Legal Opinion: Hawaii’s Short-Term Rental Regulation Preempted By Federal Law

FORMER AG DAVID LOUIE: “THERE ARE GRAVE CONCERNS ABOUT THE LEGALITY OF 2015’S ACT 204…”

News Release from The Internet Association, July 5, 2016

Honolulu, HI – Today, former state attorney general David Louie issued a letter on behalf of the Internet Association highlighting legal concerns regarding 2015’s Act 204 and urging Governor David Ige to allow HB 1850 to become law.  HB 1850 is a bill that would allow Airbnb, HomeAway, FlipKey and other interested home sharing platforms to collect and remit taxes on behalf of their user community in Hawaii.

“The Internet industry strongly supports the passage of HB 1850, which provides significant public benefits through higher compliance rates and tax revenues. Short-term rentals allow Hawaii’s residents to earn needed income from their homes, provides a boost to the local economy, and can generate tens of millions of dollars in tax revenue for the state,” said Michael Beckerman, President and CEO of the Internet Association.

“There are grave concerns about the legality of 2015’s Act 204, which may conflict with federal law responsible for the success of the internet. It is our hope that Governor Ige will allow HB 1850 to become law as it will be a more effective means of maximizing tax revenue from the short-term rental industry,” said David Louie, attorney for the Internet Association.

The letter highlights the numerous benefits of HB 1850, a bill supported by the Governor’s own tax department, including streamlined collection of tax revenue for short-term rentals on home sharing platforms and important legal problems in implementing Act 204 from the 2015 legislative session.  It raises concerns that, without the implementation of HB 1850, significant portions of Act 204 remain in conflict with CDA Section 230 of federal law, which protects internet platforms from liability for user generated content.

“Significant portions of Act 204 conflict with and are likely preempted by Section 230,” the letter states.  “For example, if a third-party user fails to post any of the required information on a listing, liability would automatically attach to the website operator. As a result, the statute imposes liability on both websites and newspapers by treating them as the ‘publisher or speaker’ of the information (or lack thereof) provided by another in direct contravention of Section 230. This impermissible conflict makes Act 204 likely unenforceable and invalid.”

“The intermediary liability protections in Section 230 have allowed the internet to scale and spurred unprecedented innovation and economic growth,” Beckerman concluded.  “HB 1850 provides Hawaii streamlined mechanisms for revenue collection and averts an expensive and lengthy legal challenge.”

To read the full letter, click here.

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