The purpose of Act 169 is to amend the law relating to the general excise tax subcontract deduction by relieving the general contractor of liability for the general excise taxes on the contract amounts paid by the general contractor to a subcontractor.
Act 169 amends section 237-13(3)(B), Hawaii Revised Statutes, to allow a general contractor a deduction from gross contracting income equal to the amount that was paid the subcontractor if the subcontractor's name, general excise number, and amount of the deduction are listed on the general contractor's excise tax return. If these items are not listed on the return, the Department will disallow the deduction.
Prior to Act 169, the general contractor could claim the deduction only if the subcontractor's name and amount of the deduction were listed on the general contractor's general excise tax return and the four percent general excise tax was paid on the gross income received by the subcontractor. If the general excise tax was not paid by the subcontractor, the general contractor was denied the deduction. Prior to Act 169, a general contractor could withhold the general excise tax from the gross income paid the subcontractor and pay the tax withheld on the subcontractor's behalf or the general contractor could issue two checks to the subcontractor each time a payment was made with one check payable to the Hawaii State Tax Collector and the subcontractor in the amount of the general excise tax due.
Act 169 is applicable to any subcontract deduction claimed by a general contractor on or after July 14, 1998.
If you have any questions regarding this Announcement, please call Marshall A. Dimond at 808-587-1533. Forms and other tax information may be downloaded from the Department's website at http://www.state.hi.us/tax/tax.html. On Oahu, forms may be ordered by calling the Department's Forms Request Line at 808-587-7572. Persons who are not calling from Oahu, may call 1-800-222-7575 to receive forms by mail or 808-678-0522 from a fax machine to receive forms by fax.
RAY K. KAMIKAWA
Director of Taxation