Hawaii Tax News
Administering the tax laws for the State of Hawaii in a consistent, uniform, and fair manner

Volume 5, Number 3

State of Hawaii ! Department of Taxation

More E-filing Options
Available!

Beginning in late October, you will be able toenjoy the ease and convenience of e-filing yourgeneral excise tax and transient accommodations tax
periodic returns (Forms G-45 and TA-1) 24 hours a day,
7 days a week! Delinquent bill payments for general
excise tax, use tax, withholding
tax, transient accommodations
tax, rental motor vehicle and tour
vehicle surcharge tax, and net
income tax also can be madeonline. You also will have theoption of making payments bycredit card!
Currently, payments are made through an electronic
check process called “VirtualPay.” A nominal fee of$2.50 is charged for each transaction involving apayment. No fee is charged if a payment is not made.
This may change, however, when payment by credit card
becomes available in October.
Benefits of e-filing include confirmation that yourreturn and payment were received, quicker returnprocessing, and easy access to your e-filing records.
To register to e-file, go to the State’s Internet portal atwww.eHawaiiGov.org and select “File Your Taxes
Online with E-Filing.” Please note that once you
register, you simply sign in with your user ID (yoursocial security number or federal employer’s
identification number) and password on subsequent
visits.
The following forms are currently available for
e-filing:• Form A-6, Tax Clearance• Form G-5, GE Application for a One-Time Event• Form G-39, GE Extension• Form HW-26, WH Extension *• Form TA-8, TA Extension• Form RV-7, RV Extension• Form HW-14, WH Period Return• Form N-1, Estimated Income Tax (Individual)• Form N-3, Estimated Income Tax (Corporation)• Form N-5, Estimated Income Tax (Estates/Trusts)• Form N-100, Automatic Extension (Partnership)

FALL 2001••

Form N-101A, Automatic Extension (Individual) *Form N-301, Automatic Extension (Corporation)(* Please note that Forms HW-26 and N-101A have been
disabled since their due date has passed.)
We are working to add even more forms: Form N-13,
Individual Income Tax Return (Resident Short Form)and Form N-15, Individual Income Tax Return(Nonresident and Part-Year Resident) should beavailable for e-filing in January 2002.
For more information, contact our Electronic Filing
Coordinator, Susan Adaniya, at 808-587-1692, or via
e-mail at efile@tax.state.hi.us.

Definition of “RealProperty” for HARPTA

W

e have received a number of Forms N-288B,
Application for Withholding Certificate for
Dispositions by Nonresident Persons of Hawaii Real
Property Interest, that have been rejected in part because
the basis of the real property sold included furniture.
The issue arises because, for FIRPTA purposes, thedefinition of “U.S. real property” in section 1445, Internal
Revenue Code (IRC), refers to the definition in section
897(c), IRC, which states that “(t)he term ‘real property’
includes movable walls, furnishings, and other personal
property associated with the use of the real property.”
See Real Property, Page 2

IN THIS ISSUE
More E-filing Options Available! . . . . . . . . . 1
Definition of “Real Property” for HARPTA . . 1
The Direct Line . . . . . . . . . . . . . . . . . . . . . . 2
Disability Exemption Forms. . . . . . . . . . . . . 2
General Excise Application for a
One-Time Event . . . . . . . . . . . . . . . . . . . . 3
Recently Issued Tax Publications . . . . . . . . 3
Criminal Section -- Concluded
Investigations Resulting in
Prosecution/Convictions. . . . . . . . . . . . . . 4
Pending Tax Publications . . . . . . . . . . . . . . 6
Fiscal Year Ended 2001 State Tax
Collections . . . . . . . . . . . . . . . . . . . . . . . . 7

Page 2

Hawaii Tax NewsThe Direct Line F
By Director Marie Y. Okamura

In this issue, we are excited tobring you the latest initiative to
make filing returns and making
payments more convenient:expanded e-filing opportunities
through the State’s Internet
portal! Our front page article
provides details on Hawaii’s
e-file program.
The August 2001 issue ofGovernment Technology ranks
Hawaii as 23rd in its Taxation
and Revenue category. This reflected a 168% point
improvement as we were in 47th place last year. Ourcontinuing efforts will result in an even more marked
improvement next year.
E-mail access to the department was featured in our
Fall 2000 issue. As a reminder, a detailed listing isprovided in our Hawaii Tax Information at a Glancebrochure, available on our website at www.state.hi.us/tax.

