Tax Hike Bill Pending Before City Council Would Confuse Taxpayers, Tax Collectors

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”’Editor’s note: Ron Heller presented this testimony in opposition to Bill 40 (2005) CD 1, FD 1 on Tuesday, August 2, 2005 at a Joint Committee on Budget & Transportation beginning at 9:00 am, Committee Meeting Room. A final vote on the bill is scheduled for August 10, 2005, at Kapolei Hale”’

I oppose Bill 40, CD 1, FD 1. Many other speakers will give you a variety of reasons for opposing this bill. Since I only have one minute, I would like to address a concern that other speakers may not mention.


Bill 40, if passed, would create complication and confusion for both taxpayers and tax officials. Every taxpayer doing business in more than one county would have to allocate income among the counties, making the filing process more complicated and burdensome. Every audit would have to include an examination of that allocation.

There would be numerous questions about how to tax inter-island transactions. If a coffee grower on the Big Island sells by mail order to a consumer on Oahu, is that a Big Island sale or an Oahu sale? If an architect on Maui draws plans for a building to be built on Oahu, where is the fee taxable? If a business on Kauai orders a new piece of equipment from a mainland dealer, and has it shipped to Oahu, where it is transferred to a barge and shipped on to Kauai, does the Use Tax apply at the Oahu rate or the Kauai rate?

The state law simply says that questions like these are to be answered by rules to be issued by the Department of Taxation. Writing those rules, however, is not going to be easy. Right now, questions of allocating and apportioning income to inside-Hawaii and outside-Hawaii sources constitute one of the most complex and contentious areas in the tax law. This Bill would greatly expand the area in controversy.

There are a lot of other reasons to oppose this Bill, but I urge you not to make the tax laws more complicated and more difficult to enforce.

”’Ron Heller is an attorney, CPA and Chair of the National Federation of Independent Business (NFIB) Hawaii Leadership Council.”’

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