WMTA Shares these commentaries, without taking a position unless otherwise noted, to bring information to our readers
To view the archives of the Tax Foundation of Hawaii's commentary click here. Weekly Commentary For the Week of October 8, 2017 If You're Still Paying Use Tax on Amazon Purchases--Stop By Tom Yamachika, President Most of us know that when we purchase a good or service in Hawaii, we must pay tax. It's called the General Excise Tax, or GET, and it seems to show up in the price of everything we buy. This tax, unlike most sales taxes, is imposed on the merchant selling the goods or services to us, but we see it on the bill anyway. But what happens if we want to buy something that local merchants just don't offer, we go online, and no tax appears on the bill. Do we still pay tax when we make those purchases? Technically, yes. The law provides that if you buy something from a merchant who doesn't have to pay our GET and you import it into Hawaii, then you are supposed to pay the tax. Although this tax, called the Use Tax, applies to many online purchases, most individual taxpayers don't pay it. The Department of Taxation could go after you for it, but generally won't unless you are a business or it's a big-ticket purchase like a car or boat. (This happens in other states with Use Taxes as well, so we are not alone.) The good news for businesses making online purchases is that the list of merchants that are paying GET is getting longer. Amazon, for example, accounts for a big chunk of online shopping. It is paying GET on purchases made in April 2017 or later, so those who buy things from Amazon and have been paying Use Tax can stop paying on those purchases. Businesses who register for and pay GET often do it without much fanfare. Their customers who pay Use Tax on purchases from them sometimes keep on doing it unwittingly. One Hawaii Supreme Court case, called Tax Appeal of Aloha Motors, Inc., 69 Haw. 515, 750 P.2d 81 (1988), involved a business that kept on paying Use Tax needlessly between 1968 and 1981, and overpaid more than $760,000 cumulatively. When Aloha Motors finally figured it out, the court held it could only recover three years of overpayments, because there is a statute of limitations in favor of the State. Other General Motors dealerships at the time were all making the same error because of some complex circumstances. They all went to the Legislature, and ultimately obtained a special waiver allowing the recovery of up to around $2 million in overpaid Use Tax. (Act 297, Session Laws of Hawaii 1990.) If you are a consumer or business and you are paying Use Tax, you shouldn’t expect to get a special waiver like the General Motors dealerships did. If you pay too much and you don’t figure it out within three years, you are probably out of luck. There are, however, great tools that didn’t exist back in the 1980’s. Anyone today can look up GET licenses online. Just go to the Department of Taxation’s website and follow the link that says, “Search the Tax Licenses.” If a vendor of yours has a GET license, you don't need to pay Use Tax on your purchases from that vendor. You’d be well advised to search through your Use Tax vendor list against the licenses every so often. What happens if you have paid too much? For example, what if you are a business that has dutifully paid Use Tax on Amazon purchases every year and have been doing so until this day, including on purchases made after March 31? One possibility is wait until the year ends, recalculate your annual liability on the G-49 reconciliation return that you need to file anyway, and use that to claim a refund. If you have paid too much in prior years for which the statute of limitations is still open (generally three years from the due date of the return), then you can file an amended return to claim a refund. And, of course, you can always contact your friendly neighborhood tax practitioner to help you figure out which of your options is best. WMTA Shares these commentaries, without taking a position unless otherwise noted, to bring information to our readers
To view the archives of the Tax Foundation of Hawaii's commentary click here. Weekly Commentary For the Week of October 1, 2017 Fritz v. Department of Taxation, and Why You Should Care By Tom Yamachika, President Over the past several months, there has been a court fight brewing that could have changed how the Department of Taxation lobbies for legislation. That's right. Not only special interest groups and activists lobby for legislation. The Department does too. Every year, it introduces and strongly supports "Administration Bills." Many of these propose to make the Department's job easier, but at the expense of taxpayer rights. So it's important for taxpayers to keep tabs on how the Department is pushing these bills. One example of the above kind of bill was HB 2396 / SB 2925 in last year’s legislative session. If a taxpayer files an amended federal income tax return or is adjusted by the IRS, current law allows an extra year for the Department to assess additional tax or for the taxpayer to claim a refund. The bill provided that only the Department, and not the taxpayer, could take advantage of this “bonus time,” which is usually needed because tax audits take a while to conclude. The Foundation was concerned that this legislation created a “one-way street,” or procedural trap, that could allow the State to retain money to which it was not entitled under law. Peter Fritz, an attorney who used to work for the Department, tried to get the Department to disclose the letters, texts, and emails sent to legislators in 2009. "Can't do," the Department said. "Work product paid for by taxpayers