SALT Report 2109 – The Hawaii House of Representatives introduced legislation that adds click-through nexus and affiliate nexus provisions to the general excise and use tax laws. Additionally, the bill requires that any person who sells or leases tangible personal property or services to the state to register with the Hawaii Department of Taxation.
A seller would be presumed to be engaged in business in the state if the seller enters into an agreement with a Hawaiian resident who refers potential customers to the seller, either by a link on a website, telemarketing, or an in-person oral presentation if the cumulative gross receipts from sales by the seller to customers in Hawaii are greater than $10,000 during the preceding 12 months.
The presumption may be rebutted by submitting proof that the residents with whom the seller has an agreement did not engage in any activity that was significantly associated with the seller’s ability to establish or maintain a market in Hawaii during the preceding 12 months.
The legislation provides that a seller is presumed to be engaged in the business of selling tangible personal property for general excise tax or use tax purposes, if an affiliated person has substantial nexus in Hawaii. The presumption would also apply if any person, other than a common carrier:
- Sells a similar line of products as the seller and does so under the same or similar business name,
- Maintains an office, distribution facility, warehouse, storage place, or other place of business in Hawaii that facilitates the delivery of property or services sold by the seller to the seller’s customers,
- Uses trademarks, service marks, or trade names in Hawaii that are the same as, or substantially similar to, those used by the seller,
- Delivers, installs, assembles, or performs maintenance services for the seller’s customers,
- Facilitates the delivery of property to customers in Hawaii by allowing the seller’s customers to pick up property at an office, distribution facility, warehouse, storage place, or other place of business, or
- Conducts any other activities in Hawaii that are significantly associated with the seller’s ability to establish and maintain a market in Hawaii
The presumption may be rebutted by demonstrating that the activities of the person or affiliate are not significantly associated with the seller’s ability to establish or maintain a market in Hawaii for the seller’s sales.
Additionally, if a seller who meets the affiliate nexus requirements makes sales of tangible personal property for use in Hawaii, the seller must collect use tax from the purchaser.
If any person sells or leases tangible personal property or services to the state of Hawaii, a state department, a state agency, or an agent of a state entity, that person and any affiliated person must register with the Department of Taxation as a seller and collect and remit general excise and use taxes.
If passed, the legislation would take effect on July 1, 2013.
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