Report Title:

General Excise Tax; Real Estate Salesperson and Brokers

Description:

Require escrow depositories to collect the general excise tax owed by real estate salespersons and brokers at the closing of a real estate transaction. Also lowers the GET rate for salespersons and brokers to 3.92%.

HOUSE OF REPRESENTATIVES

H.B. NO.

1580

TWENTY-SECOND LEGISLATURE, 2003

 

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

relating to real estate salespersons and brokers.

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 

SECTION 1. The legislature finds that an austere budgetary forecast dictates a concerted government effort to eliminate waste and maximize revenue-generating activities such as increasing tax collections. Past attempts to enhance tax collection strategies have been met with mixed results. A common flaw in the tax collection process is the inability to ensure proper payment of the general excise tax by all businesses - including real estate salespersons and brokers. Although most salespersons and brokers are honest, diligent business people who pay their taxes promptly, too many of them have escaped their tax obligations with little or no consequence.

The purpose of this Act is to improve the tax collection method for real estate salespersons and brokers by requiring escrow depositories to collect the general excise tax owed by salespersons and brokers, during the closing of a real estate transaction.

SECTION 2. Chapter 467, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§467- Escrow requirement; tax collection agent. (a) All real estate transactions involving real estate salespersons or brokers regulated under this chapter, shall be conducted under an escrow arrangement by an escrow depository company licensed under chapter 449.

(b) The escrow depository company shall serve as a tax collection agent pursuant to section 237-  .

(c) The commission may adopt rules pursuant to chapter 91 to effectuate this section."

SECTION 3. Chapter 237, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§237- Escrow depository as tax collection agent. (a) In any real estate transaction, the escrow depository conducting the real estate sales closing shall act as a tax collection agent and collect the general excise tax due under chapter 37 and owed by the real estate salespersons or brokers involved in the transaction.

(b) Every two months, the tax collection agent shall report, collect, and pay over the taxes due under this chapter, on behalf of the salespersons or brokers, to the director of taxation. The tax collection agent shall also:

(1) Provide reasonable notice before the closing of a real estate transaction, to all salespersons and brokers doing business with the escrow depository, that it has been designated to collect, report, and pay over the tax imposed by chapter 237;

(2) If required by the director of taxation, furnish a list (including appropriate identification numbers) of all salespersons and brokers for the taxable year who have been provided (by the tax collection agent) information returns that may be required under the Internal Revenue Code of 1986, as amended, and any other information that is relevant to ensure proper payment of taxes due under this section; and

(3) Be personally liable for the taxes collected, if any, but not reported or paid, together with penalties and interest as provided by law.

(c) The director of taxation may adopt rules pursuant to chapter 91 to effectuate this section, including rules to regulate escrow depositories with respect to their duties as tax collection agents."

SECTION 4. Chapter 237, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§237- Real estate salespersons and brokers. Any law to the contrary notwithstanding, the privilege tax levied, assessed, and collected on account of the business or other activities of real estate salespersons and brokers regulated under chapter 467 shall not exceed 3.92 per cent of the proceeds, sales, income, or other receipts subject to tax."

SECTION 5. New statutory material is underscored.

SECTION 6. This Act shall take effect on July 1, 2003.

INTRODUCED BY:

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