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

Volume 7, Number 3

State of Hawaii ! Department of Taxation

One-Stop ServiceOne-stop service has come to Oahu! Since
different offices on two floors of our building
provide different kinds and levels of tax services,bringing one-stop customer service to Oahu has taken
months of careful planning and an exceptional
willingness on the part of staff to embrace change.
While not everything can be accomplished with one
stop, our goal is for our Oahu Taxpayer Services Branch
to service most of the taxpayers contacting them for
information, assistance, and problem resolution. To
accomplish this, we are restructuring the Taxpayer
Services Branch and will eventually increase the numberof taxpayer assistors from 12 to 21, pending approval forhiring.
We did not add new positions to accomplish this, but
merely transferred existing positions from other areas of
the Department. Most of these additional positions are
currently vacant, so it will be some time before the new
Taxpayer Services employees can be hired and trained.
Current taxpayer assistors, and the new assistors
when hired, continue to be trained and cross-trained toprovide a wider range of services. For example, they will
be able to perform simple tax return corrections now
being done by our office auditors, and simple collections
tasks currently being done by our collectors.
In this way, most taxpayers will have their questions
and problems resolved faster and with one call or visit,and our audit, collections, and technical staff canconcentrate on handling the more serious or specializedcases and questions.
The revamped Taxpayer Services Branch should be
up to speed by January, but your patience as both the newand existing employees develop the knowledge andexperience needed to efficiently manage their new duties
will be appreciated.

New Telephone
MessagesI

t’s not very customer friendly when taxpayers haveto call multiple times in order to get through ourbusy telephone lines, so we’ve done something about it.
We are increasing the number of assistors in our

FALL 2003

Taxpayer Services Branch, but that is only part of thesolution. We found that a large number of calls were forroutine information such as our office location, hours ofoperation, and the like.
To address these types of questions, we implemented
a call attendant system in August which prompts callers
to press a number, followed by the pound (#) sign, toobtain information even after hours! Of course, callers
can go directly to a live person during business hours bypressing zero (0) at any time.
In addition to our office location and hours, otherselections provide recorded information on our mailingaddress, website address, forms request numbers, e-mailaddress, and on making a payment.
If an urgent situation arises, this system is flexible
enough to allow us to add new messages at any time. For
example, if a problem arises that we think will affect anumber of taxpayers and generate a lot of calls to the
Department, we can immediately add a new message sothat callers can hear automated information about thesituation instead of a busy signal!
During the tax season, a lot of our calls are about thestatus of tax refunds, and automating this information isa priority. In the works for implementation sometime
next year are plans to provide automated refund
information by telephone.
Although most people would rather speak to a live
person, we can’t accommodate everyone without adding
See New Messages, Page 2

IN THIS ISSUE
One-Stop Service . . . . . . . . . . . . . . . . . . . . 1
New Telephone Messages . . . . . . . . . . . . . 1
The Direct Line . . . . . . . . . . . . . . . . . . . . . . 2
Offers in Compromise . . . . . . . . . . . . . . . . . 2
Tax Credit Changes Effective
July 1, 2003 . . . . . . . . . . . . . . . . . . . . . . . 2
Digest of Tax Measures . . . . . . . . . . . . . . . 3
Year-End Workshops . . . . . . . . . . . . . . . . . 3
Post-Tax Season at the Department . . . . . . 3
Criminal Section - Concluded
Investigations Resulting in
Prosecution/Convictions. . . . . . . . . . . . . . 4
Recently Issued Tax Publications . . . . . . . . 6
Pending Tax Publications . . . . . . . . . . . . . . 6
Fiscal Year Ended 2003 State Tax
Collections . . . . . . . . . . . . . . . . . . . . . . . . 7

Page 2

Hawaii Tax NewsThe Direct Line F
By Director Kurt Kawafuchi

The implementation of our “One-Stop Service” went
off with a bang on October 1, 2003. The goal of One-Stop
Service is to centralize customer inquiries in theTaxpayer Service/Customer Inquiry section, to allow
other divisions more time to focus on core processes,
and to handle the customer inquiries at the first point ofcontact. Our goal is to have an answer rate of 80%. As
with the implementation of any major project, we
anticipate challenges along the way with theimplementation of the One-Stop Service and would
appreciate your patience during the transition period.
Our 2003 summer workshop series came to a close in
September. I really appreciate the great participation on
all the islands. A record number attended our Oahu
workshop - approximately 310 attendees!
I look forward to seeing you at our year-end
workshop!

