Saturday, December 15, 2018
Hawai'i Free Press

Current Articles | Archives

Sunday, July 29, 2018
The Wayfair Switch in Time
By Tom Yamachika @ 5:00 AM :: 1096 Views :: Small Business, Taxes

The Wayfair Switch in Time

by Tom Yamachika, President, Tax Foundation Hawaii

In late June, the U.S. Supreme Court decided the Wayfair v. South Dakota case. It was a huge turning point in constitutional law involving the ability of states to tax “online sellers” such as Amazon, Newegg, and Wayfair.

“Yeah,” you might say. “I know about online sellers because last April, Amazon started charging Hawaii GET, so I had to pay more for what I buy online. What a drag!”

But another way to look at the case is fairness to local businesses. Local stores hire local people, pay taxes to local government, and support local communities. Online stores typically didn’t do any of the above and were able to boast that local taxes weren’t added to purchase prices, giving them a 4% or 4.5% economic advantage. (This is not quite true because the law says that the buyer is supposed to pay the 4% or 4.5% tax in that situation, which we call “Use Tax,” but many buyers, especially individuals, don’t.)

This year our legislature passed, and the Governor signed, Act 41 (S.B. 2514). That law put key provisions of the South Dakota law into our GET law so we are well positioned to take advantage of South Dakota’s Wayfair victory. It also said that it “shall take effect on July 1, 2018, and shall apply to taxable years beginning after December 31, 2017.”

Apparently, the Tax Department couldn’t contain its excitement over this turn of events. On June 27, two days after the Wayfair decision was announced, the Department released Announcement 2018-10, which told taxpayers that if they met the criteria in the new law (200 transactions or $100,000 in sales in Hawaii either in the current or previous taxable year) that they were liable for GET as of the beginning of their taxable year. For many taxpayers, that meant January 1, 2018. The Department magnanimously offered to allow affected taxpayers to pay their back taxes ratably over the remainder of the year, without penalties and interest. But it wanted the tax.

This would be a problem for some online sellers who had sold products or services to Hawaii customers for the first six months of the year. Those sales transactions were already closed and completed, leaving no opportunity for the sellers to reevaluate their economic deals to take the Hawaii tax into account.

It seems that the Supreme Court foresaw just such a problem. In its opinion, the Court noted that the South Dakota law had three features designed to prevent discrimination against or undue burdens upon interstate commerce, and one of them was that the law was not retroactive. In that way it dropped a big hint that retroactivity was not going to be looked at favorably.

Act 41, moreover, wasn’t even retroactive. It took effect on July 1, 2018, which probably meant that the Department had no business asking for tax retroactive to January in the first place.

On July 10, the Department amended Announcement 2018-10 to flip the Department’s position. The new law would be applied from July 1, and there would be no retroactive application to that extent. But there would be “catch-up payments” required for those taxpayers who tripped the threshold late in the year. For example, if a taxpayer had no sales in Hawaii in 2018 but managed to break the threshold in sales in December 2019, then the Department wants tax on all $100,000 for the whole of 2019 to be paid with the December 2019 return. Is that a fair outcome for the online seller that probably had no idea that the $100,000 would be achieved until November at the earliest?

Big note to businesses and others who are paying Use Tax: After July 1, more vendors probably will be registered for GET. If a vendor is registered for GET, the purchaser does not have to pay Use Tax. So, it may pay to check your Use Tax list and stop paying tax on purchases from any newly registered vendor.

---30---

Links

TEXT "follow HawaiiFreePress" to 40404

Register to Vote

2aHawaii

808 Silent Majority

808 State Update AM940

ABCDEFG Blog

ACA Signups Hawaii

ACCE

Affordable Hawaii Coalition

ALEC

Alliance Defending Freedom

Aloha Conservative Alliance

Aloha Life Advocates

Aloha Pregnancy Care Center

American Council of Trustees and Alumni

American Mothers of Hawaii

AMVETS-Hawaii

AntiPlanner

Antonio Gramsci Reading List

A Place for Women in Waipio

Audit The Rail

Ballotpedia Hawaii

Better Hawaii 

Blaisdell Memorial Project

Broken Trust

CAFR Hawaii

Castaway Conservative

Children's Alliance Hawaii

Children's Rights Institute

Christian Homeschoolers of Hawaii

Citizens for Recall

Cliff Slater's Second Opinion

Coffee Break

Conservative Forum for Hawaii

CSIS Pacific Forum

DAR Hawaii

DeedySupport.com

DVids Hawaii

E Hana Kakou Kelii Akina

E Māua Ola i Moku o Keawe

Farmers For Choice Hawaii

FIRE

Fix Oahu!

