LIHUE, Hawaii (AP) — The Kauai County Council has passed a bill adding a 3% surcharge to the state’s hotel tax after the state stopped sharing revenue from the tax with the counties.
Mayor Derek Kawakami plans to sign the legislation, said Sarah Blane, his chief of staff. The measure was due to take effect on Oct. 1.
The county expects revenue from the tax to replace the roughly $15 million Kauai used to receive each year from its share of the state’s transient accommodation tax, The Garden Island newspaper reported Thursday.
The Maui County Council was scheduled to vote on a similar bill Friday.
The state for many years distributed a portion of the revenue it collected from the 10.25% tax on hotel room stays and other short-term rentals to the counties but stopped doing so when the coronavirus pandemic squeezed its budget.
State lawmakers then passed legislation repealing the county allocation, and instead gave counties the authority to levy their own transient accommodations tax up to 3%.
Kauai County has said it expects about $6 million in revenue for every 1 percentage point of the tax.
The bill was first introduced at the council’s July 21 meeting by Council Chair Arryl Kaneshiro, at the request of the county.
Unlike the county’s surcharge on the state’s General Excise Tax, the county will have to collect revenue from this levy, rather than leaving this duty to the state. The council and county administration discussed the strain it would put on the county’s Department of Finance, but the department has made it clear the county could handle the new workload.