HOUSE OF REPRESENTATIVES
TWENTY-EIGHTH LEGISLATURE, 2015
STATE OF HAWAII
A BILL FOR AN ACT
RELATING TO LIABILITY FOR AMOUNTS PASSED ON AS TAX.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The department of taxation found many instances where taxpayers openly passed on to consumers Hawaii taxes, such as the general excise and transient accommodations taxes, but did not remit those amounts to the State. Taxpayers who do not remit the collected taxes often claim the amounts received are not subject to taxation due to exemptions or deductions, or that the transaction is subject to a lower tax rate. Current law allows the office of consumer protection or the consumers to take legal action against businesses that collect more for taxes than are due to the State. Other than this type of consumer protection action, the State cannot recover the total collected for taxes or require the taxpayer to return the overpayment to consumers. However, the department of taxation cannot violate taxpayer information confidentiality by notifying the office of consumer protection when these types of violations are discovered.
The purpose of this Act is to:
(1) Require that taxes itemized and passed on to consumers be remitted to the State unless returned to the consumer;
(2) Specify how adjustments to liability are applied;
(3) Provide for civil penalties against the taxpayer; and
(4) Allow the department of taxation to provide notice to the department of commerce and consumer affairs of the commencement of any judicial appeal involving a violation or penalty assessment.
SECTION 2. Chapter 231, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:
"§231- Liability for certain amount passed on as tax. (a) When an amount is passed on and separately stated as the tax owed by the taxpayer for the transaction in a receipt, contract, invoice, billing, or other evidence of the business activity, the taxpayer shall be liable for the amount passed on. In addition to the liability under this section, the taxpayer shall be liable for any applicable penalties and interest assessed pursuant to this title.
(b) Adjustments under this section shall be applied as follows:
(1) Any liability under subsection (a) shall be reduced by:
(A) The amount passed on and separately stated as tax that the taxpayer has returned to the source from which it was collected;
(B) The amount passed on and separately stated as tax that the taxpayer collected solely through rounding the correct amount of tax upward to the nearest cent;
(C) The amount of tax due on any amount properly deducted;
(D) The amount passed on and separately stated as tax on any portion of receipts properly remitted to another taxpayer under an income splitting provision under title 14;
(E) The amount passed on and separately stated as tax but not collected; and
(F) Any amount authorized by the department under administrative rules;
(2) All adjustments allowed under this subsection shall be made independently for each chapter under title 14; and
(3) Any adjustment allowed under this subsection shall not reduce the liability under subsection (a) to an amount that is lower than the actual amount of tax due that is calculated without regard to this section.
(c) The department shall adopt rules pursuant to chapter 91 stating the maximum rates at which taxes under this title may be passed on and separately stated as described in subsection (a). In addition to other penalties applicable under this title, passing on a tax at a rate higher than these maximum rates shall result in an assessment of a civil penalty of up to $500 per violation.
(d) The department may notify the department of commerce and consumer affairs of the commencement of any judicial appeal in which:
(1) A taxpayer has passed on a tax, as described in subsection (a), and failed to remit those amounts to the State in a timely manner; or
(2) A taxpayer has been assessed a penalty under subsection (c)."
SECTION 3. New statutory material is underscored.
SECTION 4. This Act shall take effect on January 7, 2059.
Taxes; Liability for Amounts Passed on as Tax
Establishes that a taxpayer is liable for any amounts passed on and separately stated as the tax owed by the taxpayer for the transaction in a receipt, contract, invoice, billing, or other evidence of the business activity. Provides for civil penalty and reporting of violations to the department of commerce and consumer affairs. Takes effect 01/07/2059. (SD1)
The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.