Fall 2003

ensuing years.
In the past, offers in compromise not only were
subject to close scrutiny and evaluation by the
Department, but also required the Governor’s approval.
Once approved, certain information about the offer
became part of the public record.
Effective June 4, 2003, however, Act 136, Session
Laws of Hawaii 2003, allows the tax director, instead of
the Governor, to accept offers in compromise if the tax
does not exceed $50,000, exclusive of penalties andinterest. Before the offer can be accepted, the proposed
offer must be posted on the Department’s website(www.state.hi.us/tax) for five calendar days.
For more information on Act 136, see Department of
Taxation Announcement No. 2003-6. Detailed
information on offers in compromise was previously
published in Tax Facts No. 2000-2, dated December
2000. This Tax Facts publication is currently being
revised, and the updated Tax Facts No. 2000-2 should beavailable in the near future.
Copies of these publications may be obtained fromour website at www.state.hi.us/tax, by calling ourrequest line at 587-7572 (toll-free at 1-800-222-7572),
or from any district tax office.

New Messages(From Page 1)

to the size and cost of government. By providing more
options to our customers, we can provide faster responses
through automation where appropriate, and give callers
with less routine questions and problems a better chanceof getting through to a live assistor the first time.

Tax Credit Changes
Effective July 1, 2003

R

ecently enacted Act 207 creates a newrenewable energy tax credit for solar, wind, andphotovoltaic energy systems effective July 1, 2003.
This credit partially replaces the energy conservation
See Tax Credit Changes, Page 3

Offers in CompromiseAre you behind on your State taxes and can’t see a
way out? A recent change in Hawaii’s tax law
may make it easier to settle your taxes and get a fresh start.
If paying your tax in full or in installments is notpossible, a third option may be to compromise on theamount due by offering to pay the Department an amountless than the entire balance due to settle your account. If
the Department determines that there is doubt as towhether it can collect the entire debt or doubt as towhether you actually owe the amount determined by the
Department, then the Department may agree tocompromise on the amount of tax, penalty, and interest
and accept the amount offered.
Such offers are subject to some negotiation, and if the
taxpayer has the potential for future earnings, theDepartment may require you to pay an additionalamount if your earnings exceed certain thresholds in the

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:

Kurt Kawafuchi
Lynne Kuroda
Princess Ruth Keelikolani Building
830 Punchbowl Street, Room 219
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, code 7700

Fall 2003

Hawaii Tax News

Tax Credit Changes(From Page 2)

tax credit that expired on June 30, 2003; heat pumps and ice
storage systems are not eligible for the credit. Unlike theformer credit, the new credit is not available to banks andother financial institutions that file franchise tax returns.
Effective July 1, 2003, the hotel construction andremodeling tax credit has changed back to the 4%
refundable credit originally enacted in 2000.
In the wake of the 9/11 terrorist attacks, the credit waschanged from a 4% refundable credit to a 10%
nonrefundable credit for costs incurred through June 30,
2003.
The Legislature passed a bill to extend the 10%
nonrefundable credit until 2006, but at a reduced rate of
8%. This bill, which also would have extended the credit
to commercial buildings and facilities within resort areas
in addition to hotel and time-share facilities, was vetoedbecause it did not contain a cap on claims for the credit
and the potential cost was too high in light of the Council
on Revenues’ general fund revenue projections.

Digest of Tax
MeasuresT

he Department of Taxation’s Digest of Tax
Measures is now available on the Department’s
website at www.state.hi.us/tax!
As it does each year, the Department has published asummary of State tax legislation enacted and vetoed thisyear. The Digest also lists the specific sections of the
Hawaii Revised Statutes that were affected by the newlegislation, as well as provisions of 2002 federal tax
legislation that are operative and inoperative for Hawaii
income tax purposes.
A limited number of hard copies are available bycalling the Department’s request line at 587-7572(toll-free at 1-800-222-7572), or from any district tax
office.

Year-End Workshops

P

lanning has begun for our year-end workshop
series. Along with our presentations on suchthings as new and revised tax forms, you’ll also hear apresentation by the Internal Revenue Service and a tax
case update by the Tax Section of the Department of the

Page 3

Attorney General.
The dates for the half-day workshops are: Maui November 20; Kauai - November 25; Oahu - December
15; Kona - December 18; and Hilo - December 19.
All workshops will begin at 9:00 A.M. and end at
1:00 P.M. Four hours of CPE credit is available toattendees.
The information and registration flyer will beavailable on our website at www.state.hi.us/tax
sometime in October. For more information, call our
External Training and Outreach program at
808-587-1786.

