Hawaii Enacts New Tax Laws Affecting Withholding

September 20, 2018 Tom Hospod

The Governor of Hawaii has signed into law Act 66: Electronic Filing of Tax Returns. The new law authorizes, but does not mandate, the Department of Taxation to require electronic filing of tax returns from:

  • Employers with annual withholding tax liability of more than $40,000;
  • Taxpayers with annual general excise tax or transient accommodations tax liability of more than $4,000 (monthly filers); and
  • All taxpayers for corporate income tax, estate tax, public service company tax (utilities), franchise tax (financial institutions), fuel tax, liquor tax, cigarette and tobacco tax, and rental motor vehicle, tour vehicle, and car-sharing tax.

Please note that this law does not impose an electronic filing mandate; it merely permits the Department to do so at its discretion. The Department will provide written notice of a mandate no less than 90 days before enforcement is to begin.

The law also imposes a penalty of 2% of the amount of tax required to be shown on the return for failing to comply with the mandate, once enforced. Reasonable cause exceptions will be available.

Additionally, the Governor signed into law Act 122, increasing the amount required to be withheld on disposition of Hawaii real property – which applies to all dispositions after September 15, 2018. The amount to be withheld is now 7.25%, assuming no exemptions apply, and/or the seller has not been granted a reduction. The amount withheld is an estimated tax payment and applied when the seller files an income tax return for the year in which the disposition occurred.

About the Author

Tom Hospod

Tom Hospod is a member of the Tax Research Team for the Direct Tax division at Sovos Compliance, where his main areas of focus are Tax Withholding and Automatic Exchange of Information (AEOI). Prior to Sovos, Tom worked as a legislative aide in the Massachusetts House of Representatives. He also has experience in securities law—focusing on broker-dealer disputes and representing clients in FINRA arbitration. Tom is a member of the Massachusetts Bar, earned his B.A. from Boston College and his J.D. from the University of Miami.

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