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SB3277
THE SENATE
S.B. NO.
3277
THIRTY-THIRD LEGISLATURE, 2026
STATE OF HAWAII
A BILL FOR AN ACT
RELATING
TO DUE PROCESS FOR ESTABLISHING PERSONAL LIABILITY FOR TAX
.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
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SECTION 1.
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The
legislature finds that under the general excise tax law, the State may collect
unpaid liability for tax against responsible persons associated with an entity for
which tax is unpaid.
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However, there is
no clear process for adjudicating disputes between the department of taxation
and a person allegedly responsible for the tax.
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The department of taxation has taken the position that the disputed tax
must be paid under protest for there to be any judicial review.
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The legislature recognizes that this may
not be a viable alternative for a taxpayer alleged to have personal liability due
to a minuscule interest in a company for which a large amount of tax remains
unpaid.
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Accordingly, the purpose of this Act is to
apply the normal tax dispute resolution processes to a determination of
personal liability and thereby give an allegedly responsible person the same
due process that is provided to others who are assessed taxes.
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SECTION
2
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Section 237-41.5, Hawaii Revised Statutes, is
amended to read as follows:
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�237-41.5
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Certain amounts held in trust; liability of
key individuals.
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(a)
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There shall be personal liability for the
taxes imposed under this chapter as provided in this section for the following
amounts of gross income or gross proceeds:
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(1)
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Any amount collected as a recovery of
the taxpayer's liability under this chapter, where the amount is passed on as
the tax owed by the taxpayer under this chapter for the transaction and is
separately stated or accounted for in a receipt, contract, invoice, billing, or
other evidence of the business activity; or
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(2)
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An amount equal to the tax liability
under this chapter on a transaction where a taxpayer does not separately state
or account for the amount as a tax recovery as provided in paragraph (1).
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For purposes of this paragraph, the amount of
the imputed tax liability is the result of multiplying the gross income or
gross proceeds received in the transaction by the tax rate.
The amounts
under paragraphs (1) and (2) shall be held in trust for the benefit of the
State and for payment to the State in the manner and at the time required by
this chapter.
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(b)
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The personal liability under this
section applies to any officer, member, manager, or other person having control
or supervision over amounts of gross proceeds or gross income collected to pay
the general excise tax and held in trust under subsection (a), or who is
charged with the responsibility for the filing of returns or the payment of
general excise tax on gross income or gross proceeds collected and held in
trust under subsection (a).
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The person
shall be personally liable for any unpaid taxes and interest and penalties on
those taxes, if [
such
]
the
officer or other person wilfully fails
to pay or to cause to be paid any taxes due from the taxpayer pursuant to this
chapter.
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This subsection shall not apply to any
officer, manager, or other person having control or supervision over amounts of
gross proceeds or gross income collected to pay the general excise tax and held
in trust under subsection (a), or who is charged with the responsibility for
the filing of returns or the payment of general excise tax on gross income or
gross proceeds collected and held in trust under subsection (a) for a nonprofit
organization.
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For purposes of this subsection:
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"Nonprofit organization" means a
corporate entity, association, or other duly chartered entity that is registered
with the State and is exempt from the application of this chapter pursuant to
section 237-23(a)(3), (4), (5), (6), or (7).
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"Wilfully fails to pay or to cause to
be paid" shall be construed in accordance with judicial interpretations
given to similar provisions of the Internal Revenue Code; consistent therewith,
the term "wilfully" shall mean a voluntary, intentional violation of
a known legal duty.
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(c)
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An officer, member, manager, or other
responsible person shall be liable only for general excise taxes on gross
income or gross proceeds collected, plus interest and penalties on those taxes,
that became due during the period the person had control, supervision,
responsibility, or a duty to act for the taxpayer as described in subsection
(b) of this section.
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(d)
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Persons liable under subsection (b) are
exempt from liability when nonpayment of the general excise tax on gross income
or gross proceeds held in trust is for good cause as determined by the
director.
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(e)
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The voluntary or involuntary dissolution of
the taxpayer or the withdrawal or surrender of its right to engage in business
in this State shall not discharge the liability hereby imposed.
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(f)
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A determination that a person is liable for the unpaid taxes of another
person under this section shall be an assessment for which the rules of section
237-36 shall apply and from which a person aggrieved may appeal under section
237-42.
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SECTION 3.
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This Act does not affect rights and duties that matured, penalties that
were incurred, and proceedings that were begun before its effective date.
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SECTION 4.
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Statutory material to be repealed is bracketed and stricken.
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New statutory material is underscored.
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SECTION 5.
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This Act shall take effect upon its approval.
INTRODUCED BY:
_____________________________
Report Title:
General
Excise Tax; Personal Liability
Description:
Provides
that a determination of personal liability for another person's unpaid general
excise taxes is an assessment subject to the due process procedures and appeals
available for other assessments.
The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.