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According to a Hawaii Letter Ruling, a real property rental agent’s receipts of rental deposits and payments that were forwarded to the real property owners were considered income of the owners, and therefore the agent was not liable for Hawaii general excise tax on such receipts. Furthermore, the amounts the agent withheld from rental receipts in order to pay expenses on behalf of the owners were not income of the agent. Amounts the agent received from the owners in reimbursement for expenses of owners paid by the agent were exempt reimbursements under common law and statute HRS 237-20. The Department of Taxation made no determination of whether an agency relationship existed between the company requesting the ruling and the real property owners. The above determination was solely based on the requestor’s representation that it was an agent for the real property owners. (Letter Ruling No. 2010-06, Hawaii Department of Taxation, March 23, 2010)

(04/16/2010)

A commercial airline’s purchase and subsequent importation of a jet engine into Hawaii for use as a spare part in the repair and maintenance of its jet aircraft fleet is not subject Hawaii use tax. The definition of “use” provides an exemption from use tax for material, parts, or tools imported or purchased by a person licensed under chapter 237 which are used for aircraft service and maintenance. Since the jet engine’s primary purpose is that of a spare part in furtherance of aircraft or aircraft engine upkeep, it constitutes a “part” and not a taxable “use.” (Letter Ruling No. 2010-01, Hawaii Department of Taxation, January 22, 2010)

(03/01/2010)

The Hawaii House of Representatives has introduced legislation to conform Hawaii’s general excise tax laws to the provisions of the Streamlined Sales and Use Tax (SST) Agreement. Hawaii, an advisor state on the SST Governing Board, could petition to become a full member state if this legislation is enacted.

The new legislation was proposed using advice from the SST Governing Board and the Council On State Taxation (COST). In order to satisfy the single state tax rate requirement, the legislation would:

• move the 0.5% tax rate for wholesale transactions to a new chapter;
• add a new chapter on the taxation of imports of property, services, and contracting;
• move the 0.15% tax on insurance producers to a new chapter; and
• eliminate the tax on businesses owned by disabled persons.

The new legislation also provides for destination-based sourcing and amnesty.

Similar legislation was passed by the legislature in 2009, but later vetoed by Gov. Linda Lingle. The Senate voted to override the veto, but the House of Representatives declined to override the veto. (H.B. 2352, as introduced in the Hawaii House of Representatives on January 22, 2010; S.B. 2405, as introduced in the Hawaii Senate on January 22, 2010)

(03/01/2010)

Hawaii Governor Linda Lingle has vetoed Senate Bill 1678, which would have conformed Hawaii general excise tax laws with the Streamlined Sales and Use Tax Agreement. Although the Senate voted 23-2 to override the veto, the House of Representatives declined to override the veto; thereby, making the veto stand. The bill would have moved certain tax rates to new chapters (i.e. 0.5% tax on wholesale transactions); added a new chapter on the taxation of imports of property, services, and contracting; and eliminated the tax on businesses owned by disabled persons. Furthermore, the legislation would have provided for destination-based sourcing and amnesty. (S.B. 1678, vetoed by Hawaii Gov. Linda Lingle on July 15, 2009; Telephone Conversation, Hawaii Legislative Reference Bureau, July 16, 2009)

(08/27/2009)

House Bill 1405, that would have enacted a nexus presumption for retailers that enter into an agreement with a resident, under which the resident, for a commission or other consideration, directly or indirectly refers potential customers to the seller, has been vetoed by Hawaii Governor Linda Lingle. In her statement of objections, the governor noted that the bill’s content violates the Hawaii State Constitution which provides that each law shall embrace but one subject, which shall be expressed in its title. In addition, the governor mentioned that this bill would be harmful to the state’s current economic situation because some of the online companies, including Audible.com and Zappos.com, have already warned their Hawaii affiliates that they will terminate their relationships if this bill is passed. (H.B. 1405, vetoed by Hawaii Gov. Linda Lingle on July 1, 2009; News Release and Statement of Objections to House Bill No. 1405, Hawaii Gov. Linda Lingle, July 1, 2009)

(07/09/2009)

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