October 22, 1999


RE: Adoption of Amendment to Hawaii Administrative Rules (HAR) Sec. 18-235-61-04(b), Which Excludes Nonresident Employees of Contractors From Qualifying for an Income Tax Withholding Exemption

The amendment to HAR Sec. 18-235-61-04(b), which excludes nonresident employees of contractors from qualifying for an income tax withholding exemption, has been adopted by the Department of Taxation (department) and signed by Governor Benjamin J. Cayetano. The amendment took effect on September 20, 1999.

The amendment is based on the findings in Senate Concurrent Resolution No. 53, S.D. 1 (SCR No. 53) which was adopted by the 1999 Legislature. SCR No. 53 found that some contractors were claiming an exemption from withholding for nonresident employees even though the employees were not exempt from withholding under the current rule because the employees worked in Hawaii for more than 60 days during the calendar year. The Legislature requested that the department amend HAR Sec.18-235-61-04 by repealing the exemption from income tax withholding for nonresident employees of construction industry contractors. Thus, a contractor as defined in HRS Sec. 237-6(1), is required to withhold Hawaii income taxes on the wages paid to all nonresident employees when the contractor is performing work for a construction project located in Hawaii beginning September 20, 1999, and thereafter.

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 ("Contractors' withholding rule").

Director of Taxation

HAR Section Explained: HAR Section 18-235-61-04(b)

Download a pdf copy of the rule