Out-of-state tax applies to some sales
I purchased a wedding gift from Macy's and had it gift-wrapped and sent to Illinois. I was charged over $50 to send the item and was also charged 9 percent Illinois sales tax, instead of the Hawaii 4.5 percent general excise tax. Why isn't the sale considered a Hawaii sale even though there is a Macy's in Illinois? Macy's in Illinois is not doing anything to facilitate the sale of the items, which were being sent directly to the bride and groom. If Macy's in Hawaii is collecting the 9 percent Illinois tax, does Hawaii get any portion of the tax? I contacted Macy's and was told that the tax collected is credited to Illinois because the item is being sent to Illinois. I think that the state of Hawaii is being shortchanged, because it is not getting any portion to the tax collected. I don't know who to call in the state to ensure that Hawaii gets its fair share.
Answer: In this case, the state of Hawaii doesn't expect to get any share of the tax because of what's called an out-of-state sales exemption.
Macy's succinct answer, via tax counsel Frank Julian, of Macy's corporate office in Cincinnati, Ohio, was that, by law, the company is required to charge the tax imposed by the destination where the goods are being sent. He referred to this as "send sales."
In Hawaii, the general excise tax law allows for an out-of-state sale exemption, explained Denise Inouye, supervising tax specialist with the Department of Taxation.
If a company is shipping something for a customer directly out of state, it is considered a sales consummated out of state, she said. An out-of-state sale is when an item is delivered to, and accepted, in another state.
In that case, the company is not required to pay the Hawaii general excise tax on the sales.
It also works in reverse. If a company in another state were shipping an item to Hawaii, then it would collect the Hawaii general excise tax on behalf of Hawaii, Inouye said.
A company does not have to request this out-of-state sales exemption, but would have "to prove, if we ever audit them, that it was an out-of-state sale," she said.
If you had just bought the gift, then shipped it yourself to your friends in Illinois, the Illinois sales tax would not have come into play.
In that case, the sale would have been subject to the Hawaii general excise tax, Inouye said.
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