SB3115

SECTION 1. With the advent of increased computer use personally and in daily business operations, electronic and computer-based interactions with government are rising.

As a government agency, the department of taxation interacts with nearly every person in Hawaii on a regular, systematic, and in-depth basis. The department of taxation also regularly interacts with nonresident taxpayers and mainland-based businesses that routinely file tax information with the department.

With the increase in out-of-state interaction with taxpayers and the increase in use of electronic means of filing tax information, the legislature in 1997 made electronic filing an acceptable means of carrying out a taxpayer's obligations under the law.

Since this law was enacted, the ability to interact electronically has grown considerably. This growth is even truer for businesses where almost every business has a computer and access to the internet.

The purpose of this Act is to provide the department of taxation with the authority to require, by rule, electronic filing of tax returns and electronic payment of taxes owed. This Act is a natural progression of how a majority, if not all, tax submissions will be made in the next decade and beyond. To assure that taxpayers are provided with sufficient notice and an opportunity to comment, this Act requires that the rule be adopted pursuant to chapter 91, Hawaii Revised Statutes.

The legislature, which is charged with the responsibility of overseeing the effectiveness of tax incentives and the efficacy of the tax system as a whole, can be provided more specific data on Hawaii taxes if the tax data were captured electronically.

Finally, the legislature finds that there are certain tax returns, such as fuel tax returns, tobacco tax returns, and other specific tax credits, that impact a very small number of taxpayers, all of who likely have computer access. Allowing the department of taxation to require this small population of specific taxpayers to e-file tax returns will not adversely impact such taxpayers. Concomitantly, taxpayers will experience a commensurate decrease in the time it takes to process a return, including the processing of a tax refund. The same analysis applies to electronic payment of taxes owed, which also stands to benefit the general fund by immediate realization of revenues owed the state.

SECTION 2. Section 231-8.5, Hawaii Revised Statutes, is amended to read as follows:

"[[]§231-8.5[]] Electronic filing of tax returns. The department may allow, or require by rule adopted pursuant to chapter 91, filing by electronic, telephonic, or optical means of any tax return, application, report, or other document required under the provisions of title 14 administered by the department. The date of filing shall be the date the tax return, application, report, or other document is transmitted to the department in a form and manner prescribed by departmental rules adopted pursuant to chapter 91. The department may determine alternative methods for the signing, subscribing, or verifying of a tax return, application, report, or other document that shall have the same validity and consequences as the actual signing by the taxpayer. A filing under this section shall be treated in the same manner as a filing subject to the penalties under section 231-39."

SECTION 3. Section 231-9.9, Hawaii Revised Statutes, is amended to read as follows:

"§231-9.9 Payment of taxes by electronic funds transfer. (a) The director of taxation is authorized to require every person whose tax liability for any one taxable year exceeds:

(1) $100,000[,];or

(2) An amount equal to $100,000 or less if required by rule adopted pursuant to chapter 91;

and who files a tax return for any tax, including consolidated filers, to remit taxes by one of the means of electronic funds transfer approved by the department; provided that for withholding taxes under section 235-62, electronic funds transfers shall apply to annual tax liabilities that exceed $40,000.

(b) Any person who files a tax return for any tax and is not required by subsection (a) to remit taxes by means of electronic funds transfer may elect to remit taxes by one of the means of electronic funds transfer approved by the department with the approval of the director of taxation.

(c) If a person who is required under subsection (a) to remit taxes by one of the means of electronic funds transfer approved by the department fails to remit the taxes using an approved method on or before the date prescribed therefor, unless it is shown that the failure is due to reasonable cause and not to neglect, there shall be added to the tax required to be so remitted a penalty of two per cent of the amount of the tax. The penalty under this subsection is in addition to any penalty set forth in section 231-39.

(d) No later than twenty days prior to the convening of each regular session, the department shall submit a report to the legislature containing:

(1) The number of taxpayers who were assessed the two per cent penalty pursuant to subsection (c);

(2) The amounts of each assessment; and

(3) The total amount of assessments collected for the previous year."

SECTION 4. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 5. This Act shall take effect upon its approval.

INTRODUCED BY:

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By Request

THE SENATE	S.B. NO.	3115
TWENTY-FOURTH LEGISLATURE, 2008
STATE OF HAWAII