Hotel tax should be even across the board

As a matter of tax equity, Hawai'i lawmakers must find a way to close the so-called "loophole" in the tax on hotel room rentals — the transient accommodations tax.

As the law is now interpreted, rooms sold through bulk buyers, or wholesalers, are effectively taxed at a lower rate than those rented directly by hotels.

There is an argument that this is, indeed, what the Legislature intended when it first wrote the transient accommodations tax more than a decade ago. This argument goes that the tax is on the original "sale" of the use of the hotel room — to a customer at the front desk or to a package wholesaler. If the wholesaler further marks up the room (or perhaps even cuts the price as a loss-leader) that is not the business of the taxman.

The counterargument is that this was designed as a tax on the amount a visitor spends to occupy a hotel room. This makes sense if one thinks of the transient accommodations tax as a levy designed to offset the expense of providing government services to the visitor.

This point of view argues for a tax on the full amount paid for the room, whether bought directly from a hotel or through a wholesaler.

Because of the complexity of sorting out the relationship between hotel, Mainland wholesaler and eventual customer, Senate Tourism Chairwoman Donna Kim has suggested that wholesalers pay a surcharge of $7.25 a day for each hotel room rented.

It may be that the surcharge will have to be subjected to some closer math before it is imposed. But the general idea of creating an even tax playing field for rooms sold through wholesalers and retailers makes sense.

Tax policy works best when it is seen as fair to all concerned. This means the same rules should apply to all.