Hawaii – Tax on Complimentary and Gratuitous Accommodations

SALT Report 1217 – The Hawaii Department of Taxation released guidance regarding the taxability of transient accommodations that have been provided on a complimentary or gratuitous basis.  Since the passage of Act 103, the Complimentary Room Tax, “a daily tax of $10 shall be imposed on every room furnished on a complimentary or gratuitous basis.”

Transient accommodations may be provided through a variety of situations and in many cases it may not be clear whether the accommodation was provided gratuitously. Therefore, the following examples have been provided to clarify when the Complimentary Room Tax is applicable and when it is not.

Free Rooms

Rooms labeled as “free” may be considered furnished for consideration under certain circumstances, for example:

  • Rooms rented for three nights with the fourth night free are considered to be furnished for consideration for the entire stay
  • Rooms provided as part of an event package, such as a wedding, are not subject to the complimentary room tax because they are furnished as part of the package for which consideration was received
  • Rooms provided to guests in exchange for the guest’s attendance at a timeshare or other presentation are not subject to the room tax because the guest’s attendance is consideration given in exchange for the room, and
  • Rooms provided free to a charity
  • Rooms provided to guests as extra night stays to make up for unsatisfactory conditions.
However, if rooms are provided gratuitously to a purchaser of an event package after the package is booked and paid for, the complimentary room tax applies because no consideration was received for these rooms.
Nominal Charges
Rooms furnished for a nominal charge, such as $1 per night, are understood to be furnished for no consideration, and are subject to the complimentary room tax. The determination of how much consideration is not nominal consideration or what is considered below market price will be made on a case-by-case basis.

Personal or Employee Use

Personal use of a room is not subject to the complimentary room tax. For example, allowing friends or family members to stay in a room that is generally used as a room in a bed and breakfast operation is not subject to the complimentary room tax, so long as the use is not a commercial use. However, the transient accommodations tax may apply.

An employee’s use of a room pursuant to an employment contract where the employee is provided room and board as part of his or her salary or compensation is not subject to complimentary room tax or transient accommodations tax. However, the complimentary room tax may apply if the employee is not using the room for a business purpose.

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