HONOLULU (HawaiiNewsNow) - A state judge today blocked an effort by the Hawaii Department of Taxation to force Airbnb to hand over names, addresses and financial records of thousands of vacation rental owners.
The state argued it needs the records to find out which owners are not paying general excise and transient accommodations taxes.
“It’s difficult for (the Department of Taxation) to identify exactly how many taxpayers are not complying. But we just don’t know who these people are," said Deputy Attorney General Kristen Sakamoto.
But Airbnb said the state is conducting a fishing expedition and that the subpoena violates the vacation rental owners’ privacy rights.
“If you’re going to ask for 16,000 people’s records, I think you’ve got to show that most violated the law," said Jacob Sommer, an Airbnb attorney
Circuit Judge James Ashford said the state failed to meet the legal thresholds to use its subpoena power.
In its court papers, the state Attorney General’s office said that Airbnb officials had admitted Hawaii hosts who list properties on their site aren’t fully complying with state tax laws.
The state cited the company’s prior testimony in the state Legislature where it said that if it collected the tax from its Hawaii-based hosts, it could generate $41 million in new revenue in two years.
But Ashford disagreed, saying the company’s testimony in the Legislature was not an admission of guilt.
“I’m candidly chiding you to be very careful with the language that you use. Just to be blunt, do not exaggerate. I do not appreciate it," Ashford told Sakamoto.
The Attorney General’s office needed the court’s approval to serve a subpoena because the investigation targets a group of taxpayers, not specific individuals.
According to court documents, the Attorney General’s office said they have the right to these receipts and other documents because Airbnb hosts have already contractually agreed that the company may disclose their information to government entities.
Today’s ruling places the burden back on the state Legislature to get the vacation rental operators to pay their fair share of taxes.
Lawmakers, who need the money, are considering several bills to do that.
“We want to ensure that taxes are being collected because we know that these Airbnb establishments are bringing in commercial users," said state Rep. Della Au Belatti, (D) Makiki.
“There’s a tax that’s placed on our resources ... We have roads to take care of, we have highways and beaches and trails to take care of."
For years, lawmakers have sought to address the problems caused by short-term, illegal vacation rentals. Among them: That the rentals ramp up an already hot housing market and push out local residents.
Experts say the number of vacation rental listings have skyrocketed in recent years, due in large part to online advertising.
On Oahu alone, there are an estimated 3,700 illegal vacation rentals and only 830 “grandfathered” legal listings, which were around before the county outlawed the practice in 1986.