Category: hi2012leg

Hawaii Tax Review Commission Recommends Increasing GET to 4.5%

On August 28, 2012, the Hawaii Tax Review Commission released its “Study of the Hawaii Tax System: Final Report” .  While most of its findings were bland, it recommended the more controversial action of raising the GET from 4% to 4.5%:

Increase the GET rate to 4.5 percent

Hawaii’s GET rate is among the lowest in the country for states with this sort of broad-based consumption tax. While Hawaii has not raised its rate in over 35 years, over half of the states have raised this rate since 2000 – in many cases multiple times. Given the need to restore structural balance, an incremental increase in the GET rate is the logical method to improve the long-term financial outlook. While the GET is considered regressive, other recommended changes would reduce some of that impact.

Legislators on both sides of the aisle voiced their vehement opposition to this proposal in the report.  Click here to read more.  While increasing the GET seems to be dead on arrival, other proposals made in the report may get a legislative boost:

  • Make permanent Act 105 (2011),  which eliminated certain GET exemptions and deductions (i.e. for subcontracting and subleasing).
  • Capping open ended tax credits such as the renewable energy and film tax credits with targeted grants and loan programs.
  • Restoring the temporary increases on transient accommodation tax and rental cars, shifting the tax burden to tourists.
  • Expand nexus.

These proposals build upon and tweak what has already passed the legislature and could provide added revenue and reduced tax expenditures with limited political backlash.

Of course, any Hawaii tax debate would not be complete without a discussion of gambling.  Not surprisingly, the report declined to endorse gambling as a source of added tax revenue.  Chinatown underground game rooms aside, Winner’z Zone has been operating “legal” casinos all over Honolulu for quite a while now.

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Amazon.com Must Collect Use Tax For Sales to California

California State Board of Equalization News Release, August 31, 2012:

“Beginning September 15, 2012, a new law takes effect (Stats. 2011, ch. 313 (AB 155) that expands the types of out-of-state retailers required to register with the California State Board of Equalization (BOE) and requires them to begin collecting and remitting use tax on sales of tangible personal property to California consumers. The law applies to out-of-state retailers that have substantial nexus with California consumers. This includes any out-of-state retailer that has sold more than $1 million to California consumers in the past year and has had more than $10,000 in sales referred by an affiliate operating in California.”

Fortunately, for now, Amazon and other out of state retailers need not collect Hawaii use tax.  So far Hawaii lawmakers have been unable or unwilling to impose the taxes on out of state retailers such as Amazon.  However, comments made at a recent Hawaii State Bar Association Tax Section meeting by Johnell Nakamura, of Cades Schutte, former Hawaii Department of Taxation Rules Officer, suggested that there were some in the Department that feel that Hawaii should tax out of state retailers based on an “economic nexus” theory such that physical nexus with the state would no longer be required.  Current Rules Officer at the Department, Kevin Wakayama, did not dispute that statement, although it was unclear as to his true stance on the issue.

No Hawaii Tax Clearance Fees…. Yet.

Even though the Hawaii legislature passed Act 180 (2012) authorizing fees for tax clearances (that paper you get from the tax office that says you don’t owe any tax) the department of taxation has graciously decided not to charge anything!  I suspect understaffing deserves the credit.

When the department gets around to implementing these fees, you will have to pay $20 for a tax clearance application and $5 for each certified copy of the tax clearance.

Sutherland’s Jack Trachtenberg Interview with Bloomberg on Tax Whistleblower Laws

Click here to watch the interview on YouTube.

In the interview, Sutherland state and local tax attorney, Jack Trachtenberg, explains that tax whistleblower laws (aka False Claims Act) allow  individuals or the state attorney general to bring suit on behalf of the state for unpaid taxes in exchange for a portion of the recovery.  Some states even permit the recovery of treble damages for such lawsuits.  Trachtenberg noted that some state whistleblower laws create Catch 22 situations for sales tax collection: on the one hand, companies may decide to over collect sales tax in an abundance of caution to guard against an attorney general suit but, on the other hand, may also be subject to a lawsuit by customers for that same over collection.

Hawaii legislators considered and shot down a tax whistleblower law (S.B. 2947) during the 2012 session that was modeled after the federal whistleblower law.