Hawaii Enacts Economic Nexus Legislation

Effective Date: July 1, 2018 and applies to taxable years beginning after December 1, 2017

Threshold: $100,000 or more or 200 or more separate transactions

Measurement Date: Current or immediately preceding calendar year

Includable Transactions: Gross sales; Marketplace sales included towards the threshold for individual sellers

When You Need to Register Once You Exceed the Threshold: The first of the month following when the threshold is met

Hawaii has enacted economic nexus legislation, effective July 1, 2018 and applicable to taxable years beginning after December 31, 2017. Per the legislation, a person is engaged in business in Hawaii and subject to general excise tax, whether or not the person has a physical presence in the state, if in the current or immediately preceding calendar year:

• The person’s gross income or gross proceeds from the sale of tangible personal property delivered in Hawaii, services used or consumed in Hawaii, or intangible property used in Hawaii is $100,000 or more; or
• The person sold tangible personal property delivered in Hawaii, services used or consumed in Hawaii, or intangible property used in Hawaii in 200 or more separate transactions.

(Act 41 (S.B. 2514), Laws 2018, effective July 1, 2018, and applicable to taxable years beginning after 2017)

UPDATE: On June 27, 2018, the Hawaii Department of Taxation issued an announcement about the South Dakota v. Wayfair decision. Hawaii’s legislation is effective July 1, 2018.

UPDATE: On July 10, 2018, the Hawaii Department of Taxation walked back from the previous plan to enforce the state’s economic nexus legislation retroactively and amended their previous announcement. The notice states, ” This Announcement amends and supersedes Announcement No. 2018-10, previously issued on June 27, 2018. Taxpayers are advised that the Department will not retroactively administer Act 41, which is effective July 1, 2018.” Read the amended announcement here. The announcement also states this regarding when seller must register: “The taxpayer will be given a grace period of one period for the filing of the first periodic return. Accordingly, the taxpayer must file its first periodic return by the deadline for the periodic return following the period in which the taxpayer met the $100,000 or 200-transaction threshold.”

To find more information for remote sellers following the Wayfair decision, visit our Remote Seller Resources page.