Real Property(From Page 1)

However, for HARPTA purposes, section 235-68,
Hawaii Revised Statutes (HRS), does not refer to thedefinition in section 897(c), IRC, but instead refers to thedefinition in section 231-1, HRS. That definition does
include certain machinery and other items that might beconsidered personal property in its definition of real
property, but only when their removal “cannot be
accomplished without substantial damage to the land,buildings, structures, fences, and improvements,
excluding, however, any growing crops.”
If the sales price includes an amount for furniture orother personal property that is not included in Hawaii’s
definition of real property, sellers must allocate a part ofthe sales price to the furniture or other personal property
and use the balance to determine whether there is a loss
on the sale of the real property. If you are preparing a
Form N-288B for a sale involving personal property
whose basis must be excluded, you also must attach an
explanation of the method used to allocate the sales pricebetween the real property and the furniture or otherpersonal property.

Fall 2001

Disability Exemption
Forms

T

he certification and notification forms for
Hawaii’s income tax and general excise tax
disability benefits have been combined into a single
form.
Previously, an individual’s disability was certified
on Form N-857 (Physician’s or Optometrist’s Certified
Report on Eye or Hearing Examination or Disability for
Tax Exemption Purposes), and the individual notified
the Department using Form N-172 (Claim for
Exemption by Person with Impaired Sight or Hearing orby Totally Disabled Person).
Now, both the certification and notification are doneon the Form N-172 (Rev. 2001), Claim for Tax
Exemption by Person with Impaired Sight or Hearing orby Totally Disabled Person and Physician’s Certification.
Part I is completed by the taxpayer to provide informationneeded to claim the disability benefits allowed under
Hawaii’s income tax and general excise tax laws. Part II iscompleted by the appropriate medical practitioner tocertify the taxpayer’s disability. The original and one
copy of the completed Form N-172 (Revised 2001) arethen sent to the Department of Taxation. Form N-857 is
now obsolete. Persons who previously filed Forms N-172
and N-857 with the Department do NOT need to be
re-certified using the new form.
For more information on the disability benefits for
qualifying taxpayers, see the instructions for Form
N-172 (Rev. 2001) and Tax Information Releases No.
89-3 and No. 94-2.
A new Form G-65, Disability Deduction Worksheet,
See Disability Forms, Page 3

The Hawaii Tax News is a publication of the State of
Hawaii, Department of Taxation.
Director:
Editor:Address:
Telephone:
Fax:
E-mail:Website:Forms By
Fax/Mail:
Consumer Dial:

Marie Y. Okamura
Lynne Kuroda
Princess Ruth Keelikolani Building
830 Punchbowl Street, Room 124
Honolulu, HI 96813-5094
808-587-1577
808-587-1584
Technical_Section@tax.state.hi.us
www.state.hi.us/tax
808-587-7572
Toll-Free 1-800-222-7572
808-587-1234, audio code 7700

Fall 2001

Hawaii Tax News

Disability Forms(From Page 2)

uses a deduction method for qualified taxpayers with
impaired sight, impaired hearing, or other disability, toclaim certain allowable tax benefits on their general
excise tax returns.
Qualifying taxpayers may exclude up to $2,000 ofgross income per year from the general excise tax, andhave any remaining amount taxed at a rate of 0.5%.
Previously, qualifying taxpayers would compute thegeneral excise tax liability by multiplying the taxable
income by 0.5% instead of the 4% rate printed on the tax
return. This reporting method caused processing delays.
To reduce errors and ensure the timely processing ofreturns, Form G-65 uses a deduction method to effect the
0.5% general excise tax rate. Form G-65 does NOT need
to be attached to the tax returns, but it does need to be
kept in the taxpayer’s records.

