Hawaii's Motor Vehicle Law: Act 251 Explained

Hawaii's Act 251, which concerns the taxation of rental motor vehicles, tour vehicles, and car-sharing vehicles, has been amended several times since its inception. The most recent version of the law, as of 2020, includes a rental motor vehicle surcharge tax of $5 per day or any portion of a day that a rental vehicle is used. This tax is levied on the lessor, with certain exceptions, such as when the lessor is providing a vehicle to replace one that is being repaired. Additionally, there is a tour vehicle surcharge tax that varies depending on the number of passenger seats in the vehicle. It is important to note that Hawaii may have more current or amended versions of this law.

Rental motor vehicle surcharge tax

The State of Hawaii levies a rental motor vehicle surcharge tax on the hire of rental motor vehicles, tour vehicles, and car-sharing vehicles. As of January 1, 2024, this tax rate has increased from $6.00 per day to $6.50 per day (or any portion of a day). This tax rate will continue to increase by $0.50 annually on January 1 of each year through 2027.

The rental motor vehicle surcharge tax forms part of Hawaii's Basic Business Application, Instructions, and Payment Vouchers, which also includes the State of Hawaii's BB-1 (Rev. 2023), VP-1 (Rev. 2022), and VP-2 (Rev. 2023) forms. The tax is administered by Hawaii's Department of Taxation, which provides relevant forms and instructions as pdf files on its website.

The Department of Taxation requires any person representing a taxpayer in a professional capacity to register as a "verified practitioner." Those who are not required to register as a "verified practitioner" must use their full social security number on Form N-848 or register for a "tax matter representative" identification number. The department will not accept prior versions of Form N-848 after June 30, 2017.

For further information on the rental motor vehicle surcharge tax, taxpayers can refer to the Department of Taxation's website, which provides a range of resources, including forms, instructions, brochures, newsletters, and reports. Additionally, the department offers a Taxpayer Services Form Request Line at 808-587-4242 or toll-free at 1-800-222-3229.

Lessees without a valid Hawaii driver's license

Hawaii's Act 251, which relates to motor vehicle rental and tour vehicle surcharge tax, became law in 2018.

The statute explicitly states that the $2 per day surcharge for lessees without a valid Hawaii driver's license shall be deposited into the state treasury. Specifically, it is credited to the respective county subaccount of the state highway fund, which corresponds to the county in which the rental vehicle was driven.

It is important to note that the rental motor vehicle surcharge tax, including the additional charge for lessees without a valid Hawaii driver's license, is levied upon the lessor. However, there are exceptions to this. The tax is not levied on the lessor in cases where the lessor is renting the vehicle to replace a vehicle of the lessee that is being repaired, and the lessor retains a record of the repair order for verification purposes.

This legislation ensures that visitors to Hawaii who do not possess a valid Hawaii driver's license are subject to an additional surcharge when renting or leasing a motor vehicle. The funds generated from this surcharge are directed towards the state's highway fund, contributing to the maintenance and improvement of the state's road infrastructure.

Tour vehicle surcharge tax

In the state of Hawaii, there is a rental motor vehicle and tour vehicle surcharge tax. This is a tax of $5 per day, or any portion of a day, that a rental motor vehicle is rented or leased. This tax is levied upon the lessor and has been in place since 2019 with an increase of $0.50 per year since January 1, 2022. The tax is expected to continue increasing by the same amount each year until December 31, 2027.

The rental motor vehicle surcharge tax does not apply to lessors who are renting a vehicle to replace a vehicle of the lessee that is being repaired or has been stolen and will not be recovered or repaired due to a total loss. In these cases, the lessor or a motor vehicle repair dealer must retain a repair order, stolen vehicle record, or total loss vehicle claim for verification for two years.

In addition to the rental motor vehicle surcharge tax, there is also a monthly tour vehicle surcharge tax. This tax is levied upon the tour vehicle operator and is based on the number of passenger seats in the tour vehicle. For each tour vehicle with over 25 passenger seats that is used or partially used during the month, the tax is $66. For each tour vehicle with 8 to 25 passenger seats that is used or partially used during the month, the tax is $16.

The state of Hawaii also has a county surcharge on the general excise tax (GET) and use tax. The Legislature has authorized counties to adopt this surcharge, with a rate of no greater than 0.5%. This means that businesses may pass on this tax to their customers, but they are not required to do so. The maximum pass-on rates, which include the county surcharge, vary by county and range from 4.4386% to 4.7120%.

Tour vehicle operator

The surcharge tax for tour vehicles is separate from the rental motor vehicle surcharge tax, which is levied on the lessor and has its own set of conditions.

For tour vehicles, the amount of tax depends on the vehicle's passenger capacity. As of the latest amendments in 2022, tour vehicles with over 25 passenger seats incur a surcharge tax of $66 per month for each vehicle used, or partially used, during that month. For tour vehicles with 8 to 25 passenger seats, the surcharge tax is $16 per month for each vehicle used, or partially used, in that period.

It is important to note that these codes may not always reflect the most recent version of the law. For the most current and accurate information, it is advisable to refer to official sources or seek legal counsel.

Lessees with a vehicle under repair

The rental motor vehicle surcharge tax is $5 per day, or any portion of a day that a rental motor vehicle is rented or leased. From January 1, 2022, until December 31, 2027, this tax will increase by $0.50 each year.

The tax exemption also applies if the lessee's vehicle has been stolen and is unrecovered or will not be repaired due to a total loss of the vehicle. In this case, the lessor or motor vehicle repair dealer must retain the stolen vehicle record or total loss vehicle claim for two years.

It is important to note that the tax exemption is for the lessor, not the lessee. The lessor can pass on various fees and taxes to the lessee, such as vehicle license recovery fees, which include motor vehicle weight taxes, registration fees, and other charges. However, if the lessor is renting the vehicle as a replacement for a lessee's vehicle under repair, the lessor is exempt from the rental motor vehicle surcharge tax.

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