Airbnb attorney Jacob Sommer speaks during a hearing on the company’s vacation rentals in Hawaii, Thursday, Feb. 7, 2019 in Honolulu. First Circuit Court Judge James Ashford denied Hawaii’s move to compel Airbnb to hand over a decade of vacation rental receipts as the state examines whether hosts have been paying the equivalent of hotel and sales taxes. (AP Photo/Audrey McAvoy)
HONOLULU (AP) — A judge on Thursday denied Hawaii’s move to compel Airbnb to hand over a decade of vacation rental receipts as the state examines whether hosts have been paying the equivalent of hotel and sales taxes.
Hawaii First Circuit Court Judge James Ashford said the state did not sufficiently show that Airbnb users may have failed to comply with tax laws.
In addition, the state did not establish that the information wasn’t available from other sources, he said. Hawaii wants the records to find out which hosts have not been paying taxes involving their vacation rental and bed-and-breakfast listings.
Many Hawaii vacation rentals are operated illegally, making tax collection more challenging. In Hawaii, the necessary permits for short-term rentals are issued by counties which have varying regulations. Honolulu, the most populous county, has not issued new permits since 1989. It’s estimated to have 800 legal vacation rental and bed-and-breakfast units and about 10 times as many illegal ones.
Airbnb has argued the subpoena amounts to an unprecedented, “massive intrusion” into the private data of 16,000 hosts. Subpoenaing the records would violate state and federal law, the company said.
Hawaii is the latest state to tangle with Airbnb. In New York City, a U.S. judge last month shelved a city law that would have required home-sharing platforms to reveal hosts’ names and other information.
New York City adopted the law so it could crack down on illegal listings and impose fines.
In that case, a U.S. District Judge Paul A. Engelmayer ruled that forcing home-sharing platforms to reveal a “breathtaking” amount of information about their businesses seemed unconstitutional. He issued a preliminary injunction halting implementation of the law.
Hawaii said in court filings that Airbnb acknowledged in the past its hosts have not all paid taxes. It pointed to legislation Airbnb proposed in previous years that would have allowed it to register as a Hawaii tax collection agent to ensure its hosts do pay their taxes. A court filing from Hawaii’s attorney general said such legislation would not be necessary if hosts were tax compliant.
But Ashford said he did not see where Airbnb had made such an admission. He told the state to be careful with the language it uses and “do not exaggerate.”
He said the state successfully established that some Airbnb hosts might have violated tax laws, but the question was how many.
Kristen Sakamoto, state deputy attorney general, told Ashford that not all hosts would need to have violated tax laws for the state to subpoena the records.
Jacob Sommer, Airbnb’s attorney, countered that the standard must be higher.
“If you’ve going to ask for 16,000 people’s records, I think you’ve got to show that most have violated the law,” he said.
Sakamoto told Ashford the state attempted to narrow its subpoena by talking with Airbnb but found the company uncooperative. She said the state did not know how many hosts the company had in Hawaii until last week when Airbnb filed a response to its subpoena request.
“It’s a bit unfair that they hold all the information and are unwilling to work with (the state Department of Taxation) in trying to find a subpoena with a scope that would address the issue of identifying the unknown taxpayers,” she said.
Krishna Jayaram, a spokesman for the state attorney general, said his office was evaluating its next steps.
Hawaii wants to ensure owners pay transient accommodation taxes imposed on rooms or homes rented for less than six months. It also wants to collect the general excise tax — a levy similar to a sales tax — from rental operators.
The state needed the court’s permission to serve the subpoena because its investigation targets a group of taxpayers and not specific individuals.
The Honolulu City Council and mayor have been unable to agree on more effective regulations despite several attempts over the years.
By AUDREY McAVOY
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