Post-Tax Season at the
Department

Ever wonder what goes on at the Tax Department
between tax seasons? A LOT! It seems that theflow of tax returns never ends. The mailroom and otherprocessing areas, as well as our audit and collections
branches, are really humming along. The October 20
extension deadline is right around the corner. Periodic
general excise and other business tax returns are
year-round.
Requests for tax information and assistance ease justa bit after the tax season, but hundreds of telephone calls,
e-mails, and letters, are still coming in every day.
After months of planning, we implemented ourbeefed-up, one-stop taxpayer assistance service on
October 1, 2003. See the article on page 1.
Our Technical Section has, for some months already,been revising next year’s tax forms. By the end of
October, most of the forms should be finalized and off tothe printers.
The 2004 legislative session is also just a few months
away, and overlaps with what is for all of us a busy timeof year. Busy or not, what happens during the legislative
session can have far-reaching consequences.
Our Rules Office has been working to implement the2003 law changes, while at the same time looking foranything needing a legislative fix in 2004 and tracking
2003 federal legislation that may affect our annual
Internal Revenue Code conformity bill. Working withthem is our Research Office, which also is compiling thetax collection data that is the focus of a lot of interest
these days.
Finally, there is a lot of important behind-the-scenes
work going on as we continue the development andphased implementation of our integrated tax
information management system (ITIMS). The ITIMS
project may not be a front-line activity, but everyone
See Post-Tax Season, Page 6

Page 4

Hawaii Tax News

Fall 2003

Criminal Section – Concluded Investigations Resulting
in Prosecution/Convictions
Fiscal Years 2002 and 2003
Act 136, SLH 2003, allows the tax director to hire criminal investigators who have privileges similar to those of police
officers and deputy sheriffs so that the Department can more effectively pursue those who violate the tax laws.
The Department continues to encourage taxpayers to voluntarily file their tax returns. The Department generally will notinitiate a criminal investigation when taxpayers voluntarily come forward to report their failure to file or other omissions.
Concluded criminal investigations resulting in prosecution/convictions for fiscal years ended 2002 and 2003 aresummarized in the chart below:

VIOLATIONSNameBusiness Activity

Violation

ResultConviction
Date

Memito Ablan

RealtorFailure to File GE

Pled Nolo

08/10/01

David Bettencourt

Attorney

Failure to File GE

Pled Nolo

09/24/01

BIC Bridal Hawaii, Inc.

Sales

Failure to File GE

Pled Nolo

02/04/02

Catherine Coelho

Property Manager

False Returns

Pled Nolo

08/31/02

Dexter Coelho

Services

Evasion of Tax

Pled Nolo

08/31/02

Carolina Dayoan

Medical Practice

Failure to File GE

Pled Guilty

01/11/02

Diamond Co., Inc.

RetailFailure to File GE

Pled Nolo

08/19/02

Kathleen Higa

Hardware Sales

Failure to File GE

Pled Nolo12/13/01

Caryn Ige

Consulting

Failure to File GE

Pled Nolo

11/02/01

David Jinbo

Tax Preparer

False Returns, Theft

Defer Pros.

06/17/02

Joy A. McElroy, MD, Inc.

PhysicianFailure to File GE

Pled Nolo04/25/02

Eric Maehara

Attorney

False Return

Pled Nolo

01/16/02

Nobukatsu Naito

President, Video
Corporation

Failure to File GE

Pled Nolo

11/08/01

Nippon Video, Inc.

Retail Video

Failure to File GE

Pled Nolo

11/08/01

Randall Ogata

President, Pet Store

Failure to File GE

Pled Nolo

01/15/02

Pets Unlimited, Inc.

Pet Store

Failure to File GE

Pled Nolo

01/15/02

Wayne Picanco

Mason Contractor

Failure to File GE

Pled Nolo

06/14/02

Ric Ramos

Sales & Service

Failure to File GE

Pled Nolo

02/22/02

Yvonne Ramos

Sales & Service

Failure to File GE

Pled Nolo

02/22/02

Sage Diamond Co., Inc.

