Hawaii Joins Remote Sales Tax Frenzy With New Bills

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By David McAfee

Moving through the Hawaii Legislature are bills to join a growing list of states imposing reporting/notification schemes on remote retailers.

Under another bill, the state also would create a voluntary program to allow out-of-state vendors to collect, report and remit a simplified sellers use tax.

Reporting Scheme

H.B. 398 and S.B. 161 would both require retailers or vendors that aren’t located in the state and aren’t required to pay or collect general excise or use tax for sales to submit an annual report to the Department of Taxation and to notify purchasers of their use tax liabilities.

The house version passed the House Committee on Economic Development & Business on Feb. 1, and the Senate version has been referred to committee since its Jan. 20 introduction.

The regime would be similar to a Colorado law that received the implicit approval of the U.S. Supreme Court when it turned down an appeal challenging the law late last year ( Direct Mktg. Ass’n v Brohl, U.S., No. 16-267, cert. denied 12/12/16 ; Brohl v. Direct Mktg. Ass’n, U.S., No. 16-458, cert. denied 12/12/16 ).

Similar notice and reporting bills have been introduced this year in state legislatures in Arkansas, Hawaii, Nebraska and Utah amid a surge of interest among lawmakers in capturing lost revenue from untaxed remote sales. Alabama already has announced plans to introduce a similar bill.

Voluntary Regime

Hawaii Rep. Sylvia Luke (D.) introduced H.B. 1413, the Simplified Seller Use Tax Remittance Act, on Jan. 25. The measure would allow sellers to remit the simplified tax in lieu of the general excise or use taxes otherwise due. The House Committee on Economic Development & Business is scheduled to hear the bill Feb. 3.

“Participation in the program shall be by election of the eligible seller and only those eligible sellers accepted into the program as set out in this section shall collect and remit the simplified sellers use tax,” the bill says. “Participation in the program shall not be construed as subjecting an eligible seller to franchise, income, or any other type of taxes or licensing requirements levied or imposed by the State.”

Many other states have introduced similar bills, but they aren’t voluntary (although Oklahoma enacted a voluntary regime last year). Last week, Indiana introduced a bill, S.B. 545, that requires the collection of the gross retail tax from out-of-state sellers if, during the preceding or present calendar year, their gross revenue from in-state sales exceeds $100,000 or in-state sales amount to 200 or more separate transactions. It mirror’s South Dakota’s economic nexus statute and provides for expedited judicial review of Quill Corp. v. North Dakota, the U.S. Supreme Court’s physical presence standard for when states may impose sales and use taxes.

The 1992 Quill rule also is under direct attack in Alabama, among other states, which have enacted a flurry of new rules and laws to capture more revenue from online retailers.

So far, bills related to sales tax on transactions by remote sellers have been introduced in at least 25 states, including Georgia, Minnesota, Mississippi, Nebraska, South Carolina, Tennessee, Utah and Wyoming.

What Doesn’t Qualify

Other remote seller bills introduced in Hawaii are: S.B. 620, S.B. 622, and H.B. 345, which would limit state sales tax nexus rules by establishing what does NOT qualify as an in-state affiliate.

To contact the reporter on this story: David McAfee in Los Angeles at dMcAfee@bna.com

To contact the editor responsible for this story: Ryan C. Tuck at rtuck@bna.com

For More Information

More information on the Hawaii remote seller bills is at http://www.capitol.hawaii.gov/

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