General Excise
Application for a
One-Time EventF

orm G-5, Application for General Excise/Use
One-Time Event Identification Number, is oneof the forms taxpayers may file electronically throughthe eHawaiiGov State portal. Some taxpayers e-file it
mistaking it for Form BB-1, State of Hawaii BasicBusiness Application that licenses regular, on-going
businesses in Hawaii.
Form G-5 was created to help out-of-state taxpayers
doing business in Hawaii on a one-time basis such as aconvention or trade show. It was first developed as a pilot
form to assist an out-of-state nonprofit organization andits exhibitors obtain general excise tax licenses andsimplify the reporting of the income from their in-Hawaii
sales transacted during their Hawaii convention.
Out-of-state vendors who had no knowledge about
Hawaii’slicensingrequirements
neededa
simple-to-understand form and instructions about filingto encourage them to comply with Hawaii’s tax laws andthus, Form G-5 and instructions were developed.
Form G-5 should not be used for rentals or any othertype of on-going business activities. Taxpayers
receiving income from those types of activities must file
Form BB-1, State of Hawaii Basic Business Application.

Page 3

Recently Issued Tax
Publications

T

he following is a list of the publications issued
by the Department of Taxation from January
2001 through September 2001. Copies of thesepublications may be obtained from our website atwww.state.hi.us/tax, from any district tax office, or by
mail through our request line at 587-7572 (toll-free at
1-800-222-7572).
TIR No. 2001-1 - Discusses the application ofcertain Hawaii taxes to qualified subchapter S subsidiarycorporations, qualified subchapter S trusts, and electing
small business trusts.
TIR No. 2001-2 - Discusses the Director of
Taxation’s authority to exempt, exclude, or apportion
the value of imported property, services, or contracting
for use tax purposes; use tax exemptions for imported
services and contracting; and the use tax credit for taxes
paid to another state.
Announcement No. 2001-1 - Provides a list of
candidates for political office who have registered withthe campaign spending commission.
Announcement No. 2001-2 - A listing of the Tax
Information Releases in effect and obsolete as ofJanuary 5, 2001, and a listing of Hawaii Administrative
Rules related to taxation.
Announcement No. 2001-3 - A listing of New Tax
Forms, Instructions, and Schedules; Errors Found on
Hawaii Tax Forms As of March 1, 2001.
Announcement No. 2001-4 - Provides informationon Act 36, SLH 2001, which allows licensed
audiologists to certify for tax purposes that a person is
deaf.
Announcement No. 2001-5 - Provides informationon Act 44, SLH 2001, which repeals the 2 percent
penalty provision for taxpayers who elect to participate
in the EFT program.
Announcement No. 2001-6 - Provides informationon Act 45, SLH 2001, which extends the confidentiality
privileges for certain taxpayer communications to alltaxes administered under title 14, HRS.
Announcement No. 2001-7 - Provides informationon Act 64, SLH 2001, which provides for a sharing of the
public service company tax revenues with those counties
that establish by ordinance an exemption from real
property tax for public service companies.
Announcement No. 2001-8 - Provides informationon Act 119, SLH 2001, which provides a refundable
income tax credit of $1 multiplied by the number ofqualified exemptions the taxpayer is entitled to claim.
Announcement No. 2001-9 - Provides informationon Act 125, SLH 2001, which simplifies the application
See Recent Publications, Page 6

Page 4

Hawaii Tax News

Fall 2001

Criminal Section -- Concluded Investigations Resulting
in Prosecution/Convictions
Fiscal Years 1999, 2000, and 2001

VIOLATIONSNameBusiness Activity

Violation

ResultConviction
Date

Albert Honda

PhysicianEvasion GE

Pled Guilty

09/20/99

David Pocock

Contractor

Failure to File GE

Pled Guilty

08/09/99

Multimedia Pacific, Inc.

Media

Failure to File GE

Pled Guilty

12/21/98

Christopher Waidzunas

Media

Failure to File GE

Pled Nolo

02/10/00

Nettie Kaahaina

Contractor

Theft, Failure to File
GE/WH

Pled Guilty

04/19/99

William Campbell

Hauling Co.

