Discussion:Hawaii Excise Taxes
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Mtmckeecpa (talk|edits) said: | 19 April 2006 |
| My client moved from Florida to Hawaii, he says that in addition to a sales tax, there is an excise taxes at a rate of .4166 on services, rents, doctor bills, etc...????
Anybody out there who can clue me in on this Hawaii excise tax and whether or not it is a specific deducton for State of Hawaii purposes? | |
Actionbsns (talk|edits) said: | 19 April 2006 |
| Mtmckeecpa, there is no sales tax in Hawaii, only the GE Tax and yes it is charged on absolutely everything. Not only that, the State of Hawaii considers the GE Tax to be revenue to you, so you pay GE Tax on that also, which is why we charge people .4166. It passes the cost on while keeping us whole. Some people have a problem with that thought, but if you want to earn $100 and charge $4.16 in GE Tax, you pay GE Tax on $104.16, multiplied by 4% which is the actual state mandated GE Tax rate, the amount you pay is $4.16 and you keep your $100. Having come from California where I never paid sales tax on my services, this is a pain to have to pay, but it's the rule. Pretty much everyone I talk to has a GE Tax number for some reason or other. Additionally, if you are a non-resident and sell a piece of real estate, the title company holds back a substantial portion of the proceeds for your state income taxes, they do it automatically. There's a form you have to file to get it back if you don't think you will need to pay it. Hawaii is fun, with all kinds of new and different ways of doing things. | |
Mtmckeecpa (talk|edits) said: | 19 April 2006 |
| Action,
Thankyou. So,if my client is a regular W-2 employee, this GE tax is NOT a specific deduction on his Hawaii State Individual return, right? AND what rate do you use on the federal 1040, Sch A general sales tax table, 4%? Client now lives in Honolulu. I suspect though that client's state income tax expense will far exceed the general sales tax table deduction. Florida tried a sales tax on services back in '87, went over like a lead balloon, lasted for about 6 months.... | |
| 19 April 2006 | |
| Yes, the Hawaii GE tax is not an itemized deduction on the Hawaii individual return. The GE tax is imposed on the "privilege" of doing business in Hawaii. But in practice, businesses pass on this cost to consumers in what looks a lot like a sales tax. Some people (usually low income retirees) who don't pay much state income taxes might take the general sales tax deduction @ 4% from the table. But a W-2 wage earner probably will deduct his/her state income taxes instead. Interestingly, Hawaii's standard deduction is ridiculously low ($1,500 single; $1,900 married filing joint), so a lot of people itemize on their state return. | |
| 19 April 2006 | |
| Additionally....Hawaii taxes gross income and allows a deduction for income tax paid to other states.
Hawaii credits must be filed for before 12/31 of the tax year or they are lost (late filers). You have to unselect the Sch X if the taxpayer doesn't file the return in the tax year. IRS does consider GET tax paid as a sales tax for the purposes of choice between sales tax or income tax withheld. Hawaii does not tax retirement so this could be a plus for retirees. | |
| 19 April 2006 | |
| Taxea, I'm so glad you're from Hawaii! I finally have someone to bounce ideas off of! Speaking of the retirement exclusion, do you sometimes have problems determining where your client's retirement distributions are from (i.e., employer matching portion, employee contributions, etc.)? A lot of people rollover company plans into IRAs, and supposedly they retain their character as tax exempt pensions, including employer matching contributions in 401k's. But I find clients sometimes forget what came from where, and don't have records either. | |
| 20 April 2006 | |
| Well, the early bird gets the worm. I would add that not everything is subject to GET, e.g., prescription drugs. Some things, however, end up being taxed several times over as they pass from one business to another. In my experience, most taxpayers do take state income taxes as a deduction on their returns rather than the GET unless they had a big purchase (boat, car, etc.) that put the total GET over the income tax amount. Since your client just moved here, you might want to ask about those additional purchases.
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| 21 October 2006 | |
| What about a Hawaii resident who has passive real estate activities In Idaho. Would this income be included on the GE45 (General Excise / Use Tax Return)? | |
| October 22, 2006 | |
| No. The general excise tax is based on income from sales and other business activities (including services) in Hawaii.
