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State use tax applies
to most shipped cars

Question: I have an interesting situation that I don't know how to resolve. I am in the military, stationed in Italy. I am going to purchase an automobile for use in Italy. I will have it for approximately one month before the Navy ships the vehicle to Hawaii. There is no sales tax for the U.S. military in Europe. Will I be liable for sales or use taxes upon arrival in Hawaii?

Answer: You may be able to escape paying the state's use tax if you are a non-Hawaii resident and can provide "sufficient evidence" to show the state Department of Taxation that you meet the requirements for an exemption.

Unless there is an exemption in the law, all new or used property imported to Hawaii generally is subject to the use tax, said Fern Elizares, of the department's External Training & Outreach Office. That includes motor vehicles imported for their owners' use in Hawaii.

The use tax is 4 percent of the property's landed value, including the purchase price, shipping and handling fees, insurance costs and customs duty, but not including any sales or use tax paid to another state or country.

If you are a Hawaii resident who is in the military, your 1-month-old vehicle purchased in Italy would be subject to the use tax, Elizares said.

However, she said, if you are a nonresident in the military, your 1-month-old vehicle would not be subject to the use tax IF you provide sufficient evidence that you had acquired the vehicle outside Hawaii while a bona fide resident of another state or country; you acquired the vehicle for use outside Hawaii; you made actual and substantial use of the vehicle outside Hawaii; and that the license, fees and applicable sales or use taxes have been paid to your home state of record.

The use tax is paid on Form G-26, Use Tax Return. An alternative, Elizares said, is to send a letter to the Department of Taxation with a check or money order payable to the "Hawaii State Tax Collector."

Additionally, importer-owners of vehicles are required to file Form G-27, the Motor Vehicle Use Tax Certificate, she said. This form must be presented to the Motor Vehicle Registration Office of the county in which the vehicle will be registered to declare that the use tax has been paid or that no use tax is due.

However, active-duty military stationed in Hawaii who are not Hawaii residents and who have already paid sales/use taxes on their vehicle to their home state are exempt from filing this form, Elizares said.

State tax forms are available online at www.state.hi.us/tax or by calling a 24-hour request line at (808) 587-7572.

If you have more questions or need other tax information, call (808) 587-4242 or e-mail Taxpayer.Services@hawaii.gov.

Q: Your help is truly needed concerning a situation at our residential complex. For a time now there has been a family, including a co-resident manager, operating their personal-owned business from the premises where we reside. Cars are frequently brought in to be refurbished and detailed, then placed "for sale." The vehicles are often parked on the premises with the "for sale" sign visible to road traffic, or parked on the adjoining private street. Complaints have been made previously with the property company who sold the complex's lease, as well as to the other co-resident manager living on the premises (who also brings his car wash business home), but nothing has been done. It seems everyone is turning their heads and ignoring voiced concerns of residents. Is it legal to operate a private business in a residential area? No one will provide an answer to the ongoing situation. Many of the residents are angered and frustrated as logical voice concerns of safety issues and lack of house rules have been totally disregarded by management.

A: Your complaint was received a couple of months ago and looked into, but we only recently found out what happened.

Such activity is not allowed, but no violations have been documented by the city.

A similar complaint was made last fall. In both instances, city building inspectors could find no sign of any illegal activity, according to Ivan Matsumoto, chief building inspector for the city's commercial and multifamily code enforcement branch.

In the last instance, an inspector went out on three different occasions in late February and early March and "he couldn't find anybody doing any type of work -- either auto repair or auto detailing," Matsumoto said. "No cars were being worked on."

However, he acknowledged that inspectors will only go out weekdays during normal working hours. The problem is documenting the illegal activity if it is taking place at night or on weekends.

"We cannot cite based (only) on a complaint," he said.

You can call Matsumoto at 527-6341 to discuss the situation and to provide more details.

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