normally needs to be made public, but policy deliberations can be withheld, and these communications are in that category." Fritz didn't agree, and asked the State Office of Information Practices (OIP) to rule on the matter. OIP ruled in Fritz's favor in 2011, ordering the Department to cough up the documents. The Department complied. But by the time it did so, it was years after the legislative session ended. In the 2016 legislative session, Fritz tried again. The Department refused to provide documents relating to Administration Bills that it was then sponsoring, again relying upon the “deliberative process privilege” that the OIP had ruled in 2011 to be inapplicable. “Gotta do a case by case determination,” the Department said. Fritz filed suit. In January 2017, well after the ending of the 2016 session, the Department “voluntarily disclosed” the documents, although explicitly saying that it “reserved any and all rights to withhold any other documents from disclosure on any and all grounds.” Those documents could have made a difference during session. When SB 2925, described above, was heard by the Senate Ways and Means Committee, then-Chair Jill Tokuda and Majority Leader J. Kalani English were particularly interested in whether the bill was a solution in search of a problem. When they pointedly asked the Department about it at the hearing, the Department representatives professed ignorance. The records later turned over, however, clearly showed that the Department was reacting to a case involving only one taxpayer. The legislation, by the way, ultimately died. In the lawsuit, Fritz asked the court to take positive steps so that the Department can’t again play cat-and-mouse. The State, of course, maintained that once they turned over the documents, the suit can no longer exist because courts are there to decide actual controversies, not purely academic issues. The circuit court judge agreed with the State, and the lawsuit will soon be dismissed. When the Department of Taxation states a position in a communication to the Legislature, the public is entitled to know what that position is. This is especially important with a complicated subject like taxation, where the public relies heavily on guidance and interpretations put out by the Department. (Other legislators do too.) And it is critical to have a fully informed debate when the Department tries to coax legislators to change the law in a way that would make its job easier at the expense of taxpayer rights and protections. WMTA Shares these commentaries, without taking a position unless otherwise noted, to bring information to our readers
To view the archives of the Tax Foundation of Hawaii's commentary click here. Weekly Commentary For the Week of September 17, 2017 Legislature with U R Missing By Tom Yamachika, President This week, I was inspired by a sign on the First Baptist Church on Pensacola Street here in Honolulu. Their sign read, "CH _ _ C H – what's missing? U R !" If you take away "U R" from "CHURCH," you are left with "CHCH," which isn't even a word. Apparently, the point there is that the church isn't a church, and in fact has no meaning, without the people participating in it. Now, what happens if we apply that same concept to "LEGISLATURE"? "U R" missing from "LEGISLATURE" yields "LEGISLATE," which means "to make laws." This is quite different from the situation with “CHURCH,” because the remaining letters do have a meaning. And that meaning is significant. Why? You don't need the people's participation to legislate. Legislatures don’t have a monopoly on legislating. Kings and tyrants do it too. The Law of the Splintered Paddle, a legacy of King Kamehameha the Great here in Hawaii, is a very famous law here, now enshrined in the Hawaii Constitution at Article IX, section 10. That law was not voted on by a house, or senate. It was decreed. By one person. A legislature, which is one of the key components of our form of government, also legislates. But there is supposed to be ample opportunity for public participation, because those who framed our system of government believed that this participation was indispensable to the process of legislating. Lawmakers get input from those with many different viewpoints and backgrounds, including watchdog groups like the Tax Foundation of Hawaii. That input and those viewpoints can be used to craft better legislation. I say that there is "supposed to be" opportunity for participation because legislation doesn't always happen that way. Public participation either can be squelched or cut off by those doing the governing, or it can wither and die because we in the public don’t want to participate. If participation is limited or barred, those doing the governing become no different from the kings, dictators, and tyrants. Sometimes they do come up with good, wise, and enduring laws, as was the case with Kamehameha the Great. But sometimes those leaders have issues like unfairness and corruption, and occasionally come up with laws that serve themselves rather than their constituents. If public participation isn't there because people don't want to participate, we get to the same result. The people who are doing the legislating have fewer effective checks and balances, and it's easy for them to get used to not being held accountable. That leads to the same issues of unfairness, corruption, or self-serving legislation. What form of government would you rather have doing the legislating? Shouldn't you care about participating in the process as opposed to just being aghast when you find out the results? "LEGISLATURE." It's so much better with (when) "U R" included. |
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