Failure to File PSC

Pled Nolo04/27/99

A-1 Hawaii Trucking

Hauling Co.

Failure to File PSC

Pled Guilty

03/19/99

Shirley Hall

Hauling Co.

Failure to File PSC

Pled Guilty

03/19/99

Dart Systems of Hi

Entertainment

Failure to File GE

Pled Guilty

05/07/99

Stephen Yamada

Attorney

Failure to Pay

Pled Guilty

09/21/99

Jerry C. Alivado

Gov’t. Employee

Neglect of Duty

Pled Nolo11/26/99

Sandra Mensza

WelfareFailure to File GE

Pled Guilty

02/24/00

Richard Basuel

Return Preparer

Failure to File GE

Pled Nolo

02/03/00

Richard Basuel II

Return Preparer

Failure to File GE

Pled Nolo

02/03/00

Richard Basuel

Return Preparer

False Returns

Pled Nolo

04/18/01

Stephen Goldsmith

Attorney

Failure to File GE

Pled Nolo

06/30/00

Noreen Takara

Fantastic Sams

Failure to File GE/WH

Pled Nolo

10/27/99

Evonnelle L. Hurley

Unemployed

Theft-False Returns

Pled Guilty

07/18/00

Dennis Nishimura

Attorney

Failure to File GE

Pled Nolo

04/20/00

Harrison P. Chung

Attorney

Failure to File GE

Pled Nolo

02/29/00

Glenn Kobayashi

Attorney

Failure to File GE

Pled Nolo

02/29/00

Joana H. Magno, M.D.

Cardiologist

Failure to File GE

Pled Nolo

09/26/00

Gateway Mgt. Corp.

Tourism

Failure to File GE

Dismissed

N/A(See Criminal Section, Page 5)

Fall 2001

Hawaii Tax News

Page 5

Criminal Section(From Page 4)

VIOLATIONSNameBusiness Activity

Violation

ResultConviction
Date

Conklin Nakamura

Tourism

Failure to File GE

Pled Nolo

05/19/00

Bruce BarberController

Failure to File CigaretteTaxPending

Severino Galacgac

Mtg.
Solicitor/Realtor

Failure to File GE

Pled Nolo

06/26/00

William Hill

Computer Sales

Failure to File GE

Pled Guilty

11/14/00

Dina Caleda

Return Preparer

Failure to File GE,
False Returns

Pled Guilty

08/10/01

Rosalinda DeGuzman

Return Preparer

Prep. False Returns

Pending

Richard Basuel II

Return Preparer

Prep. False Returns

Pled Guilty

08/23/01

Kam’s Express, Inc.

Hauling Co.

Failure to File PSC/WH

Pled Nolo

02/14/01

Thomas Kam

Hauling Co.

Theft - Withholding

Pled Nolo

02/14/01

Herbert Kam

Hauling Co.

Theft - Withholding

Pled Nolo

02/14/01

Romeo Pineda M.D., Inc.

Radiology

Failure to File GE/WH

Pled Nolo

10/18/00

Rosabella Pineda

Radiology

Failure to File GE/WH

Pled Nolo

10/18/00

Caesar Buted

RealtorFailure to File GE

Pled Nolo

05/18/01

Marshall Ige

Former Senator

Evasion of Tax

Pending

Anita Gabriel

Nurse

Failure to File GE

Pled NoloHarry Ikeda

BarberFailure to File GE/Lic.

Pending

Radio Hawaii, Inc.

Media

Failure to File GE

Pled Guilty

05/15/01

Samuel Wagenvoord

Media

Failure to File GE

Pled Guilty

05/15/01

Franklin Kometani

DentistFailure to File GE,
Theft

Pled Nolo03/15/01

Kometani & Associates

Dental Co.

