While many states have imposed economic nexus standards or set bright line nexus tests for income tax purposes, Hawaii is the first state to incorporate the same nexus thresholds for both income and sales tax purposes in light of the decision in Wayfair.1 The Legislature approved Senate Bill 495 (SB 495), which details the nexus presumptions of persons lacking physical presence in the state. Under the new law awaiting the governor’s signature, the presumption is that a person is systematically and regularly engaged in business in the state if that person engages in 200 or more business transactions or the person’s gross income attributable to sources in the state equals or exceeds $100,000. These thresholds for nexus are the same thresholds for remote sellers to collect and remit Hawaii general excise tax, the state’s sales tax equivalent, and now for Hawaii’s income tax.
The Tax Foundation of Hawaii has advocated that the same nexus standard should apply to all taxes in the state, not only including sales and income taxes, but the standard should apply to “franchise tax, public service company tax, transient accommodations tax, and so forth.”
Upon the governor’s signature, this will be the first state to statutorily enact the same bright line standards for both sales and income taxes.
1 South Dakota v. Wayfair, Inc. 138 SCt 2080, 2094 (2018).
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