Hawaii – HI Economic nexus: Solving online tax dodge

The Maui News
President of the Tax Foundation of Hawaii
April 5, 2017

There has been some confusion recently about a bill now in our Legislature, SB 620, that would redefine how our general excise tax laws define “doing business.”

The bill concerns a U.S. constitutional concept called “substantial nexus.” Some amount of connection between a potential taxpayer and a state is needed before the state has power to impose that tax. The U.S. Supreme Court held in Quill Corp v. North Dakota, 504 U.S. 298 (1992), that some physical presence is needed before substantial nexus can be found. Thus, online retailers such as Overstock, Land’s End and Amazon made a good business of selling into states without withholding and paying those states’ sales taxes. This was all legal, they claimed, because they have no physical presence in those states.

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