Failure to File GE,
Theft

Pled Nolo03/15/01

02/02/01

Page 6

Hawaii Tax News

Recent Publications(From Page 3)

process for certain nonprofit organizations seeking
exemption from the payment of general excise tax andreduces the filing burden for these organizations.
Announcement No. 2001-10 - Provides informationon Act 143, SLH 2001, which encourages the use ofalternative fuels by reducing the fuel tax to reflect theenergy content of alternative fuels.
Announcement No. 2001-11 - Provides informationon Act 164, SLH 2001, which clarifies that the general
excise tax wholesale rate of ½ percent applies
comparably to sales made to aquacultural andagricultural producers and cooperatives.
Announcement No. 2001-12 - Provides informationon Act 210, SLH 2001, which excludes from the general
excise tax amounts received as rent for the rental orleasing of aircraft or aircraft engines used by the renter or
lessee for interstate air transportation and exempts fromthe use tax, the importation and use of aircraft or aircraft
engines by a renter or lessee for interstate airtransportation.
Announcement No. 2001-13 - Provides informationon Act 199, SLH 2001, which conforms the Hawaii
income tax law with the amendments to the operative
sections of the Internal Revenue Code.
Announcement No. 2001-14 - Provides informationon Act 221, SLH 2001, which expands and clarifies priortax incentives for technical businesses and provides
additional tax incentives for technical and non-technicalbusinesses.
Announcement No. 2001-14 (Revised) - Corrects atypographical error in the discussion regarding the hightechnology business investment tax credit inAnnouncement No. 2001-14.
Announcement No. 2001-15 - Provides informationon Act 270, SLH 2001, which clarifies the cigarette tax
stamping law.
Announcement No. 2001-16 - Provides informationon Act 272, SLH 2001, which requires each electricutility company that sells electricity for consumption in
the State to establish renewable energy portfolio
standard goals and provides net energy metering forelectric utility customers operating an “eligible
customer-generator” with a capacity of not more than 10
kilowatts.
Announcement No. 2001-17 - Provides informationon Act 293, SLH 2001, which provides a 4% refundable
income tax credit for the construction of new drought
mitigation water storage facilities, or the repair orreconstruction of existing water storage facilities.
Announcement No. 2001-18 - Provides informationon Act 309, SLH 2001, which provides a nonrefundable

Fall 2001

income tax credit for contributions of in-kind services
for the repair and maintenance of Hawaii’s publicschools.
Tax Facts No. 2001-1 - Provides a general overview
of the appeal process available to taxpayers who do notagree with the assessment of State taxes by the
Department of Taxation.
Tax Facts No. 2001-2 - Provides general
information about the application of the general excise,use, fuel, and net income taxes to agricultural andaquacultural producers in Hawaii.
Digest of Tax Measures - Enacted by the State of
Hawaii, Twenty-first Legislature, Regular Session of
2001.

Pending Tax
Publications

T

he following is a list of the Department’s tax
projects in progress, and the name and telephone
number of the staff member assigned to the project.
Administration of Taxes• Application of penalties and interest and the waiverof penalties and interest - sections 231-3 and 231-39,
HRS.
• Clarify the application of the penalty for failure to
pay tax after timely filing a return (section
231-39(b)(3), HRS) where a corporation files anextension for a return and remits taxes with thereturn.
Income Tax Law• Clarify the application of the income tax to pension
amounts rolled over to an Individual Retirement
Account - section 235-7, HRS. (Peter Fritz,
587-1533)• Clarify the application of the capital goods excise tax
credit by focusing on the requirement that the tax
must be paid before the credit may be claimed.
• Clarify whether a taxpayer who files an extension
may amend a return during the extension period tochange filing status from married filing joint tomarried filing separate.
General Excise Tax Law• Clarify the application of the general excise tax forreimbursements - section 237-20, HRS. (Grant
Tanimoto, 587-1569)• Clarify the application of the general excise tax
See Pending Publications, Page 7

Fall 2001

Hawaii Tax News

Pending Publications(From Page 6)

•
•

•

•
•

exemption for scientific contracts - section 237-26,
HRS. (Johnson Lau, 587-1562)
Clarify the application of the general excise tax tosales of property (e.g., goodwill, covenants not tocompete, etc.) upon the termination of a business.
Clarify when the Department may disclose tax return
information to persons contractually obligated to pay
general excise and use taxes assessed against another
under section 237-34(b), HRS.
Application of the general excise, use, and income
taxes on agricultural cooperatives organized underchapter 421, HRS, and farmer’s cooperatives
meeting the requirements of section 521, IRC.
Pyramiding relief for Hawaii businesses under Act
71, SLH 1999, and Act 198, SLH 2000.
General excise tax exemption for exported services
and contracting and the use taxation of imported
services under Act 70, SLH 1999, and Act 198, SLH
2000.