RetailFailure to File GE

Pled Nolo

08/19/02

Vincent Sage

RetailFailure to File GE

Pled Nolo

08/19/02

James Schmit

Architect

Failure to File GE

Pled Nolo

09/07/01

See Criminal Section, Page 5

Fall 2003

Hawaii Tax News

Page 5

Criminal Section(From Page 4)

VIOLATIONSNameBusiness Activity

Violation

ResultConviction
Date

Vivian Soong

Return Preparer

Prep. False Returns

Pled Guilty

02/14/02

Taylng Yang

Medical Doctor

Failure to File GE

Pled Nolo

07/23/02

Jeffrey Yano

Retail Sales

False Returns, Theft

Pled Nolo

01/29/03

Douglas Abarca

Individual Taxpayer

False Return, Theft

Pled Nolo

02/19/03

Builders of Hawaii, Inc.

Building Contractor

Failure to File GE

Pled Nolo

06/27/03

Leticia Castillo

Gov’t Employee

False Returns

Pled Nolo

05/21/03

Comm. Truck & Lift

Trucking

Failure to File GE

Pled Nolo12/02/02

Daniel Doyle

RealtorFailure to File GE, NI

Pled Nolo

05/21/03

Ed Ellenson

Computer

Failure to File GE,
Theft WH

Pled Nolo

08/27/03

James Faria

Individual Taxpayer

False Return, Theft

Pled Nolo

02/03/03

Vikki Ferstler

Service

Failure to File GE

Pled Nolo

09/13/02

Valerie Hamada

Food Service

Failure to File GE

Pled Nolo

10/29/02

Austin Keanu

Individual Taxpayer

False Return, Theft

Pled Nolo

04/23/03

Dale Keama

Individual Taxpayer

False Return, Theft

Pled Nolo

02/19/03

Craig Lee

Trucking

Failure to File GE

Pled Nolo12/02/02

Michael Lippert

Attorney

Theft WH

Pled Nolo

07/14/03

Eugene Miranda

Individual Taxpayer

False Return, Theft

Pled Nolo

05/20/03

Harvey Nakamoto

Building Contractor

Failure to File GE

Pled Nolo

06/27/03

Fred Overstreet

RealtorFailure to File GE

Pled Nolo

05/21/03

Jeffrey Page

Tourism Service

Failure to File GE,
False Returns

Pled Nolo

02/03/03

Bonnie Prebula

Pharmacist

False Return, Theft

Pled Nolo

07/16/03

Louis Tapu

Individual Taxpayer

False Return, Theft

Pled Nolo

05/05/03

Sonia Tapu

Individual Taxpayer

False Return, Theft

Pled Nolo

05/05/03

Andrew Tung

Individual Taxpayer

False Return, Theft

Pled Nolo

02/20/03

Shopping Svc. of HI, Inc.

Food Service

Failure to File GE

Pled Nolo

10/29/02

Page 6

Hawaii Tax News

Post-Tax Season(From Page 3)

who is now able to electronically file returns through our
joint federal-state e-filing program (JELF), e-filing via
the Internet program (ELF), and bulk filing via theInternet program has this hard-working team to thank.
The Department’s mission is to administer the tax
laws of the State of Hawaii in a consistent, uniform, andfair manner. Our employees strive to accomplish thismission, not just during the tax season, but through theentire year.

Recently Issued Tax
Publications

T

he following is a list of the publications issued
by the Department of Taxation from January
2003 through September 2003. Copies of thesepublications may be obtained from our website atwww.state.hi.us/tax, by calling our request line at587-7572 (toll-free at 1-800-222-7572), or from any
district tax office.
TIR No. 2003-1 - Provides information on the proper
application of the law regarding the high technology
business investment tax credit.
TIR No. 2003-2 - Provides information on theextension of deadlines and other tax relief for membersof the armed forces, reserves, and Hawaii National
Guard.
Announcement No. 2003-1 - Provides informationon the new and revised high technology business
investment tax credit forms.
Announcement No. 2003-2 - A listing of new andobsolete tax forms, instructions, and schedules; errors
found on Hawaii tax forms.
Announcement No. 2003-3 - Provides a list of
candidates for political office who voluntarily filed
affidavit forms with the campaign spending
commission.
Announcement No. 2003-4 - Provides informationon Act 14, SLH 2003, which provides corrective
legislation to Hawaii’s estimated tax underpayment
penalty and clarifies the law regarding extensions to file
tax returns.
Announcement No. 2003-5 - Provides informationon Act 100, SLH 2003, which provides a nonrefundable
attractions and educational facilities tax credit equal to100% of certain costs incurred after May 31, 2003, andbefore June 1, 2009, for the development of such
facilities at Ko Olina Resort and Marina and the Makaha

