A recent inquiry to the Honolulu Star-Advertiser's Kokua Line has brought attention to the Hawaii Department of Taxation's (DOTAX) recent communications with rental property owners. The question posed to the column was whether the DOTAX is broadly sending letters to all rental owners or if the department is specifically targeting those suspected of non-compliance with General Excise Tax (GET) and/or Transient Accommodations Tax (TAT) regulations. The inquiry suggests a landlord received a letter despite their belief that taxes are properly filed and paid, leading them to believe that this is a widespread audit.
While the Kokua Line provides a platform for general inquiries, it does not explicitly state the DOTAX's exact procedure for selecting recipients of these letters. However, previous reports shed some light on the issue. In a December 2020 article in the Honolulu Star-Advertiser, the DOTAX was already initiating contact with landlords who had not properly participated in the Rent Relief and Housing Assistance Program. This indicates that the department actively investigates potential tax evasion based on external data. Isaac W. Choy, the DOTAX Director at the time, was quoted as saying, “The Department of Taxation has already started the process of identifying and contacting these landlords. It’s a fairness issue; people who circumvent their tax responsibilities make everyone else pay more.”
This proactive approach implies that DOTAX likely uses various data points to identify potential tax discrepancies, not just those tied directly to the Rent Relief Program. Data from other sources may include property records, rental listings, and even complaints. Consequently, any landlord could be contacted, even if they believe they are in compliance. Landlords needing more information on tax obligations may find resources on the Hawaii Department of Taxation website. Understanding and adhering to these regulations is crucial to avoid penalties and ensure fair tax practices within the state.
Rental property owners should ensure they are correctly accounting for and paying all applicable taxes. This includes GET, which is a tax on gross receipts from doing business in Hawaii, and TAT, which is levied on the gross rental income from transient accommodations. The Department of Taxation offers helpful publications and resources to assist taxpayers in meeting their tax obligations.