Follow the Money Hawaii

Frank in Hawaii

Front Page Magazine

Frontline: The Fixers

Genetic Literacy Project

Get Off Your Butts!

God, Freedom, America

Grassroot Institute

Habele.org

Hawaii Aganst Assisted Suicide

Hawaii Aquarium Fish Report

Hawaii Aviation Preservation Society

Hawaii Catholic TV

Hawaii Christian Coalition

Hawaii Cigar Association

Hawaii Coalition Against Legalized Gambling

Hawaii ConCon Info

Hawaii Credit Union Watch

Hawaii Crime Victims' Rights

Hawaii Crop Improvement Association

Hawaii Debt Clock

Hawaii Defending Marriage

Hawaii Defense Foundation

Hawaii Families for Educational Choice

Hawaii Family Advocates

Hawaii Family Forum

Hawaii Farmers and Ranchers United

Hawaii Farmer's Daughter

Hawaii Federalist Society

Hawaii Federation of Republican Women

Hawaii Firearm Community

Hawaii Fishermen's Alliance

Hawaii Future Project

Hawaii Gathering of Eagles

Hawaii History Blog

Hawaii Homeschool Association

Hawaii Jihadi Trial

Hawaii March for Life

Hawaii Meth Project

Hawaii's Partnership for Appropriate & Compassionate Care

Hawaii Public Charter School Network

Hawaii Rifle Association

Hawaii Right to Life -- Big Island

Hawaii Right to Life -- Oahu

Hawaii Senate Informer

Hawaii Shield Law Coalition

Hawaii Shippers Council

Hawaii Smokers Alliance

Hawaii State Data Lab

Hawaii Together

Heritage Foundation

HI Coalition Against Legalized Gambling

HIEC.Coop

Hiram Fong Papers

Homeschool Legal Defense Hawaii

Honolulu Homeless Crisis

Honolulu Navy League

Honolulu Traffic

Horns of Jericho Blog

House Minority Blog

House Republican Caucus YouTube

HPACC

Hump Day Report

Hunting, Farming and Fishing Assoc.

I Vote Hawaii

If Hawaii News

Inouye-Kwock, NYT 1992

Inside the Nature Conservancy

Inverse Condemnation

Investigative Project on Terrorism

Iowa Meets Maui

Jackson v Abercrombie

Jihad Watch

Judgepedia Hawaii

July 4 in Hawaii

Kahle v New Hope

Kakaako Cares

Kau TEA Party

Kauai Co GOP

Keep Hawaii's Heroes

KeyWiki

Land and Power in Hawaii

Legislative Committee Analysis Tool

Lessons in Firearm Education

Lingle Years

Malulani Foundation

Managed Care Matters -- Hawaii

Malama Pregnancy Center of Maui

Mauna Kea Recreational Users Group

MentalIllnessPolicy.org

Middle East Forum--The Legal Project

Mililani Conservatives for Change

Military Home Educators' Network Oahu

Missile Defense Advocacy

MIS Veterans Hawaii

Muslim Brotherhood in America

NAMI Hawaii

NARTH

Natatorium.org

National Christian Foundation Hawaii

National Parents Org Hawaii

National Wind Watch

New Zeal

NFIB Hawaii News

No GMO Means No Aloha

Northwest Economic Policy Seminar

Not Dead Yet, Hawaii

Now What I Really Think

NRA-ILA Hawaii

Oahu Alternative Transport

ObamaCare Abortion Hawaii

OHA Lies

Ohana Policy Group

OurFutureHawaii.com

Pacific Aviation Museum

Patients Rights Council Hawaii

PEACE Hawaii

People vs Machine

Pritchett Cartoons 

Pro-GMO Hawaii

P.U.E.O.

RailRipoff.com

Rental by Owner Awareness Assn

Republican Party -- Hawaii State

Research Institute for Hawaii USA

Rick Hamada Show

RJ Rummel

Robotics Organizing Committee

Salvage The Rail

Save the Plastic Bag

School Choice in Hawaii

SenatorFong.com

SIFE Remington

SIFE W. Oahu 

Sink the Jones Act

Smart About Marijuana--Hawaii

St Marianne Copenull

State Budget Solutions Hawaii

State Policy Network

Statehood for Guam

Tax Foundation of Hawaii

TEA Party Maui

TFB Micronesia

The Harriet Tubman Agenda

The Long War Journal

The Real Hanabusa

Time Out Honolulu

Truth About Trade & Technology - Hawaii

UCC Truths

Union Members Know Your Rights

US Tax Foundation Hawaii Info

Valor in the Pacific

VAREP Honolulu

Waagey.org

West Maui Taxpayers Association

What Natalie Thinks

Whole Life Hawaii

Yes2TMT