QUESTION: When entering nightclub establishments after certain hours, most customers have to pay a cover charge. I have asked for a receipt, just to see whether I would receive one, but it never happens. What happens to the money? Is it tax-free income for the business or the bouncers? Without receipts, how does the business know how much the bouncers really received? How does the state tax this income?

ANSWER: Nightclub cover charges are taxable income.

The state Department of Taxation's Technical Section pointed to Sections 235-102 (income tax law), 237-41 (general excise tax law) and 238-9 (use tax law) of the Hawaii Revised Statutes as requiring taxpayers “;to keep books of accounts or records sufficient to establish the amount of gross income, deductions, credits, or other matters required to be shown in any return, generally for three years.”;

Those who fail to do so may be subject to a fine or criminal penalty.

The Tax Department does acknowledge that if there is no record-keeping of cover charges by a nightclub, “;it would be difficult”; to know how much is collected.

However, last July it created a Special Enforcement Section in an attempt to crack down on those not paying their share of taxes.

The Special Enforcement Section “;will civilly (not criminally) investigate reported or suspected violations of tax laws, with a special emphasis on cash-based businesses,”; according to an official with the Technical Section. Violations can include “;substantial monetary fines.”;

The citable offenses are failure to produce a license upon demand, obtain a general excise tax license, keep adequate books and records, record transactions by receipt and record transactions by register, as well as tax avoidance price-fixing, possession of currency for tax avoidance purposes and interference with a tax official.

Click here for more information.

IRS Open House

The Internal Revenue Service will hold an open house at the Honolulu Tax Assistance Center, 300 Ala Moana Blvd., from 9 a.m. to 2 p.m. Saturday.

IRS staff will be on hand at the special open house—being held concurrently at about 200 other offices in every state—to help small businesses and individuals solve tax problems, including issues involving notices and payments, return preparation, audits, etc.

Two other open houses are planned for June 5 and 26. Details will be released later.

Auwe

To the TheBus No. 868 on Route 52. It's not the first time I've seen it happen, with Tuesday, April 27, being the latest. At about 3:35-3:45 p.m., TheBus comes barreling down H-2 freeway from Wahiawa in the HOV (high-occupancy vehicle) lane going at least 65 mph. I'm going at 60 mph with the speed limit at 55 mph, and it roars by me and all other cars. It continues on the H-1 freeway, still in the HOV lane doing 65 mph all the way into town via the viaduct. From seeing it at a distance in the rearview mirror by Mililani, to it blowing by, to seeing it vanish from view ahead in Pearl City, it's a major incident/accident waiting to happen! —Nate

We passed on your complaint to Oahu Transit Services, which said it would follow up.

Next time, contact the transit company directly: Call 848-4500 or file a complaint online at www.thebus.org/CS/CustomerService.asp.