Note that the link doesn't work. HB1706 sailed through all committees, and there are no more scheduled hearings, so it won't allow a submission.
I've heard some say that it only requires an on-island contact for the guests. My interpretation is: it looks like it requires a property manager or agent, just like HB1707.
I'd sure like some clarification on this (and an idea for how it could be stopped if my understanding is correct).
I would like some clarification on this too. We all have on-island contacts and that is easy to supply the info if needed, but being a real estate agent is a different issue. http://www.capitol.hawaii.gov/session2012/bills/HB1706_.pdf
I have read it and I am still unsure what it means. Clarification is definitely needed here.
Aloha from Hawaii! I live here, so don't really need to worry about this legislation. But living here also shows me some of the reasons that the State is pushing this. How many owners are paying Hawaii State Income tax on the rental income (and yes, you are supposed to)? Obviously the resident owners are because the funds are being collected in Hawaii.
One of the posts shows the issue with service providers:
- 1099: Our cleaning service provider, appliance repairman, window washer and "handyman" are independent contractors. There is no employer-employee relationship with any of these contractors. They provide us an invoice for services rendered, plus applicable taxes, and we pay the full amount of the invoice. There is no requirement to issue a 1099.
This is 100% wrong. You do not need to issue a W2 because there is no employee-employer relationship, but you definitely need to issue a 1099, which is the tax reporting form for all "non employee compensation".
So to fight this bill, we will need to do more than say "we don't want it". Provide another tool that they could use to determine that all taxes are being paid. Maybe require each ad listing to put their GET/TAT number on the ad. And yes, most posters on this blog are paying, but there are hundreds and hundreds that are not. Offer to file an annual report showing that you are paying State Income tax, GET/TAT, and have 1099'd all service providers. Perhaps the State would consider this an acceptable alternative.
But to just say that some are doing it right so nobody should be held accountable might not be enough.
Just the "local perspective".
All very good points. I send my help on the island a 1099 because I pay them! I also pay my GET and TAT taxes, and in California, we are required to send the state of Hawaii a copy of our tax return. This shows my income for my vacation rental. I do this and always have done this. I do understand that some repairs are done by independent contractors for some people. I pay my on island agent a percentage of my gross plus cleaning, repairs, etc. and send them a 1099 at the end of the year. I also report all of this on my tax return and file a return with the state of Hawaii too. If people aren't doing this, then that is wrong. But these new laws won't ensure the filing of tax returns.
I think your point that there are some who don't understand the tax law is correct, and education is the answer.
I think "hundreds and hundreds are not paying taxes" is a guess, and not based on any research or empirical data. There needs to be research done. How much is the state losing? Given that this bill, if passed, might flood the real estate market with more property at an already depressed time, property prices would decrease further, as would property taxes. How much more would the state lose if they passed this bill? These questions need to be studied. Anecdotes and conjecture are not sufficient.
I know one big problem states are having is collection of sales tax on items bought on the internet, which are supposed to be claimed on your state taxes, but many do not. I don't know how many, but it's a big issue for all the states, so I'm guessing some data exists...
Given the approach this bill is taking, they should also pass a law where everything bought by Hawaiians on the Internet must be paid for at a local brick-and-mortar store, which will charge the appropriate sales tax, and collect 50% more for the item as their cut. That's only fair. I'm sure the local brick-and-mortar stores would be in support (as, like the Property Managers, their business model has also fallen victim to a more efficient business model using the Internet).
sandyb: Thank you for clarifying the issue with respect to issuing 1099s. However, since all of my service providers are limited liability companies, are you also suggesting I need to issue companies a 1099? I certainly hope not! I file Hawaii GET and TAT returns quarterly (and remit all taxes collected), as well as US federal income tax returns, Hawaii state federal tax returns, Canadian federal tax returns and Province of British Columbia tax returns annually.
1099's and LLC's are a bit tricky. Go on-line and search "do I need to 1099 an LLC". The basic rules are that you need to know how they file their income tax. If they file as a corporation (which is quite rare for an LLC), then no 1099 is needed. But if they file as a sole proprietor or partnership, then you do need to issue a 1099. (there is my CPA background speaking out). A funny note... the changes enacted by the IRS in 2010 would have required you to 1099 Costco starting in 2012. Thank goodness that was repealed last year!!
But this is getting off topic. The topic is how to prevent the passage of this bill. My posting was only to suggest that if you can offer an alternative way to show that off-island owners are paying all of the appropriate taxes (perhaps an annual compliance report), then legislators would have a valid reason to say "no" to the bill.