Page 7

Miscellaneous• Clarify the application of certain Hawaii taxes to theincome received from property or services purchasedwith a General Services Administration Smart Pay
credit card. (Johnson Lau, 587-1562)• Clarify the use of bonds by cigarette stamping
licensees.

Conveyance Tax Law• Clarify the application of the conveyance tax,
including transactions involving Fannie Mae. (Grant
Tanimoto, 587-1569)

Fiscal Year Ended 2001 State Tax Collections(In Millions of Dollars)
Difference
Individual Income Tax
Corporate Income Tax
General Excise Tax
Transient Accommodations Tax
All Others
Total Tax Collections

FY 2001$ 1,104.8
60.8
1,640.0
177.2
695.6$ 3,678.4

FY 2000$ 1,064.6
68.2
1,536.3
168.6
674.0$ 3,511.6

Amount$ 40.3
-7.4
103.8
8.6
21.6
$ 166.8

Percent
3.8%-10.9%
6.8%
5.1%
3.2%
4.7%

General Fund Revenues$ 3,157.7$ 2,972.3$ 185.3

6.2%(Note: Totals may not add up due to rounding.)

Total tax collections for fiscal year 2001 amounted to $3,678.4 million, increasing 4.7% over last fiscal year’s total of$3,511.6 million. Fiscal year 2001 general excise tax collections grew by $103.8 million, followed by individual income
tax with $40.3 million, and transient accommodations tax (TAT) by $8.6 million. Although visitor arrivals increased amere 0.1%, fiscal year 2001 TAT collections grew 5.1%, mainly due to an increase in average daily room rates. Fiscal year
2001 corporate income tax collections dropped $7.4 million over the previous fiscal year.
Of the $3,678.4 million in taxes collected for fiscal year 2001, $3,157.7 million was allocated to the state general fund, anincrease of $185.3 million from the previous fiscal year. While total tax collections increased by 4.7%, general fundrevenues increased by 6.2%, partly because transfers to the special convention center fund ceased effective July 2000.

WEB INFORMATION AND FORMS
www.state.hi.us/tax
OAHU DISTRICT OFFICE
Princess Ruth Keelikolani Building
830 Punchbowl Street
Honolulu, HI 96813-5094
E-mail: Taxpayer_Services@tax.state.hi.us
Fax: 808-587-1488
Telephone:
For Tax Information:808-587-6515 (January - April 20)
808-587-4242
1-800-222-3229 (Toll-Free)808-587-1418 (TDD - For the hearing impaired)
1-800-887-8974 (TDD Toll-Free - For the hearing impaired)
Forms By Fax/Mail:
808-587-7572
1-800-222-7572 (Toll-Free)

MAUI DISTRICT OFFICE
State Office Building
54 S. High Street, #208
Wailuku, HI 96793-2198
Telephone: 808-984-8500 Fax: 808-984-8522
E-mail: Maui_Office@tax.state.hi.us

HAWAII DISTRICT OFFICE
State Office Building
75 Aupuni Street, #101
Hilo, HI 96720-4245
Telephone: 808-974-6321 Fax: 808-974-6300
E-mail: Hilo_Office@tax.state.hi.us

KAUAI DISTRICT OFFICE
State Office Building
3060 Eiwa Street, #105
Lihue, HI 96766-1889
Telephone: 808-274-3456 Fax: 808-274-3461
E-mail: Kauai_Office@tax.state.hi.us

Taxpayer Services BranchState of Hawaii
Department of Taxation
P.O. Box 259
Honolulu, HI 96809-0259

DISTRICT TAX OFFICES
Forms and Information may be obtained from any district tax office,Mondays through Fridays, except State holidays, from 7:45 A.M. to
4:30 P.M.