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Hawaii struggles to pass e-fairness law

Hawaii Legislature will try again to pass an e-fairness law in 2013, but each competing proposal has drawbacks

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What a Federal Law Would Require

States that simplify their sales and use taxes are still unable to require remote retailers to collect and pay states’ sales and use taxes. In 2011, three federal bills were introduced in Congress that would allow conforming states to do so. None of the acts allow states to levy income, franchise or other taxes on remote retailers.

Marketplace Equity Act (53 cosponsors)
In order for states to require remote retailers to collect and pay sales and use taxes, states must:

  • Include an exception for retailers who sell less than $1 million in annual gross sales nationwide, or less than $100,000 in the individual state;
  • Define a single administrative body for sales- and use-tax remittance;
  • Use uniform goods and services definitions; and
  • Have a conforming tax-rate structure with either a single statewide blended rate; a maximum state rate; or an applicable destination rate.

Marketplace Fairness Act (19 cosponsors)
This act allows member states of the Streamlined Sales and Use Tax Agreement to require qualifying remote retailers to collect and pay states’ sales and use taxes. If a state chooses not to comply with SSUTA requirements, it can still qualify if it:

  • Provides a single administrative body, audit for state and local taxing jurisdictions, and return form for sales- and use-tax remittance;
  • Provides a uniform sales- and use-tax base among state and local taxing jurisdictions;
  • Requires remote retailers to collect sales and use taxes for the applicable destination rate;
  • Provides remote retailers with tax-collection software;
  • Does not hold remote retailers liable for incorrect sales- and use-tax collections if the mistakes result from state error; and
  • Includes an exception for retailers with less than $500,000 in gross annual remote sales in the U.S.

Main Street Fairness Act (five cosponsors)
This act allows SSUTA member states to require qualifying remote retailers to collect and pay each state’s sales and use tax when:

  • At least 10 states with at least 20 percent of the U.S. population have joined the agreement (SSUTA already has 24 member states that comprise 33 percent of the U.S. population)
  • Minimum requirements have been outlined and implemented by the Streamlined Governing Board; and
  • Member states provide and maintain tax databases.

This act includes an exception for small sellers.

Other States Take Action

Streamlined Sales and Use Tax Members
Arkansas, Georgia, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Nebraska, Nevada, New Jersey, North Carolina, North Dakota, Ohio, Oklahoma, Rhode Island, South Dakota, Tennessee, Utah, Vermont, Washington, West Virginia, Wisconsin, Wyoming

States with Click-Through Nexus Laws
Arkansas, California, Connecticut, Georgia, Illinois, New York, Rhode Island

States with Economic Nexus Laws
California, Connecticut, Washington, Wisconsin

States with 1099 Disclosure Laws
Colorado, Oklahoma, South Dakota, Vermont

States That Put Use-Tax Lines on Tax Forms
Arizona, Illinois, New Jersey, Pennsylvania, Virginia

States with Amazon Deals
California, Indiana, Nevada, New Jersey, South Carolina, Tennessee, Texas, Virginia

How Much Is Hawaii Losing?

The 2010-2012 Hawaii Tax Review Commission asked William Fox, a professor of economics at the University of Tennessee, to write a report about how much the state has lost and will lose in GET and use-tax revenue because of e-commerce. Fox’s numbers are on the high end of similar Hawaii estimates.

You can find the entire report at tinyurl.com/8gfrzj2. Another outside report was done for the tax review commission by The PFM Group, a mainland consulting group. A draft version of its “Study of the Hawaii Tax System” can be found at tinyurl.com/8oq8bsg.

Which Online Retailers Collect Hawaii’s Tax?

The only online retailers listed here that regularly collect the state’s GE/use tax from their Hawaii customers are those that have stores in Hawaii:

Hawaii Business magazine invites you to comment on our articles and the issues they raise. Comments are moderated for offensive language, commercial messages and off-topic posts and may be deleted. Some comments may be chosen for inclusion in the magazine on the Feedback page.

Old to new | New to old
Oct 5, 2012 02:41 pm
 Posted by  xcergy

Mr. Campbell's statement of 'typing in a zip code to find a tax rate' Is not quite true. There are over 9600 tax districts in the US, and none are defined by zip code.
'Level Playing Field' is a myth at best. If you find a $100 item in a B&M and online is $75, even with Sales Tax, the online price is cheaper. Even if the price was the same, shipping costs, esp to Hawaii offset any cost savings. The true 'unfair advantage' is the cry from lawmakers looking for a bigger piece of tax pie.

Oct 5, 2012 02:53 pm
 Posted by  xcergy

I live in S.C. I love buying HI goods online, but do those HI businesses really want to be burdened with registering w SC DOR, then be required to know over one hundred tax districts and special laws/exemptions? What about the other 43 States that require collection of Sales Tax? Lawmakers/Local businesses are looking only at their own back yard. Compliance costs will put many small businesses out of business.

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