Fall 2003

Resort.
Announcement No. 2003-6 - Provides informationon Act 136, SLH 2003, which changes tax
administration by (1) authorizing the Department of
Taxation to waive penalties and interest on tax liabilities
that have been delinquent for more than 90 days, (2)streamlining the offers in compromise process byauthorizing the tax director, instead of the Governor, toaccept offers in compromise for tax liabilities that are$50,000 or less (exclusive of penalties and interest), and(3) allowing the tax director to hire tax criminal
investigators.
Announcement No. 2003-7 - Provides informationon the increase in the cigarette tax to 6.5 cents per
cigarette for sales, use, or possession of cigarettes afterJune 30, 2003.
Announcement No. 2003-8 - Announces theincrease in the Maui County gasoline and diesel fuel tax
rate from 13 cents to 18 cents per gallon, effective July 1,
2003.
Announcement No. 2003-9 - Provides informationon Act 135, SLH 2003, which amends or repeals
obsolete tax laws.
Announcement No. 2003-10 - Provides informationon Act 172, SLH 2003, which brings Hawaii Income
Tax Law into conformity with many but not all of thechanges made to the Internal Revenue Code as ofDecember 31, 2002.
Announcement No. 2003-11 - Provides informationon Act 173, SLH 2003, which authorizes Hawaii’s
participation in multistate discussions relating to the
Streamlined Sales Tax Project which is a nationwide
effort being undertaken among the various states.
Hawaii Tax Information at a Glance Brochure Revised June 2003.
Digest of Tax Measures - Enacted by the State of
Hawaii, Twenty-Second Legislature, Regular Session of
2003.

Pending Tax
Publications

T

he following is a list of some of the
Department’s pending tax publications.
Administration of Taxes• Application of penalties and interest and the waiverof penalties and interest - sections 231-3 and 231-39,
HRS.
• Clarify the offers in compromise process.
See Pending Publications, Page 7

Fall 2003

Hawaii Tax News

Pending Publications(From Page 6)

Income Tax Law• Clarify the application of the Hawaii tax credit forincreasing research activities.

Page 7

Transient Accommodations Tax• Clarify the application of the transient
accommodations tax.
Conveyance Tax Law• Clarify the application of the conveyance tax.

General Excise Tax Law• Clarify the general excise tax rules, including theapplication of the general excise tax forreimbursements - section 237-20, HRS.

Fiscal Year Ended 2003 State Tax Collections
July 2002 - June 2003
(In Millions of Dollars)
Difference
Individual Income Tax
Corporate Income Tax
General Excise Tax
Transient Accommodations Tax
All Others
Total Tax Collections

FY 2003$ 1,038.1
8.3
1,792.7
170.9
723.6$ 3,733.5

FY 2002$ 1,071.6
45.5
1,612.3
157.6
637.4$ 3,524.4

Amount$ -33.5
-37.2
180.4
13.2
86.2
$ 209.1

Percent-3.1%-81.8%
11.2%
8.4%
13.5%
5.9%

General Fund Revenues$ 3,182.0$ 3,048.5$ 133.5

4.4%(Note: Totals may not add up due to rounding.)

Total tax collections for fiscal year 2003 amounted to $3,733.5 million, or $209.1 million more than the same period
last year. General excise tax (GET) collections, one of the most comprehensive indicators of the economy, jumped$180.4 million, or 11.2%, to $1,792.7 million for fiscal year 2003. GET details indicate that construction and realestate activities (contracting and commissions) are growing very strongly. However, the drop in corporate andindividual income taxes partially offset the GET collections. Possible reasons for this drop may be the increase in tax
credit claims, loss of capital assets, and lingering effects of the September 11, 2001, terrorist attack.
Consistent with a 4.8% increase in visitor arrivals is an 8.4% increase in transient accommodation taxes. Other major
increases include: $15.2 million for franchise tax mainly due to payments made under protest; $24.1 million for
unemployment security due to a tax rate increase; and $20.1 million for public service company taxes. Another reason
for the overall growth is the “weekend effect”, where collections for the month of June 2002, were due on July 1,
2002, shifting the collections into fiscal year 2003. General fund revenues totaled $3,182.0 million, increasing by$133.5 million, or 4.4%, over fiscal year 2002.

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

TAXPAYER SERVICES BRANCH
Princess Ruth Keelikolani Building
830 Punchbowl Street
Honolulu, HI 96813-5094
Website: www.state.hi.us/tax
E-mail: Taxpayer_Services@tax.state.hi.us
Fax: 808-587-1488
Telephone: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)