South Dakota v. Wayfair Update: Hawaii

Hawaii’s general excise tax (GET) is a privilege tax imposed on all business and other activities in the state. Following the South Dakota v. Wayfair ruling, the Hawaii Department of Taxation announced on June 27, 2018 the state will implement Act 41, effective July 1, 2018. Act 41 provides that a person is engaging in business in the State, regardless of whether the person is physically present in the state, is required to collect and remit GET if in the current or preceding calendar year they have:

  • 200 or more annual sales transactions; or
  • $100,000 or more in annual gross receipts from sales into the state.

Hawaii’s remote seller legislation differs from the South Dakota law in that it retroactively applies to taxable years beginning after December 31, 2017. Accordingly, if a taxpayer meets the $100,000 or 200-transaction threshold in calendar year 2017 or 2018, the taxpayer will be subject to GET for the tax year beginning after December 31, 2017. “Qualifying taxpayers” can report and pay GET on “catchup income” (income recognized between January 1, 2018 and June 30, 2018) without penalty or interest, by:

  • reporting and paying GET on all catchup income in full on their next periodic return due after July 20, 2018; or
  • spreading the liability over the remaining periods in the current tax year, beginning with the next periodic return due after July 20, 2018.

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