interval owners are similar to transient individuals occupying hotels for tax purposes. Act 156 quotes the following language from The Law and Business of Time-share Resorts: “The purchaser is essentially purchasing tomorrow’s vacation at today’s prices and dollars. The contract price is paid or financed all at one and there is no worry about skyrocketing hotel rentals or inflation.” Transient individuals occupying a resort timeshare vacation unit utilize State and county facilities in a manner similar to transient individuals occupying hotels. Act 156, therefore, taxes the transient occupancy of resort timeshare vacation units under the transient accommodations tax in a manner similar to hotels being taxed on their hotel rental.
As a timeshare interval owners, am I responsible for filing the tax returns for the transient accommodations tax on timeshare occupancy?
No. The timeshare plan manager is responsible for collecting the tax, filing the tax returns and paying the tax to the Department of Taxation.
A plan manager is a person who undertakes the duties, responsibilities and obligations of managing a resort timeshare vacation plan or is required to act for a resort timeshare vacation plan under the Transient Accommodations Tax Law.
The transient accommodations tax on timeshare occupancy is 7.25% on the unit’s fair market rental value. What is fair market rental value?
Fair market rental value is defined as an amount equal to one-half the gross daily maintenance fees that are paid by the owner, are attributable to the timeshare unit and include maintenance costs, operational costs, insurance, repair costs, administrative costs, taxes, other than transient accommodations taxes and other costs including payments required for reserves or sinking funds. The taxpayer shall use gross daily maintenance fees, unless the taxpayer proves or the Director of Taxation determines that the gross daily maintenance fees do not fairly represent fair market rental value taking into account comparable transient accommodation rentals or by other appraisal methods.
I am a timeshare interval owner and pay $700 annually in maintenance fees. My timeshare interval period is 7 days. How do I determine the timeshare unit’s fair market rental value?
The daily fair market rental value is calculated as follows:
- Divide the annual maintenance fees for the time interval period by 7 days to obtain the gross daily maintenance fee ($700 / 7 days = $100).
- Divid the gross daily maintenance fee by 2 to obtain one-half the gross daily maintenance fee ($100 / 2 = $50).
To obtain the total fair market rental value for the interval period, the daily fair market rental value is multiplied by the number of days that the resort timeshare vacation unit is occupied by the timeshare interval owners or by some other person (but not rented). The number of days that the timeshare unit was rented from the timeshare interval owners should not be included in this calculation. See Question number 7.
I am a timeshare interval owner. My time interval period is 7 days. I only occupied the unit for 5 days. Will I be subject to the transient accommodations tax on timeshare occupancy for the entire 7 days?
No. Since you occupied the unit for only 5 days, the daily fair market rental value would be multiplied by 5 days to obtain the total fair market rental value that is subject to the 7.25% transient accommodations tax on timeshare occupancy.
I am a timeshare interval owner. My time interval period is 7 days. I decided not to stay at the unit so I let my friend stay at the unit for the 7 days. I did not charge my friend to stay there. Will my friend be subject to the transient accommodations tax on timeshare occupancy?
Yes. The transient accommodations tax on timeshare occupancy is imposed on the occupant of the timeshare unit. An occupancy is defined as an owner of a resort timeshare vacation plan or other person occupying the resort timeshare vacation unit. Since your friend occupied the unit for 7 days, the daily fair market rental value would be multiplied by 7 days to obtain the total fair market rental value that is subject to the 7.25% transient accommodations tax on timeshare occupancy.
I am a timeshare interval owner. My time interval period is 14 days. I occupied the unit for 7 days and rented the unit to someone else for 7 days. Will I be subject to the transient accommodations tax on timeshare occupancy for the entire 14 days?
No. Since you occupied the unit for only 7 days, the daily fair market rental value would be multiplied by 7 days to obtain the total fair market rental value that is subject to the 7.25% transient accommodations tax on timeshare occupancy.
However, since you received rental income from the rental of the unit for 7 days, you must be licensed under both the Transient Accommodations Tax Law and the General Excise Tax Law. You must pay to the State the transient accommodations tax at the rate of 7.25% on the gross rental or gross rental proceeds derived from furnishing transient accommodations (the timeshare unit) and report the transient accommodations tax on the regular transient accommodations tax return. Since you are subject to the transient accommodations tax for the 7 days that the timeshare unit was rented, the plan manager shall not be liable for the transient accommodations tax on timeshare occupancy for thos 7 days. You must also pay to the State the general excise tax at the rate of 4% on the gross income derived from the rental of the timeshare unit. These licensing and payment requirements for timeshare interval owners existed prior to the enactment of Act 156.
I am a timeshare interval owner. My time interval period is 7 days. I extended my vacation and stayed at the timeshare unit for 10 days. I was charged an additional amount to stay at the unit for the additional 3 days. Will I be subject to the transient accommodations tax on timeshare occupancy for the 10 days?
Although you occupied the unit for 10 days, the daily fair market rental value would be multiplied by 7 days to obtain the total fair market rental value that is subject to the 7.25% transient accommodations tax on timeshare occupancy.
Since the timeshare unit was rented to you for the additional days, the person who rented the unit to you would be subject to the 7.25% transient accommodations tax and the 4% general excise tax on the rental income received from you. The person may visibly pass on the cost of the taxes to you.
I am a timeshare interval owner and have the right to use a 2 bedroom, 2 bath unit for 7 days. I occupied the unit for 7 days; however, instead of using the whole unit, I decided to use only 1 bedroom and 1 bath. The rest of the unit (1bedroom, 1bath) was “locked out” and I can bank this balance and ut it at another time. Will I be subject to the transient accommodations tax on timeshare occupancy on the fair market rental value of the whole unit?
No. The portion of the unit which was “locked out” would not be included in the total fair market rental value that is subject to the transient accommodations tax on timeshare occupancy. This allocation may be based on the ration of the square footage of the “locked out” portion to the total square footage of the whole unit.
If you have any questions regarding the “lock out” of timeshare units, please contact your plan manager.
I am a timeshare interval owner. My time interval period runs from the end of December, 1998, through the beginning of January, 1999. If I occupied the unit for 5 days in December and for 2 days in January, will I be subject to the transient accommodations tax on timeshare occupancy for the entire 7 days?
No. Since the transient accommodations tax on timeshare occupancy is effective January 1, 1999, the daily fair market rental value would be multiplied by 2 days to obtain the total fair market rental value that is subject to the 7.25% transient accommodations tax on timeshare occupancy.
Please note: The current 2014 transient accommodations tax rate is 9.25%
For additional Hawaii tax information and forms, you can visit the website at: www.state.hi.us/tax/tax.html
For additional information about timeshares, check out our video and blog resources:
Video:
Hawaii Timeshare Taxes
Blog articles:
Why you should use a real estate broker in Hawaii when buying or selling a timeshare in Hawaii
Syed Sarmad, Principal Broker for Advantage Vacation
