In support of streamlined sales tax proposal

The Keiki Caucus, along with business and community leaders, yesterday gathered in support of SB 2405 and HB 2352, which would allow Hawaii to implement the streamlined sales and use tax agreement and collect taxes on out-of-state sales. Currently, Hawaii is unable to collect sales tax on out-of-state purchases, including those made through catalogs and over the Internet. The proposed measures would adopt amendments to Hawaii tax laws to implement the existing streamlined sales and use tax agreement.

The amount of sales and use tax revenues that have remained uncollected is significant. “Last year, the National Conference of State Legislatures calculated that $245.5 million was not collected by our state,” said Senator Suzanne Chun Oakland, chair of the Human Services Committee. “At the same time, hundreds of thousands of children and youth in Hawaii are being impacted by the cuts that have already been made in public education, child care, higher education, public health services, youth services and public assistance, to name a few.”

“Think about furlough Fridays,” suggested Representative John Mizuno. “If we had collected that $245 million, would this even be an issue?”

Mizuno also stressed that, “This is not a new tax. It is just uncollected tax.”

For the business community, there is also a concern that businesses selling via catalogs or over the Internet and do not collect the sales and use tax enjoy an unfair advantage. “For us, it’s all about competition,” said Dick Botti of the Hawaii Retail Association. “If somebody can order something from the mainland over the Internet and avoid the taxes, it creates an unfair playing field, and this helps level it. We need this type of legislation.”

According to Carol Pregill of the Retail Merchants of Hawaii, “The retail industry in Hawaii employs about twenty-three percent of our workforce. This bill would give us the opportunity, the latitude, the revenue, the break that we need that we can continue to employ our Hawaii people in our industry.”

Since 1969, Hawaii law has required that buyers pay a tax whenever they purchase something outside of Hawaii through a catalog, the Internet, or by other means. However, the means has not been available to collect those taxes.

“With technology, we now have a way to help our tax departments collect the taxes that are due, help level the playing field for our local businesses, and help preserve those programs that are at the core of government services,” said Senator Carol Fukunaga, chair of the Economic Development and Technology Committee.

In 2003, Hawaii became a participant in the national Streamlined Sales Tax Project by enacting the Hawaii Simplified Sales and Use Tax Administration Act (Act 173, Session Laws of Hawaii 2003). In 2009, the State Legislature passed streamlined sales and use tax legislation by wide margins (23-2 in the Senate, 42-7 in the House) but Governor Linda Lingle vetoed the measure. Twenty-three states representing over thirty percent of the nation’s population have already been certified as being in compliance with the Streamlined Sales and Use Tax Agreement: Arkansas, 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 and Wisconsin.