updated 03:35 pm EDT, Fri May 8, 2009
Hawaii Internet tax law
Legislation that would require Hawaii-based online vendors to collect a 4 percent general excise tax on purchases placed from all other states is currently going through the system and may become law. According to a Friday report, the legislation is meant to standardize parts of Hawaii's tax code and simplify tax rates, joining an ongoing national effort towards similar goals.
Hawaii-based companies that sell products over the Internet are not currently required to collect state sales or excise taxes on purchased if they do not have a physical storefront in the buyer's state. Despite this, over 1,100 retailers are voluntarily collecting sales taxes on items shipping to the 22 participating states. If the legislation passes to become law, all Hawaii-based Internet vendors will be required to collect sales tax on shipped items.
New York has tried for a similar approach more than once but has rejected these plans, with some arguing that taxing out-of-state sales would only damage state revenue further by discouraging companies from basing themselves the same area.