When this posting came out a couple of days ago, I took the time to look at 46 condos that showed their property name and unit number. My initial reason was to be able to say with clear conviction that there was no reason for this bill. I referenced the property name/unit number, to the property tax lists to see if they were paying the correct property tax. I then used the owner name from the property tax list to check the State site for a GET/TAT number. Guess what? More than half are not paying correctly in one category or the other. And this did not include checking 1099's or income tax. So there is a clear need to do something, but I agree that it's unfair to penalize those that have posted to this blog and have been paying correctly.
The question is.... what alternative can we offer so that the State legislature feels comfortable that they are getting all of the tax that they should be?
We don't need to figure a solution. We need less laws not more.
The real estate agents are really the ones who are pushing this for more business and using the revenue lost as an excuse.
Hawaii has a bigger problem of rentals that are not even zoned to be rentals. They can't pay tax since its illegal to rent.
Not sure I'd put a lot of stock in this.
After reading what you did I conducted my own search on the state GE /TAT.
My name - no results
My company name - no result (except someone using almost the same name)
My tax ID - Bingo, found me
So my thought would be if I had difficulty, I image someone who didn't know my info as well might not be so lucky. In fact, without my Tax ID, one might think I didn't comply.
Sent from my iPad2
Please visit vacation.ninolehawaii.com
I sent the following email to all of the names of the Senators that Julesss sent me. I also attached the re-formatted 33 pages of comments from the change.org petition related to HB1707. I would urge you to not only voice your concern but to also send ideas on how to capture lost taxes, track tax scofflaws, etc. to the senators who will be considering this bill. I will include their email addresses in the next post.
I am writing to urge you to vote NO on SB2089 which is coming before you this coming week. I have attached a document which includes the names and comments of people who signed a petition this past week to stop these bills. Since most likely most of you will not see the petition or read the comments attached to it, I have taken the time to format them and forward them to you in as readable a document as I could make, given the short notice. I have also sent it to you as a 2003 Word document in case you don't have the latest version and cannot open the .docx one.
These comments were all attached to a petition that received over 750 signatures in less than two days. Most of the people who signed had no idea that these bills were being considered. Given more time, we could submit much more testimony and evidence of the very strong feelings against these bills. You will note as well when you view the document that many of those commenting are Hawaii residents.
Please take the time to read people's comments. There are some very real consequences of these bills that you don't seem to be taking into consideration. We also have created a forum in which we have discussed ideas to help the government collect the lost taxes. One that came up today was to have the requirement that on all VRBO or HomeAway websites the non-resident and resident owners post their HI State Tax ID#. It might even be possible to gain cooperation from HomeAway and VRBO to supply lists of these to the state tax collector as it would be in their best interests to keep the Hawaiian business, which they will undoubtedly lose if these bills pass. Alternately, people could submit annual statements indicating that they have paid their taxes.
From our investigations and calls to the offices of various representatives, including Rep. Carol Evans, we also discovered that there is no hard supporting data about how many people are evading their taxes (if in fact, that is really what these bills are about). How can you pass a law that effects not only so many small business people, but the tourist industry as a whole, without doing your due diligence? It is irresponsible and not good government.
In my opinion, a committee should be formed to both investigate this issue and to come up with solutions. This committee should not include people with vested interests in the outcome (such as rental management companies). It has been the opinion, as you will see of many of the commentors that the thrust behind these ill-conceived bills is not, in fact, to do with collecting taxes but is an attempt at a financial grab by the rental management agencies who are being hurt by individual owners renting their condos/homes. That these companies are using both fear tactics to convince you, the public representatives, that the state is losing hundreds of thousands of dollars annually with no really extensive evidence to back it up when in fact, their goal is to gain all of the rental business for their companies. If this is truly the case, you as governmental officials are being conned by inaccurate data in order to provide business for one segment of the population at the expense of another. This does not seem to be the way we claim to do business in America. I urge you to slow down and take the time to consider what is really at stake and going on here.
I also urge you to read the attached document which is only 33 pages long and broken into very short segments of each person's comments. It is likely that a new petition specifically related to SB2089 will be created and you may receive comments and individual emails from that. I hope you will take the voice of the people into consideration. Not all are your current constituents, but many like myself intend to be at some point.
Mahalo for your time and your commitment to making Hawaii a prosperous state!
Here are email addresses for the Senators for SB2089
I read that testimony must go to this address to be on the record.
Nice job, but I do oppose proposing more state laws and regulations to have them consider which your letter suggested.
Maui has an entire North shore of vacation rentals not even zoned for short term rentals. The local level should be the place to ensure following regulations, and not a state law.