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June 30, 2003
RE: Act 173, Session Laws of Hawaii 2003 (Act 173), Relating to Simplified Tax Administration

Act 173 adds a new chapter to the Hawaii Revised Statutes to authorize Hawaii's participation in multistate discussions relating to the Streamlined Sales Tax Project (project), which is a nationwide effort being undertaken among the various states.

The 2001-2003 Tax Review Commission recommended that Hawaii participate in the project.

The project arose from a recognition that traditional tax collection systems could not deal adequately with the rapid growth of the Internet and e-commerce. The project is intended to simplify sales and use tax administration and reduce the burden of tax compliance by addressing issues, relating to the multiplicity of sales and use tax rates, definitions, and taxing jurisdictions. These issues make it difficult for businesses, including e-businesses, to apply the proper sales and use taxes to transactions.

Act 173 is substantively similar to model legislation drafted by the National Conference of State Legislatures. This model legislation directs the state revenue departments to join in multistate discussions to develop a simpler, uniform, and fairer system of sales and use taxation, that removes the burden imposed on retailers, preserves state sovereignty, and enhances the ability of United States firms to compete in the global economy. A key component of this model legislation further directs and commits the states to continuing discussions aimed at developing an interstate agreement to govern a streamlined sales tax administration system for the 21st century.

Hawaii’s participation in the project may lead to a substantial reduction in the burden of tax compliance for all sellers and for all types of commerce. Among the goals of the project are a single state sales tax rate, uniform definitions of sales and use tax terms, requiring states to administer any local sales and use taxes, and a central electronic registration system to allow a seller to register to collect and remit sales and use taxes for all states. It is anticipated that technology will help cure problems of increased trans-state sales.

Act 173 will take effect on July 1, 2003, except that section -9 of section 2 of the bill shall take effect when the State becomes a member of the streamlined sales and use tax agreement.

Current forms and other tax information are available at the Department’s website at: If you know which tax form or publication you need, please call the Department's request line at 808-587-7572, or toll-free from the neighbor islands and continental U.S. at 1-800-222-7572. This service is available 24 hours a day, 7 days a week.

Kurt Kawafuchi
Director of Taxation