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Hawaii modernizes tax system

 The Hawaii Department of Taxation is modernizing its tax system.

The Hawaii Department of Taxation is undergoing Tax System Modernization (TSM), which it expects to complete by 2020. According to the department, most every technical system will be either upgraded or replaced during this time. Tax department modernizations can seriously impact taxpayers. Every business must learn something new and update internal systems to comply with the changes.

Modernizing GET and TAT

Tax modernization for Hawaii’s general excise tax and transient accommodation tax will go live on August 15, 2016, when a new website — Hawaii Tax Online — launches. Hawaii Tax Online will enable business taxpayers to access and update their own tax account, file and pay more quickly, send secure messages to Taxpayers Services staff, and authorize third parties to access their accounts.

GET and TAT taxpayers, along with county surcharge, rental motor vehicle, seller’s collection, and use taxpayers, will receive new tax identification numbers by August 31, 2016. Business licenses with the new ID numbers should be displayed at all business locations, and the new numbers should be shared with financial institutions and other businesses.

Existing taxpayer identification numbers will be maintained. According to the department, “To avoid inconveniencing taxpayers, the Department of Taxation will always continue to support tracking old account numbers and processing returns/payments received with old account numbers.”

Taxpayers will have limited access to their accounts on August 11-12 due to the conversion to the new tax system. Additional information.

Periodic auditor reviews 

Part of modernization includes upping the game of auditors. Under Act 261, (S.B. 2547), auditors must “periodically review certain tax exemptions, exclusions, and credits under the GET and use tax, public service company tax, and insurance premium tax.” Beginning in 2018, auditors are required to:

  • Determine the amount of tax expenditure for the exemptions, exclusions, and credits for each of the previous three fiscal years
  • Estimate the amount of tax expenditure for the exemptions, exclusions, and credits for the current fiscal year and the next two fiscal years
  • Determine whether the exemptions, exclusions, and credits have achieved and continue to achieve the purpose for which they were enacted by the Legislature
  • Determine whether the exemptions, exclusions, and credits are necessary to promote or preserve tax equity or efficiency
  • Determine whether an economic benefit has resulted, and if so, quantify the estimated benefit directly attributable to the exemptions, exclusions, and credits
  • Estimate the annual cost of the exemptions, exclusions, and credits per low-income resident of the State

Auditors are also required to recommend whether credits, exclusions and exemptions should be amended, repealed, or retained without modification. The Act takes effect July 1, 2017 and reviews will commence in 2018.

A similar program for income tax and financial institutions tax begins in 2019 under Act 245 (H.B. 1527). Additional information.

The modernization of Hawaii’s tax system provides an excellent opportunity for taxpayers to modernize their own tax management systems. Avalara’s end-to-end tax solution simplifies compliance in all states. Learn more.

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.