Owning a Honolulu vacation rental can be rewarding, but the tax stack can feel confusing. If you have heard about OTAT on top of TAT and GET, you might wonder what gets taxed, who files, and how to budget. You are not alone. In this guide, you will learn how O‘ahu’s county transient accommodations tax fits into Hawaii’s statewide taxes, how to calculate your total obligation, and the practical steps to stay compliant and protect your cash flow. Let’s dive in.
What OTAT is and how it fits
Honolulu’s OTAT is a county tax on transient accommodations that applies in addition to Hawaii’s state Transient Accommodations Tax and the state General Excise Tax. Each tax has its own rules and filing. You calculate them on your gross rental proceeds for short stays, not your net profit.
You must also follow Honolulu’s zoning and permitting rules for short‑term rentals. Tax compliance is separate from land use compliance, and you need both.
Three taxes you must plan for
- State TAT: Hawaii’s tax on gross rental proceeds from transient stays, administered by the Hawaii Department of Taxation.
- County OTAT: Honolulu’s county‑level transient accommodations tax that layers on top of the state TAT.
- GET: Hawaii’s tax on business gross income that generally applies to your short‑term rental receipts.
Why it matters for cash flow
These taxes apply to gross rental receipts, so they directly affect your gross‑to‑net yield. Whether a booking platform collects and remits any of these taxes for you will change your cash flow during the month, but you remain responsible for accurate filing and payment unless you are formally relieved by law or contract.
How the tax stack works
The basic formula
Start with your gross rental receipts for the period. Then apply each tax to the appropriate base.
- Let R = gross rental receipts for the period
- Let S = state TAT rate (decimal)
- Let C = Honolulu county OTAT rate (decimal)
- Let G = GET rate (decimal)
Calculations:
- State TAT owed = R × S
- County OTAT owed = R × C
- GET owed = R × G
Total taxes owed before any credits or marketplace remittances = (R × S) + (R × C) + (R × G).
Bases and tax‑on‑tax notes
TAT and OTAT are generally calculated on gross rental proceeds. GET is a tax on gross business receipts. Some Hawaii taxes can be applied to amounts that include taxes collected from guests, which can create a tax‑on‑tax effect. Confirm current guidance from the Hawaii Department of Taxation on whether TAT or OTAT amounts are included in your GET base for your reporting period.
Platform collections and your responsibility
Many booking platforms collect and remit lodging taxes in some jurisdictions. When a platform remits on your behalf, it can reduce your out‑of‑pocket payments during the month. You should still obtain documentation and reconcile those remittances to your listings and booking periods. Unless you are formally relieved, you remain responsible for correct filing and payment.
Registration and filing
Before you list: pre‑launch checklist
- Confirm your zoning and permit status under Honolulu’s rules for transient rentals. Tax registration does not replace permit compliance.
- Register for TAT and GET accounts with the Hawaii Department of Taxation, and register with the City and County of Honolulu for OTAT if required.
- Determine whether your booking platforms will collect and remit any taxes. If they do, request written statements and periodic remittance reports.
Filing cadence and deadlines
After registration, the Department of Taxation will assign filing frequencies for TAT and GET based on your liability. Honolulu may have its own OTAT filing and payment schedule. Calendar your due dates and file on time to avoid penalties and interest.
Bookkeeping to stay audit ready
Monthly reconciliation routine
Track each reservation separately, including guest name, dates, gross rental charge, cleaning or other fees, platform fees, refunds, cancellations, and any taxes collected from guests. Reconcile platform payout reports with your bank deposits and your booking ledger each month. Keep third‑party platform statements and settlement details with your records.
Record retention
Retain tax and booking records for a minimum period consistent with Hawaii Department of Taxation guidance. Three years is commonly cited by many tax authorities, but keep records longer if you file amended returns or if an audit is possible. Maintain clear expense records for deductible operating costs and capital improvements.
Budgeting for taxes
Build a tax reserve
- Confirm current rates for S, C, and G.
- Compute your total effective percentage S + C + G.
- If a platform remits any taxes, subtract that portion from what you need to set aside.
- Move that percentage of gross receipts into a separate account each payout cycle so funds are ready when returns are due.
Example worksheet you can plug into
Use this template with current rates you confirm on the day you file:
- Gross rental receipts for the month = R
- State TAT owed = R × S
- County OTAT owed = R × C
- GET owed = R × G
- Operating deductions you track separately = platform fees + cleaning + management
- Net before mortgage and other owner costs = R − operating deductions − (TAT + OTAT + GET)
When in doubt, make an estimated payment rather than risk underpayment penalties.
Risks, penalties, and common issues
Common pitfalls
- Misunderstanding tax bases and treating taxes like pass‑throughs when they must be included in gross receipts.
- Relying on platform statements without reconciling to your bookings and payouts.
- Failing to register and file on time, which leads to penalties and interest.
- Mixing personal and rental funds, which complicates calculations and raises audit exposure.
If you discover an error
Consult a tax professional with Hawaii lodging tax experience. Amended returns and payment plans can reduce further penalties in many cases. Keep contemporaneous documentation of any platform collections and remittances to support credits or corrections.
Investor due diligence
Model net yields correctly
Always model cash flow using the exact current rates for state TAT, Honolulu OTAT, and GET. Consider potential tax‑on‑tax effects if they apply. Layer in vacancy, seasonality, platform fee changes, and the cost of compliance.
Work with experienced pros
A CPA or tax advisor who works with Hawaii lodging taxes can verify base treatments, confirm filing schedules, and prepare reconciliations or amendments. Property management accounting software that supports TAT, OTAT, and GET buckets can streamline your monthly process and reduce mistakes.
Ready to run the numbers for a specific Honolulu property and align tax planning with your acquisition or hold strategy? Contact Unknown Company to Request Your Instant Property Valuation or Schedule a Private Consultation.
FAQs
What is OTAT in Honolulu?
- OTAT is the City and County of Honolulu’s transient accommodations tax that applies to gross rental proceeds for short‑term stays, and it is charged in addition to Hawaii’s state TAT and the state GET.
Do Airbnb or VRBO collect Honolulu OTAT for hosts?
- Some platforms may collect and remit certain lodging taxes in specific jurisdictions, but you should confirm what is covered for your listings and keep the platform’s remittance statements because you remain responsible for accurate filing and payment.
How often do I file OTAT, TAT, and GET returns in Honolulu?
- Filing frequency is assigned after registration and can be monthly, quarterly, or another cadence based on liability; Honolulu may have its own OTAT schedule, so confirm your assigned frequencies and calendar the due dates.
What records should Honolulu short‑term rental owners keep for taxes?
- Keep a reservation‑level ledger with guest details and charges, platform payout and fee reports, bank deposit records, tax collected from guests, and supporting documents for returns, and retain them for at least the minimum period recommended by the Department of Taxation.
Are these Honolulu lodging taxes based on rent or profit?
- TAT and OTAT are generally calculated on gross rental proceeds and GET is on gross business receipts, not net profit, so plan your pricing and reserves accordingly and confirm current base rules before filing.
