Reviewed by Steven Montgomery, EA and Gorden Gates, EA, IRS Enrolled Agents · Updated November 2026
A Rental Property Compliance Notice means the Hawaii Department of Taxation (DOTAX) has records showing you may earn rental income from Hawaii property, and it wants to confirm you’re filing and paying General Excise Tax (GE tax) and, for short-term rentals, Transient Accommodations Tax (TAT).
It isn’t a bill. It is a request to show you’re compliant or to fix the problem. Respond even if the deadline has passed. DOTAX says late replies are still accepted.
Why Did I Get This Notice?
DOTAX gets the information from your rent collector. Under HRS §237-30.5 and §237D-8.5, property managers, booking platforms and rental agents who collect rent for owners must report that activity to DOTAX on Form RCA-1. DOTAX then compares those reports with its records of who holds GE and TAT licenses and files returns.
According to the Honolulu Star-Advertiser (Dec. 18, 2025), the letter says DOTAX has “received information that you may be operating a rental property in Hawaii and may not be properly filing or paying General Excise Tax and/or Transient Accommodations Tax.” A DOTAX spokesperson told the paper the reviews are targeted. The notice gives a response deadline, which the paper reported as 45 calendar days from the date of the notice. Check the date on your own letter.
The notice can cover any residential rental: a whole house, part of a house or an ʻohana unit, a condo, an apartment, a second home or a vacation rental.
“I Already Report My Rent on My Income Tax Return.” Isn’t That Enough?
No. This is the most common misunderstanding behind these notices. Hawaii rental income can be subject to three separate taxes:
| Tax | Who owes it | Returns |
|---|---|---|
| Hawaii income tax | All rental owners | Form N-11 (residents) or N-15 (nonresidents and part-year residents) |
| General Excise Tax (GE tax) | All rentals of Hawaii property, short- or long-term | GE license, periodic G-45 returns and annual G-49 |
| Transient Accommodations Tax (TAT) | Rentals of less than 180 consecutive days | TAT license, periodic TA-1 returns and annual TA-2, plus county TAT paid to the county |
GE tax applies to gross rental income, before mortgage interest, repairs or management fees. It also applies to any GE tax you pass on to your tenant. For 2026, the GE rate on rent is 4% plus a 0.5% county surcharge, so 4.5% in every county. The TAT rate is 11% starting January 1, 2026.
My Property Manager Handles the Taxes. Am I Still Responsible?
Yes. DOTAX says plainly that the owner is “ultimately responsible” for filing and paying GE and TAT, even when a property manager files for you. If the manager files late or incorrectly, the owner can be held liable for the tax, penalties and interest. DOTAX recommends asking your manager for copies of returns and payment confirmations. If you have a manager, ask for those first. It’s the fastest way to know where you stand.
How to Respond, Step by Step
1. Read the notice and note the deadline
Find the response date, the Letter ID and the one-time password. You need the last two to reply online.
2. Figure out which situation you’re in
- You’re fully compliant under your own name. Reply with your GE and TAT license numbers.
- You report the rental through an LLC, a trust or another business. Reply through Hawaii Tax Online or by mail with the GE and/or TAT license numbers you use and the name of the business tied to them. This lets DOTAX match your rental to the right account.
- The notice is wrong. For example, you don’t own the property, it isn’t rented, or it was sold. Submit DOTAX’s Declaration Form with an explanation. Online, log in to Hawaii Tax Online (hitax.hawaii.gov) and use Correspondence → “Reply to Rental Property Compliance Notice” with your Letter ID and one-time password. By mail, send it to Department of Taxation, Attn: Compliance Verification – RCA, P.O. Box 259, Honolulu, HI 96809-0259.
- You haven’t been filing GE and/or TAT. Don’t just send a reply. Get registered and get the missing returns filed. See the next section.
3. Keep copies
Save a copy of everything you send and the confirmation number from Hawaii Tax Online.
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If You Haven’t Been Filing: How Far Back and What It Costs
How far back? Further than most owners expect. When a GE or TAT return was never filed, Hawaii law lets the tax be assessed at any time (HRS §237-40(b) and §237D-9(d)). DOTAX’s rental guidance says there is “no statute of limitations for non-filers” and recommends filing at least 10 years of back returns if you’ve been renting that long. See how many years of back taxes the IRS and Hawaii usually require.
Penalties DOTAX lists for rental owners:
- Failure to file: 5% of the unpaid tax per month, up to 25%.
- Failure to pay within 60 days of a timely-filed return: 20% of the unpaid tax.
- Fraudulent failure to pay: up to 50%.
- Interest: two-thirds of 1% per month.
- Operating without a GE license: $500, or $2,000 for a cash-based business.
- Short-term rentals: advertising without your TAT license number carries fines of at least $500 a day for a first violation, $1,000 a day for a second and $5,000 a day after that.
Get licensed. Register for GE and TAT licenses with Form BB-1, online through Hawaii Tax Online (“Register New Business”) or on paper. If your annual GE or TAT liability is more than $4,000, you have to file monthly and electronically. Not e-filing when required can add a 2% penalty.
Filing back years correctly matters. Each year needs the right periodic and annual returns, and the gross receipts have to match what your manager or platform reported on RCA-1. Your Hawaii income tax returns should also agree with your GE and TAT figures. If the bill is more than you can pay at once, Hawaii offers payment plans through Hawaii Tax Online. Hawaii’s offer in compromise has strict published requirements. We can tell you whether either one fits.
Once Hawaii assesses the tax, it generally has 15 years to collect it. See how long Hawaii can collect back taxes.
How We Help Hawaii Rental Owners
Our Enrolled Agents, Steven Montgomery, EA and Gorden Gates, EA, represent property owners before DOTAX and the IRS. Here’s what that covers:
- We pull your DOTAX account records.
- We rebuild gross rents from manager statements and platform reports.
- We prepare the missing G-45, G-49, TA-1 and TA-2 returns.
- We answer the notice for you.
- When there’s a balance, we request penalty relief where it’s available and set up a payment plan.
We start with a fixed-fee analysis to understand your tax situation and identify the next steps. We then provide upfront quotes for any overdue tax returns and the recommended resolution work. Each quote explains what’s included. If additional work becomes necessary, we explain the change and agree on any additional fee with you before proceeding.
In one recent case, a Hawaii client hadn’t filed GE tax for 11 years. The original balance of $37,714 was resolved at $17,927. See more case results. Results depend on each client’s facts and circumstances. Past results do not guarantee a similar outcome.
Frequently Asked Questions
Is a Rental Property Compliance Notice an audit?
No. It’s a compliance check based on rent-collector reports (Form RCA-1). It asks you to show you’re filing GE tax, and TAT if it applies. An audit or assessment can follow if the issues aren’t resolved.
I missed the deadline. Is it too late?
No. DOTAX says to reply as soon as possible using the methods in the notice, even after the deadline.
Do long-term rentals owe GE tax?
Yes. GE tax applies to rental income from Hawaii property no matter how long the rental is. TAT applies only to rentals of less than 180 consecutive days.
My LLC holds the property. Why was the notice sent to me?
DOTAX may not have linked your name to the business’s license. Reply with the GE and TAT license numbers and the business name so it can match the accounts.
Don’t Ignore the Letter
A notice you deal with now is usually much cheaper than an assessment later. If you’re not sure what you owe, or you haven’t been filing, talk to us before you reply. See our Hawaii GE and TAT tax help page for more.
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This article is general information, not tax advice for your specific situation.
