Tax Information Release No. 2004-01 - Hawaii Department Of Taxation (Page 2 of 3) in pdf

Tax Information Release No. 2004-01

December 7, 2004

Page 2

semiweekly depositor by aggregating the amounts of taxes reported on the employer's prior four

quarterly returns.

Administrative Exemption from Required Electronic Filing

With respect to the required payment by EFT, the Department is committed to ensuring

close conformity with the federal tax law and to limit the burden on taxpayers in complying with

Act 113. Thus, the Department will not require an employer whose withholding liability exceeds

$40,000 (and is, therefore, subject to the new remittance requirements under Act 113) to pay by

EFT if such employer is not required to also remit their federal employment taxes electronically

via the Electronic Federal Tax Payment System (EFTPS).

Payments that are not made by EFT must be attached to a completed Form VP-1 Tax

Payment Voucher.

To avoid penalties that may apply to the failure to file by EFT, employers must provide

the Department with some evidence to indicate that they do not pay their federal employment

taxes by the EFTPS (thus showing that they are not required by the Internal Revenue Service to

pay by EFTPS). Evidence that will be accepted by the Department as sufficient proof of

payment by other than electronic means shall include a copy of a cancelled check for payment of

federal employment taxes within the calendar year for which the exemption is being asserted.

Please note that under § 231-9.9, HRS, and the accompanying administrative rules,

taxpayers whose liability for any tax type is more than $100,000 in any one taxable year shall be

required to participate in the EFT program upon notification by the department that the taxpayer

is required to participate. A taxpayer who is required to participate shall participate for a

minimum of one year. Electronic payment shall be required to any taxpayer meeting the

$100,000 threshold, notwithstanding the administrative exemption from EFT requirements in Act

113 described in this Tax Information Release.

Adoption of the Federal Three-Day Banking Rule

To further conform with the federal remittance dates to ease compliance for taxpayers,

the Department will adhere to the "Three-Day Banking Rule", which allows semiweekly

depositors three banking days to make the deposit. See Example (2)(ii) of § 31.6302-1(d), Treas.

Reg. In general, if a deposit is required to be made on a day that is not a banking day, the

deposit is deemed timely if it is made by the close of the next banking day. Saturdays and

Sundays along with federal and state bank holidays are treated as nonbanking days.

As applied specifically to semiweekly depositors, if any of the three weekdays after the

end of a semiweekly period is a banking holiday, the employer will have one additional banking

day to make the deposit. For example, if a semiweekly depositor accumulates taxes for

payments made on Friday and the following Monday is not a banking day, the deposit that is

normally due on Wednesday may be made on Thursday (to allow a total of three banking days to

make the deposit).

Tax Information Release No. 2004-01 - Hawaii Department Of Taxation Page 2