Question: I was told by a car dealership on Oahu that the buyer of a new car must pay the state general excise tax based on the full amount of the list price, not on the agreed-upon selling price. What? For example, we bought a new car based on a negotiated price of $20,800. Yet we had to pay the excise tax on the original list price of $23,300. I wonder how many car buyers are aware of this apparent sleight of hand. If this is true, car buyers should bring along an attorney to read the small print. At no time has this ever been pointed out to me in any transaction in my nearly three decades living — and buying cars — in Hawaii. I’m sure your readers would appreciate having it explained in detail. It makes no common sense.
Answer: According to the state Department of Taxation, charging the general excise tax on the higher list price is not illegal — if the dealer has to pay that amount based on gross receipts and passes the entire amount on to the state.
"It depends on the structure of the transaction," explained Taxation Department spokeswoman Mallory Fujitani.
She said the department is aware of similar situations involving the purchase of electronics from a big-box retailer, in which the "discount" is actually a rebate or payment from the manufacturer.
As an example: A TV set is listed for sale at $1,000, but the manufacturer gives an instant $200 rebate, leaving the customer to pay $800.
However, the retailer still receives a total of $1,000 in gross receipts, which is subject to the general excise tax, Fujitani said.
The big-box retailer "usually" is not going to pay the tax on the $200 rebate/payment for the customer, she said, so it passes the tax liability on to the customer.
"We believe this is acceptable, provided the amount collected from the customer is the actual tax due and passed on to the department," Fujitani said.
Anyone questioning the excise tax charge should contact the state Department of Commerce and Consumer Affairs, either the Office of Consumer Protection or the Regulated Industries Complaints Office.
The Taxation Department wouldn’t act on a complaint like yours because confidentiality laws prevent it from disclosing information about any filings to anyone other than the taxpayer, unless the taxpayer provides the individual a power of attorney permitting them access to their tax records, Fujitani said.
That means taxpayer information wouldn’t even be provided to an investigating state agency, such as OCP or RICO, she said.
However, she said complainants can contact the appropriate agency, which would provide the Taxation Department with its findings if a questionable practice is uncovered.
In this case, because RICO oversees complaints about licensed motor vehicle dealers and salespeople, you can file complaints with the office by calling 587-4272 or going online to cca.hawaii.gov/rico/form.
Motor vehicle dealers must comply with Hawaii’s tax and licensing laws, said DCCA spokeswoman Christine Hirasa.
If a store, restaurant or other business not regulated by RICO is involved, OCP would be the entity to investigate matters involving the alleged overcharging of the general excise tax, said OCP Executive Director Stephen Levins.
Question: Can you share this with your readers? I found out recently that the telephone number for the collection of refuse and bulky items listed in the phone book is no longer in service. People should call the city Department of Environmental Services at 768-3200.
Answer: Thank you for the information.
Environmental Services did recently change "to this all-encompassing phone number for all refuse-related phone calls," confirmed spokesman Markus Owens.
Mahalo
To the kind and honest gentleman who found my credit card in the Dillingham Marukai parking garage and turned it in to customer service. He saved me much inconvenience and worry. I will be sure to pay it forward. — Elaine, Liliha
Write to “Kokua Line” at Honolulu Star-Advertiser, 7 Waterfront Plaza, Suite 210, 500 Ala Moana Blvd., Honolulu 96813; call 529-4773; fax 529-4750; or email kokualine@staradvertiser.com.
