Hawaii Updates Voluntary Disclosure Process

Effective May 25, 2016, the Hawaii Department of Taxation (DOT) has updated its voluntary disclosure process, which allows taxpayers to voluntarily disclose any liability for all Hawaii taxes. Given the broad nexus and taxability provisions under the Hawaii General Excise Tax (GET) structure, this tax could apply to companies with minimal activities in Hawaii. It is recommended that any business with customers in Hawaii evaluate their potential liability for this tax. In return for a voluntary disclosure, penalties and partial interest may be waived and taxpayers may avoid criminal tax investigation, as well as a civil audit, assessment, and collection. The DOT will consider a voluntary disclosure when a taxpayer fully cooperates in determining their state tax liability. All relevant circumstances must be disclosed truthfully, accurately, and completely. Any misrepresentation by the taxpayer will cease further consideration of the disclosure. Final acceptance of any voluntary disclosure is at the discretion of the DOT. The DOT states that the look-back period for a voluntary disclosure generally will be limited to ten years. However, in certain situations the DOT may look back more than ten years. For taxpayers filing through the Multistate Tax Commission Voluntary Disclosure Program, the DOT states that it will honor the look-back period of such an agreement. (Tax Information Release No. 2016-02, Hawaii Department of Taxation, May 25, 2016)

Posted on June 28, 2016