TAXWatch: Revenue Raisers Already Sent to the Governor

We’ve previously warned that our legislature has a dogged focus on new taxes – 

“ARF!  Don’t make fun of me like that!”

It’s the Hawaii State Tax Watch Doggie, with a report on recent bills!

Q:        What would you like to report?

A:        Our Legislature is wasting no time pushing those revenue raisers!  A couple of them cleared the legislative process already and were sent to the Governor’s desk on March 20th.

Q:        What does that mean?

A:        When a bill is sent to the Governor during session, he needs to decide whether to sign or veto the bill within 10 days rather than the usual 45.  So, bills could become law much earlier than June or July when most bills are approved.

Q:        What else has gone up to the Governor’s office already?  I wrote about SB 94last week which would try to force presidential candidates to post their tax returns, and I know that’s gone upstairs.

A:        SB 1361would raise estate taxes on Hawaii estates valued at over $10 million.  It would apply a top tax rate of 20%.  That would make us tied with Washington state as the highest state estate tax rate in the country.

Q:        We want to be top dog that much?

A:        (Facepaw)  I’ll forget you said that.  I guess they really want to soak the rich folks who die here.  That’s dangerous.  You need to remember that these folks easily can jump on a plane and be out of here.  According to the Census Bureauwe lost more than 10,000 people a year to the mainland for the last three years.

Q:        Voting with their feet, I guess.

A:        Then, there is SB 396, relating to marketplace facilitators.

Q:        What’s that all about?

A:        The state has tried really hard to go after online sellers like Amazon, Wayfair, and Overstock.  Previously those sellers could offer products to Hawaii customers without paying Hawaii tax, and that  gave them an advantage over local stores.  Last year, following a state-friendly U.S. Supreme Court ruling, our state adopted a law requiring many of those businesses to register and pay tax.

Q:        So there was a problem with that?

A:        The online sellers also set up “marketplaces.”  Under that system they said they weren’t selling their own products, but were selling on behalf of other stores like Dan’s Dog Food in Plano, Texas.  So the marketplace said Dan’s Dog Food isn’t registered or paying tax in Hawaii, so the marketplace had no responsibility to collect or pay GET.  Amazon, for example, was only paying tax on about half of its sales because the other half was marketplace sales.

Q:        Why Dan’s Dog Food?

A:        I’m hungry.

Q:        So SB 396 will change this?

A:        Yes.  It says that if an online marketplace collects money on a sale to Hawaii, the marketplace needs to pay GET as the retailer.  The business on whose behalf the marketplace is selling is treated as selling its goods to the marketplace.

Q:        So the marketplace pays 4%, and Dan’s Dog Food would pay the half-percent wholesale rate GET.

A:        Yes.  I don’t know if Dan’s will actually pay, but that’s the theory.  And the marketplace facilitators that don’t handle money will be required to report all of their Hawaii sales, with names and addresses of the buyers, to our tax office. 

Q:        Anything else on its way to the Gov’s desk?

A:        Not right now, but we’ll keep you informed!  Woof!

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Tom Yamachika is the President of the Tax Foundation of Hawaii, a private, nonprofit educational organization dedicated to informing the taxpaying public about the finances of our state and local governments in Hawaii. Tom is also a tax attorney in solo practice and has been since early 2013. Prior to 2013, he was with the accounting firm Accuity LLP, which was formed in 2006 from the Honolulu office of Coopers & Lybrand (which later became PricewaterhouseCoopers). Before that, he served as an Administrative Rules Specialist in the State of Hawaii Department of Taxation from 1994 to 1996, where he drafted rules, interpretive releases, and legislation on several different state taxes. Prior to that, he practiced litigation and tax law with Cades Schutte Fleming & Wright in Honolulu.