Droop common excise tax exemptions for 2 years? – Honolulu, Hawaii

Building 58, we used to write Waiting to Pass Legislature and become law on the governor’s desk. In the calendar year 2022 to 2023, some exemptions from sales tax (GET) will be suspended. This article describes some of them and those who might be affected.

In 2011, lawmakers enacted Law 105, Hawaii’s Session Law 2011, to address the economic situation following the Great Depression of 2008 and suspend 31 different GET exemptions for two years. In mid-2020, the 2020-05 State Audit Office’s report, which seeks to quantify the impact of the exemption’s suspension using 2018 numbers, but will get the latest data in case Congress re-suspends the exemption in response to COVID-19 Want to contemplate crisis I can do it.

But this year lobbyists are poised to fight for the exemptions customers were interested in, increasing the list of suspended exemptions from 31 (which was on the original Senate Act 56 list) to just 11. The left has little economic impact. For others, few taxpayers are subject to the tax exemption and the tax office does not disclose information about these tax exemptions in order to keep taxpayers confidential so that the financial implications do not become public. We consider the following two key exceptions:

Sale to the federal government. Local sellers (including military exchanges and commissioners) trying to sell to the federal government must pay 4% of their sales as the federal government can import what they need without a Hawaii tax or GET. , Will be at a disadvantage. Though their outside-state competitors didn’t. This is part of the science of why the exception was made. Hence, the big losers here are local companies trying to get Uncle Sam to buy the product or store it for resale on commissions and in exchange.

In 2018, the business scope covered by this exemption was approximately $ 1.4 billion, resulting in a GET exemption of just over $ 49 million.

Sublease deduction. Much land is leased in Hawaii. During the Kingdom of Hawaii, landowners transferred ownership to the state of Hawaii and didn’t want to give up the land, so they leased it instead. For example, tenants of huge lots, especially those that have turned into shopping malls, have sublet their land to shops. Large stores can sublet part of their space to smaller stores. The problem is that every rental and sublease contract pays a GET of 4%. This started adding immediately when there was more than one rental hierarchy. For this reason, our MEPs issued a sublease deduction in 1997. This means that 87.5% of the rent paid can be deducted by both the recipient and the payer of the rent. This deduction aims to mimic the economics of wholesale retail pricing, where a wholesaler pays a 0.5% rate when a customer resells a product and pays a 4% GET retail price when reselling. I was there.

The auditors estimated that this deduction would result in an annual loss of revenue of approximately $ 6.8 million based on 2018 numbers.

The big loser would be a small shop renting from a big shop renting from people upstream of the grocery chain. More taxes are paid at the top and bottom of the chain, and taxes are usually passed on to the borrower who occupies the space. So make sure that the retail prices of the products sold in these stores go up.

In our estimation, these are the two biggest exceptions. Our governor gets the first sticking point when deciding whether these stops are enabled.

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Suspend general excise tax exemptions for two years? Source link Suspend general excise tax exemptions for two years?