LINDA LINGLEKURT KAWAFUCHIGOVERNORDIRECTOR OF TAXATIONJAMES R. AIONA, JR.

SANDRA YAHIRO

LT. GOVERNOR

DEPUTY DIRECTOR

STATE OF HAWAII

DEPARTMENT OF TAXATIONP.O. BOX 259
HONOLULU, HAWAII 96809

PHONE NO: (808) 587-1510
FAX NO: (808) 587-1560

October 11, 2005

DEPARTMENT OF TAXATION ANNOUNCEMENT NO. 2005-17
RE:Adoption of Amendments to Hawaii Administrative Rules Sections 18-237D-1
through 18-237D-12, Relating to the Transient Accommodations Tax

The Department of Taxation (Department) is pleased to announce the adoption ofamendments to Section 18-237D-1 through 12, Hawaii Administrative Rules (HAR)
which became effective on June 3, 2005.
Highlights of New Rules•§18-237D-1-02—This new section clarifies the application of the TAT to rentalof time share intervals by adding a definition of "fair market rental value" andproviding examples drawn in part from Tax Facts 98-4.

•§18-237D-1-03—Renumbers the previous §18-237D-1-02 and amends thissection to include an exclusion for forfeited deposits and business interruption
insurance proceeds (drawn from Tax Information Release (TIR) No. 92-7), andupdate examples to reflect the 7.25% tax rate.

•§18-237D-1-04—This new section adds a definition of "occupant" and provides
examples illustrating the definition.

•§18-237D-1-06—Renumbers the previous §18-237D-1-04 and adds examples
relating to the application of the TAT to temporary dwellings resulting fromnatural disasters.

•§18-237D-1-07—Renumbers the previous §18-237D-1-05 and amends thissection to clarify the application of the TAT on time share occupants and adds
examples drawn from TIR No. 98-4 which explain the application of the TAT toincome received pursuant to a long-term rental agreement by a contracting party
for use by its employees.

•§18-237D-2-01—Amends the section to add references to the 7.25% tax rate andto the taxation of time share occupancy.

Department of Taxation Announcement No. 2005-17
October 11, 2005
Page 2 of 2•§18-237D-3-01—Adds an example illustrating the TAT exemption for military
personnel seeking permanent living accommodations (drawn from TIR No. 98-4),
and clarifies the exemption for accommodations furnished to students during
summer employment. The section is further amended to clarify the TAT
exemption for diplomats and consular officials having valid tax-exempt cards
issued by the Department of State and clarifies that there is no exemption from theTAT to an operator renting to non-military employees of the federal government
or for state government employees.

•§18-237D-4-01, §18-237D-4-02, §18-237D-4-03, §18-237D-4-04, §18-237D-601. §18-237D-6-02, §18-237D-7-01, §18-237D-7-02, §18-237D-8-01, and.§18237D-9-01 —Amendments to these sections extend the requirements of that
section to time share plan managers and resort time share vacation plans.

•§18-237D-12-01—Amendments to this section require time share plan managers
to keep records of fair market rental value.

The TAT rules had not been amended since July 18, 1994. These amendments
update the TAT rules to reflect the subsequent statutory amendments and administrative
guidelines issued by the Department and will assist the public in proper application of theTAT, easing the burden of administration and compliance.
Current forms and other tax information may be downloaded from theDepartment’s website at: www.state.hi.us/tax. If you know which tax form orpublication you need, please call the Department’s request line at 808-587-7572, or tollfree from the neighbor islands and continental U.S. at 1-800-222-7572. This service isavailable 24 hours a day, 7 days a week.

KURT KAWAFUCHI
Director of Taxation
HAR Sections Explained: HAR Sections 18-237D-1 through 18-237D-12