Honorable Robert Bunda

President of the Senate

Twenty-Second State Legislature

Regular Session of 2004

State of Hawaii

Sir:

Your Committee on Ways and Means, to which was referred S.B. No. 2986 entitled:

begs leave to report as follows:

The purpose of this measure is to conform the state withholding tax remittance due date policy (for employers with an annual withholding tax liability exceeding $40,000), to the federal "semi-weekly" tax remittance due date policy.

Currently, an employer with an annual state withholding tax liability of $100,000 or less, must remit payment on or before the fifteenth day of the calendar month following the month for which the taxes were withheld. An annual withholding state tax liability of $100,000 or more requires remittance of taxes on or before the tenth day of the calendar month following the month for which the taxes were withheld. Finally, if an employer's annual state tax liability is less than $5,000, remittance may be made on or before the fifteenth day of the month after the close of each quarter.

This bill conforms the State's monthly due date for remitting Hawaii withholding tax to the federal "semi-weekly" policy, but with a lower $40,000 threshold. The lower threshold is necessary because the state wage withholding consists of only income tax, while federal wage withholding consists of income tax, social security tax, and Medicare tax.

Your Committee finds that a one-time revenue gain of $40,000,000 to $60,000,000 for fiscal year 2005 will be realized by the State because the "float" on state income tax withholdings will be drastically reduced by the expedited semi-weekly payment required under this bill.

Your Committee has amended the bill by lowering the proposed tax remittance threshold amount from amounts that exceed $40,000 to amounts that exceed $20,000. Your Committee has also adopted the recommendation of the Department of Taxation and has lowered the electronic funds transfer threshold for withholdings taxes to amounts that exceed $20,000. Otherwise, tax payments by electronic funds transfer are required only for taxpayers with an annual tax liability of at least $100,000.

As affirmed by the record of votes of the members of your Committee on Ways and Means that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 2986, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 2986, S.D. 1, and be placed on the calendar for Third Reading.