Amendments to HAR Section 18-235-61-04, relating to the exemption from withholding of income taxes on wages of qualifying nonresident employees, have been adopted by the Department of Taxation (Department) and signed by Governor Benjamin J. Cayetano. The amendments to the rule took effect on January 29, 1999.

The amendments clarify: (1) which employees are "qualifying" nonresident employees for purposes of the exemption from withholding; (2) the number of days per calendar year a nonresident employee shall perform services in the State to be classified as a qualified nonresident employee; and (3) that there are five criteria to satisfy in order to be classified as a qualifying nonresident employee.

The amendments to HAR Section 18-235-61-04 ease the burden of tax compliance for taxpayers by providing clear guidance for determining which nonresident employees would qualify their employers for the nonresident income tax withholding exemption.

A copy of the rule and other tax information may be downloaded from the Department's website at: http://www.state.hi.us/tax/tax.html. Alternatively, to request a copy of the amended rule, please mail a request to The Department of Taxation, Attention: Rules Office, P.O. Box 259, Honolulu, Hawaii, 96809-0259. Please include your name and address, identify the rule ("nonresident withholding exemption rule"), and provide a check for $1.00 (50 cents per copied page) made out to the "Director of Finance." The law requires that agencies, including the Department, charge for copies of the rules. While several bills have been introduced in the 1999 Legislature to clarify the law, including bills which would reduce the copying fee, nothing has been enacted at the present time.

/s/
RAY K. KAMIKAWA
Director of Taxation

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HAR Section Explained: HAR Section 18-235-61-04