Wednesday, April 17, 2024
Hawai'i Free Press

Current Articles | Archives

Sunday, November 26, 2023
Wholesaling:  What You Don’t Know
By Tom Yamachika @ 5:00 AM :: 1379 Views :: Small Business, Taxes

Wholesaling:  What You Don’t Know

by Tom Yamachika, President, Tax Foundation Hawaii

Every so often, we at the Foundation are asked about Hawaii tax laws. A couple of recent inquiries focused on when the “Wholesale Rate” in the Hawaii General Excise Tax (GET) kicks in.

The answer is that you as a taxpayer can never really know, but you can protect yourself just the same.

Huh?

Most of us are familiar with the GET retail rate. It’s 4% or 4.5%, and it appears on invoices as 4.166% or 4.712%. (This is because any dollar billed for tax becomes part of the seller’s revenues and is taxed the same as the rest of its revenue.)

The wholesale rate applies when a seller’s goods or services are being resold by its customer. So, if a farmer sells an avocado to a market for $1 and the market sells it to me for $1.50, the market pays the retail tax (4.5% of $1.50) and the farmer pays the wholesale tax (0.5% on $1.00).  County surcharge is not allowed on wholesale sales, so the 0.5% doesn’t get doubled to 1%.

But think about it for a minute. How does the farmer know what the market is going to do with the avocado once the sale takes place?  Sure, markets usually resell their inventory to retail buyers like you or me. But the farmer still doesn’t know what happens to the avocado he sold. Maybe the market owner gets hungry and uses it in a sandwich. Maybe some punk sneaks into the store and swipes it. And if that avocado isn’t in fact resold, then the farmer’s wholesale rate may be in trouble.

Fortunately, there is a solution to this information gap. It’s called a resale certificate (Form G-17 for goods).  Basically, the market signs a paper saying that it intends to resell the avocado and gives that paper to the farmer. In that form, the market agrees that if it lied on the form and that lie caused the farmer’s tax to go up, then the market would pay the farmer the difference in tax.

In that way, the farmer really doesn’t know what is going to happen to the avocado but is protected by the market.

And if the market isn’t willing to sign the paper, then the farmer can simply treat the avocado as sold at retail.

There are other kinds of wholesale sales recognized by the GET Law. If, for example, an accounting firm asks me to resolve a client’s tax question, I bill the accounting firm, and the firm bills its client, then my service is being resold and I get the wholesale rate. Just as with the farmer, however, I don’t necessarily know whether my service is in fact resold. So, I ask the accounting firm to give me a resale certificate. For services the form number is G-82.

The determination of whether some good or service is being resold can get very complicated. If Ms. Clean manufactures little bars of soap and sells them to a hotel for them to leave in guest rooms, is that a resale on the theory that the hotel’s guests are buying the amenities from the hotel with their room rate?  (Under Hawaii law, the answer is yes.)  In this situation also, Ms. Clean has only a general idea how the soaps are supposed to be used and, therefore, needs a resale certificate from the hotel saying that its soaps are going to be used in that way.

The wholesale rate under GET is not easy, but protecting yourself when the rate is claimed is not difficult.

Links

TEXT "follow HawaiiFreePress" to 40404

Register to Vote

2aHawaii

808 Silent Majority

Aloha Pregnancy Care Center

AntiPlanner

Antonio Gramsci Reading List

A Place for Women in Waipio

Ballotpedia Hawaii

Broken Trust

Build More Hawaiian Homes Working Group

Christian Homeschoolers of Hawaii

Cliff Slater's Second Opinion

DVids Hawaii

FIRE

Fix Oahu!

Frontline: The Fixers

Genetic Literacy Project

Grassroot Institute

Habele.org

Hawaii Aquarium Fish Report

Hawaii Aviation Preservation Society

Hawaii Catholic TV

Hawaii Christian Coalition

Hawaii Cigar Association

Hawaii ConCon Info

Hawaii Debt Clock

Hawaii Defense Foundation

Hawaii Family Forum

Hawaii Farmers and Ranchers United

Hawaii Farmer's Daughter

Hawaii Federalist Society

Hawaii Federation of Republican Women

Hawaii History Blog

Hawaii Homeschool Association

Hawaii Jihadi Trial

Hawaii Legal News

Hawaii Legal Short-Term Rental Alliance

Hawaii Matters

Hawaii's Partnership for Appropriate & Compassionate Care

Hawaii Public Charter School Network

Hawaii Rifle Association

Hawaii Shippers Council

Hawaii Smokers Alliance

Hawaii State Data Lab

Hawaii Together

HIEC.Coop

HiFiCo

Hiram Fong Papers

Homeschool Legal Defense Hawaii

Honolulu Moms for Liberty

Honolulu Navy League

Honolulu Traffic

House Minority Blog

Imua TMT

Inouye-Kwock, NYT 1992

Inside the Nature Conservancy

Inverse Condemnation

Investigative Project on Terrorism

July 4 in Hawaii

Kakaako Cares

Keep Hawaii's Heroes

Land and Power in Hawaii

Legislative Committee Analysis Tool

Lessons in Firearm Education

Lingle Years

Managed Care Matters -- Hawaii

Malama Pregnancy Center of Maui

MentalIllnessPolicy.org

Military Home Educators' Network Oahu

Missile Defense Advocacy

MIS Veterans Hawaii

NAMI Hawaii

Natatorium.org

National Christian Foundation Hawaii

National Parents Org Hawaii

NFIB Hawaii News

No GMO Means No Aloha

Not Dead Yet, Hawaii

NRA-ILA Hawaii

Oahu Alternative Transport

Obookiah

OHA Lies

Opt Out Today

OurFutureHawaii.com

Patients Rights Council Hawaii

PEACE Hawaii

People vs Machine

Practical Policy Institute of Hawaii

Pritchett Cartoons

Pro-GMO Hawaii

P.U.E.O.

RailRipoff.com

Rental by Owner Awareness Assn

ReRoute the Rail

Research Institute for Hawaii USA

Rick Hamada Show

RJ Rummel

Robotics Organizing Committee

School Choice in Hawaii

SenatorFong.com

Sink the Jones Act

Statehood for Guam

Talking Tax

Tax Foundation of Hawaii

The Real Hanabusa

Time Out Honolulu

Trustee Akina KWO Columns

UCC Truths

US Tax Foundation Hawaii Info

VAREP Honolulu

Waagey.org

West Maui Taxpayers Association

What Natalie Thinks

Whole Life Hawaii

Yes2TMT