Attachment_8,_Government_Excise_Tax_and_County_Surcharge_Tax.pdf

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COUNTY SURCHARGE

Related information:

• County Surcharge

• County Surcharge FAQs (http://tax.hawaii.gov/geninfo/a2_b2_7csurchg_faq)

• County Surcharge – Summary (http://tax.hawaii.gov/geninfo/a2_b2_7csurchg_sumry)

Effective January 1, 2007, the general excise and use tax was amended to provide a county surcharge thereby increasing the GET and Use tax rate for transactions attributable to the county. It is targeted for use in the building of a mass transit system in the county where it is implemented. Only the City and County of Honolulu opted to implement the tax. Users can compute the general excise tax, including the county surcharge, if applicable, on Forms G-45 and G-49. The tax is remitted to the Department of Taxation. Funds will be transferred to the county once a month.

If you do business on more than one island, you will need to separate your transactions by taxing districts (Oahu, Maui, Kauai, Hawaii) so that the amounts can be properly reported in Part IV (for any Oahu sales) and Part V (for assignment of taxes by District) of the GE Tax forms G-45 and annual G-49. If you did business in more than one district, you are required to complete and attach Form G-75 to your Forms G-45 and G-49.

If you have questions about the County Surcharge, you may call our Call Center customer service representatives at 808-587-4242 or toll-free from the neighbor islands and continental U.S. at 1-800-222-3229, Monday thru Friday, 7:45 a.m. to 4:30 p.m.

(excluding State holidays).

See also:

• Tax Announcement 2005-11

(http://files.hawaii.gov/tax/news/announce/2004_09/ann05-11.pdf) Act 247, Session Laws of Hawaii 2005, Relating to County Surcharge on State Tax.

State of Hawaii Department of Taxation (http://tax.hawaii.gov)

(http://tax.hawaii.gov)

Page 1 of 4Department of Taxation | County Surcharge

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ATTACHMENT 8

HDEC08-17-R-0009

• Tax Announcement 2006-15 (http://files.hawaii.gov/tax/news/announce/2004_09/ann06-15.pdf) General Excise Tax (GET) and County Surcharge Tax (CST) Visibly Passed on to Customers.

• Tax Announcement 2006-17 (http://files.hawaii.gov/tax/news/announce/2004_09/ann06-17.pdf) Relating to the Application of the County Surcharge Sourcing Rules to Cash Basis and Accrual Basis Accounting Method Taxpayers.

• Tax Information Release 2007-01 (http://files.hawaii.gov/tax/legal/tir/1990_09/tir07- 01.pdf) Relating to the Application of the County Surcharge Sourcing Rules to Real Property Management Companies.

SOURCING RULES

Act 247, SLH 2005 (http://files.hawaii.gov/tax/geninfo/csurchg/ACT_247_2005.pdf) Relating to County Surcharge on State Tax (Act 247) requires the Department of Taxation to promulgate rules addressing in which counties a taxpayer is engaged in business for purposes of imposing the 0.5% county surcharge. New Hawaii Administrative Rules (HAR) section 18-237-8.6, implementing this requirement became effective on December 7, 2006. HAR section 18-237-8 may be viewed by clicking on the following link: HAR section 18-237 (http://files.hawaii.gov/tax/legal/har/har_237.pdf) .

For a short summary of the rules, County Surcharge – Summary (http://tax.hawaii.gov/geninfo/a2_b2_7csurchg_sumry) .

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TAXPAYERS AND BUSINESSES – WHEN DOES IT APPLY?

Oahu Taxpayer (Business)

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(http://tax.hawaii.gov/wp-content/uploads/2012/11/tcs_pg1.jpg)

County Surcharge – When Does It Apply? (TXT) (http://files.hawaii.gov/tax/geninfo/csurchg/County_Surcharge_When_Does_It_Apply.txt)

Neighbor Island (Non-Oahu) Taxpayer (Business)

(http://tax.hawaii.gov/wp-content/uploads/2012/11/tcs_pg2.jpg)

County Surcharge – When Does It Apply? (TXT) (http://files.hawaii.gov/tax/geninfo/csurchg/County_Surcharge_When_Does_It_Apply.txt)

Any comments or suggestions, please email Tax.Rules.Office@hawaii.gov

Page 3 of 4Department of Taxation | County Surcharge

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Page 4 of 4Department of Taxation | County Surcharge

LINDA LINGLE KURT KAWAFUCHI

GOVERNOR DIRECTOR OF TAXATION

JAMES R. AIONA, JR. SANDRA L. YAHIRO

LT. GOVERNOR DEPUTY DIRECTOR

STATE OF HAWAII

DEPARTMENT OF TAXATION

P.O. BOX 259

HONOLULU, HAWAII 96809

PHONE NO: (808) 587-1510

FAX NO: (808) 587-1560

September 8, 2006

DEPARTMENT OF TAXATION ANNOUNCEMENT 2006-15

RE: General Excise Tax (GET) and County Surcharge Tax (CST) Visibly Passed on to Customers

Beginning January 1, 2007, as a result of the City & County of Honolulu's decision to enact a surcharge on the GET described in Section 237-8.6, Hawaii Revised Statutes, the total rate of tax assessed on transactions subject to the surcharge and GET is 4.5% of the transaction's gross proceeds.

This Announcement supplements Tax Facts 96-1, where relevant, ONLY as a discussion of the new amount that sellers may visibly pass on to customers in transactions subject to the CST. Other announcements will be released within the coming months regarding other aspects of the CST law.

The GET is levied on the gross receipts of a business. On the customer's bill, however, the tax is expressed as a percent of the price. Because gross receipts are defined to include any tax that the business passes on to the customer, the tax rate expressed as a percent of the price is greater than the statutory tax rate on gross receipts. With the county surcharge tax, the new statutory tax rate on gross receipts for sales on Oahu is 4.5%.

The 4.5% tax on gross receipts translates into a maximum visible pass on tax rate of 4.712% when expressed as a percent of the price and limited to six decimal places. Gross Receipts consist of two parts; (1) Tax = 4.5% of Gross Receipts, and (2) Price = 95.5% of Gross Receipts. The tax as a percent of the price is 4.5% divided by 95.5% = 0.047120 or 4.712%.

A seller is prohibited, as a matter of consumer protection law, from visibly collecting more than the amount actually owed. With the addition of the CST, a seller may pass on the following amounts:

(1) Nothing—The seller may choose not to pass on their GET expense to customers; or

(2) 4.5%— The seller may choose to pass on to customers 4.5% of the cost to cover their GET and CST expense; or

(3) 4.712%—The seller may choose to pass on to customers 4.712% of the cost to cover the optimum amount of GET and CST expense.

EXAMPLE — In a transaction where the revenue is $1,000 and the GET/CST pass on rate is

4.712 % (0.04712), $47.12 is the amount passed on to the customer. $1,047.12 is then the amount of gross revenue subject to the GET and CST on Oahu. At the 4% state tax rate (0.04), $41.88 is paid to

Department of Taxation Announcement No. 2006-15 September 8, 2006 the state on $1,047.12. At the 0.5% county surcharge tax rate (0.005), $5.24 is paid to Honolulu County on $1,047.12. The total of the taxes owed to the state and county is $47.12 and equals to the amount of tax that was passed on to the customer. Thus, 4.712% is the optimum maximum rate that may be passed on to customers.

For a more detailed discussion on the GET, including the reasons why a seller cannot pass on greater tax than owed, please see Tax Facts 96-1.

For more information on this Announcement, please contact the Rules Office at 808-587-1577.

KURT KAWAFUCHI

Director of Taxation