On October 17, 2019, the Hawaii Department of Taxation released Tax Information Release No. 2019-03 (“TIR”), which provided guidance regarding Hawaii’s Gross Excise Tax (“GET”) marketplace collection provisions effective January 1, 2020. On December 13, 2019, the Department issued a Revised 2019-03 to clarify the GET and use tax liability of marketplace facilitators and marketplace sellers. Specifically, the TIR clarifies that marketplace facilitators are liable for GET at the retail rate of four percent on the following activities:
- The marketplace facilitator’s own sales made into the State, and
- Sales made through its marketplace into the State, regardless of whether the marketplace seller is registered to do business in the State.
However, marketplace facilitators are subject to use tax at the wholesale rate of 0.5% for:
- Sales of tangible personal property through the marketplace where the marketplace seller is not engaged in business in the State;
- Sales of tangible personal property that are delivered to the marketplace facilitator outside of the State prior to the sale through the marketplace, and
- Sales of services through the marketplace where the marketplace seller is not engaged in business in the State and the services are ultimately used and consumed in the State.
Marketplace sellers may also have GET tax obligations. The TIR further clarifies marketplace sellers that are engaged in business in the State are subject to GET at the retail rate on their own retail sales in the State. Marketplace sellers that are engaged in business in the State are also subject to GET at the wholesale rate on sales of tangible personal property made through a marketplace facilitator that the marketplace seller sends to a purchaser in the State. Marketplace sellers are also liable for GET at the wholesale rate on sales of tangible personal property that is delivered to a marketplace facilitator in the State and sales of services that are sold through a marketplace facilitator that are ultimately used and consumed in the State.
Why this is important: Marketplace facilitators and marketplace sellers involved in marketplace and non-marketplace transactions need to make sure that they are paying and collecting GET at the correct tax rate. In marketplace transactions, the GET tax rate will vary depending on who the seller is, who the purchaser is and where the transaction occurs.
What to prepare for: Hawaii’s marketplace law is effective January 1, 2020. Marketplace facilitators and marketplace sellers will want to make sure they have adjusted their tax collection obligations and contractual arrangements to make sure they are properly collecting Hawaii GET.