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| 22 October 2006 | |
| The rental income is included on the N11 as part of the IRS AGI. If Idaho requires a tax return for your client then the amount of tax paid to Idaho is deducted on the N11 other taxes paid line.
FYI I always ask my clients for detailed Sch A (medical, dental, optical, donations) expenses because they frequently work for Hawaii even though they aren't enough for a deduction on the 1040. I also use ProSeries and post the deductions on Sch A of the 1040...it automatically transfers to the Hawaii return even when the Sch A is not used on the federal return. This goes for all Sch A items. As for you question about where the retirement contributions come from. This can get very time consuming if your client has not kept good records, which they rarely do...My response is to call the client and tell them that the 1099 indicates "taxable amount not determined". They are responsible to get the information if they don't want to pay unnecessary taxes. If they don't provide it I use the taxable amount shown on the 1099...I have to admit I hate it when the employer does not provide the information in the 1099 boxes. But what do they care, they don't have to pay the tax so why take the time to give the former employee everything. I also have a problem with insurance companies that don't fill out box 2 on the 1099! taxea | |
| 22 October 2006 | |
| Regarding the GET, what is a good example of valid deductions against gross receipts for a service business in HI. | |
| October 23, 2006 | |
| One of the most common deductions for an accrual-basis taxpayer is bad debt. Sometimes a reduced GET rate comes into play for service businesses as well. There are many other deductions and exemptions available. What kind of service? | |
| 23 October 2006 | |
| "Regarding the GET, what is a good example of valid deductions against gross receipts for a service business in HI."
The TP is required to obtain a GET license from Hawaii for any business set up in Hawaii...including rentals. The income and expenses are reported on the TP's 1040 Sch C or Sch E which flows over to the Hawaii return. The TP also has to report the gross income and pay to the State 4.00% by preparing the G45. Instructions for this form can be found on the State Taxation website. The amount paid to the State for GET is deducted as an expense on the Sch C or E. All business expenses are valid as deductions on the Sch C. Deductions on the GET are limited to those addressed in the instructions. The GET is paid on the gross business income if stated deductions do not apply. taxea | |
Michaelstar (talk|edits) said: | 24 October 2006 |
| Taxea - based on what I have read here (and the HI material from the web site) the t/p needs to obtain the GET license first and then pay the GET via form G45?
I have a t/p who moved to HI at the end of 2004 and had HI income in 2005. We did not even know about this GET until now (I am a CPA from CA and have never had a client in HI) and so we are in catch up mode on this issue. I may have more questions so please check back on this post if you see it run to the top of the posting list. Thank you for your HI knowledge. | |
| 24 October 2006 | |
| Michaelstar
Yes, the license should have been in hand first, however, since this is not the case. Email me at taxea@hawaii.rr.com and I will provide you with all the resource sites you need for this. | |
| 25 October 2006 | |
| Hey Natalie...not an early bird...more a night owl.
Bengoshi-you are welcome to use my email also but I'm sure if it is a general question we ought to post it here for the benefit of all. taxea If Hawaii is Heaven, Wahiawa is the Garden of Eden. | |
| 25 October 2006 | |
| Thanks Taxea. Next time I'm stumped w/ a HI specific question I'll have to e-mail you.
I know Wahiawa isn't all that far from town, but it sure seems that way! But it is beautiful over there. I used to love taking drives with my family through the area when I was a child. | |
Death&Taxes (talk|edits) said: | 25 October 2006 |
| A client owns a rental unit on Maui. He's an ex-UAL pilot who has seen parts of his pension go poof and now has asked the tax cost of selling the unit. He has always had losses, and has mid-five figures in unused passive losses. Can these unused losses be used in the final year for state taxes, when his gain should exceed $1,000,000? While the return appears to be based on the Federal, I'd rather let the experts answers the question. In his home state, he cannot carryover the losses but the Hawaii tax appears to far exceed that State's liability. By the way, I know he has a GTE number because he keeps talking about paying that tax and lists both the collections and the payments in his summaries. | |
| 25 October 2006 | |
| Hawaii follows the Federal rules on this issue. Here is their site:
http://www.state.hi.us/tax/tax.html taxea | |
| 26 October 2006 | |
| Here is a brief FAQ regarding the new .5% county surcharge. | |
| February 2, 2007 | |
| Try this: | |
