LIHU‘E — The Kaua‘i County Council is putting support behind the administration’s request to implement a 3% county transient accommodations tax.
Bill No. 2829, which would allow the administration to establish this tax, passed at its first hearing last Wednesday, with councilmembers in favor of finding ways to fill the roughly $15 million per year the state was expected to give the county in TAT revenues.
State House Bill 862, now Act 1 of the 2021 special session, eliminated the distribution of TAT revenues to the counties, and allows counties at their discretion to create their own visitor-accommodation tax of up to 3%.
The state typically pulls in about $103 million from its 10.25% TAT, a portion of which was previously distributed to the counties. So this proposed 3% tax administered by the county would be on top of that.
Officials suggested that the administration would like to see the tax up and running by Oct. 1.
County Finance Department Director Reiko Matsuyama projected that to break even, the county would need to charge between 2.3% and 2.4%.
This proposed bill establishes a 3% TAT on all gross rentals, gross-rental proceeds and fair-market rental value considered taxable to be collected each month. The proposed bill also applies to visitor brokers, travel agencies and tour packagers who arrange transient accommodations at noncommissioned contracted rates, the bill states.
In a previously reported projection, per every 1% TAT increase, the county would see about $6 million in revenue.
“We are not looking at full $17 to $19 million because we only have three-quarters (of the year left), assuming pre-COVID levels would continue based off the calculation of TAT,” County Managing Director Michael Dahilig said.
The money the county would be collecting would essentially be to cover ongoing expenses.
“It’s not a new stream of funding,” Matsuyama said.
When the state cut off the county’s TAT cut in fiscal year 2020 due to the pandemic, the administration and council opted to utilize the reserve fund to balance the budgets of FY21 and FY22.
Matsuyama said the county is working with neighbor counties as well as the state’s Department of Taxation to figure out implementation.
County Council Chair Arryl Kaneshiro suggested he’d like to see the state do the assessment and then forward the county’s share.
“It seems like such a waste of resources,” Kaneshiro said. “They (the state) assess (general excise) tax and they cut us a check for it. I see it as the same thing with TAT. For us to have the same system and pay two different sets of employees to do the same thing, I don’t see it as being anywhere near efficient.”
The council will take up the tax bill at a public hearing next month.
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Sabrina Bodon, editor, can be reached at 245-0441 or sbodon@thegardenisland.com.
