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THE SENATE                           S.C.R. NO.            S.D. 1
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
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                    SENATE  CONCURRENT
                        RESOLUTION

  REQUESTING THE DEPARTMENT OF TAXATION TO AMEND ITS RULES FOR
    EMPLOYERS PAYING STATE WITHHOLDING TAXES FOR NONRESIDENTS. 



 1        WHEREAS, section 235-61, Hawaii Revised Statutes, requires
 2   employers to deduct and withhold from wages paid to an employee
 3   an amount of income tax and pay that withheld amount over to
 4   the Department of Taxation on a periodic basis; and
 5   
 6        WHEREAS, the Department of Taxation has established rules,
 7   as authorized by law, for the purpose of implementing the
 8   income tax law; and
 9   
10        WHEREAS, nonresidents are generally not subject to the
11   income tax law and the Department of Taxation has adopted
12   section 18-235-61-04, Hawaii Administrative Rules, that exempts
13   wages paid to nonresident employees from the withholding
14   requirements; and
15   
16        WHEREAS, section 18-235-61-04 also qualifies employees as
17   nonresidents for the purposes of withholding taxes as those
18   employees who are temporarily performing services in the State
19   for not more than sixty days; and
20   
21        WHEREAS, the legislature finds that this rule is being
22   used by unscrupulous members of the construction industry to
23   avoid the withholding of income tax that is legally due by
24   employing employees within the State for fifty-nine days at a
25   time, releasing the employees, and then returning the employees
26   at a later date to restart another sixty-day period, thus,
27   qualifying those employees as nonresidents; and
28   
29        WHEREAS, the failure to withhold taxes from these
30   employees results in loss of revenues to the State, when if
31   both residents and nonresidents were subject to withholding,
32   true nonresidents would be able to file an income tax return
33   for a refund of any tax withheld just like residents; now,
34   therefore 
35   
36        BE IT RESOLVED by the Senate of the Twentieth Legislature

 
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                                  S.C.R. NO.            S.D. 1
                                                        
                                                        

 
 1   of the State of Hawaii, Regular Session of 1999, the House of
 2   Representatives concurring, that the Department of Taxation is
 3   requested to amend section 18-235-61-04, Hawaii Administrative
 4   Rules, to repeal the exemption from withholding for nonresident
 5   employees of contractors in the construction industry and
 6   require that their wages be subject to withholding regardless
 7   of residency; and
 8   
 9        BE IT FURTHER RESOLVED that a certified copy of this
10   Concurrent Resolution be transmitted to the Director of
11   Taxation.