Cash-based businesses could be facing more pressure from Hawaii tax collectors.
The state Department of Taxation is seeking to amend a state law that allows businesses that rely on cash transactions, such as vendors at farmers markets or swap meets, to avoid penalties for not keeping proper records of sales if they don’t do more than 10 transactions a day.
Department spokeswoman Mallory Fujitani said the law was passed to give smaller businesses “some flexibility” in case they weren’t familiar with state tax law. But it has since opened the door to abuse, she said, with some businesses claiming they do too few sales to pay taxes or keep records even when that’s not the case.
How much the state loses in revenue because of that is hard to estimate, she said.
“We need to encourage them to do record keeping that’s required of all other taxpayers,” Fujitani said.
Lawmakers are considering a bill to make the change.
Senate Bill 1196 passed the Senate and is up for consideration by the House Committee on Finance.
R. Peterson, a Hilo Farmers Market vendor who declined to give her full first name, said she is concerned the rule change would place too much pressure on the smallest of business owners.
“It’s just more paperwork,” she said. “I’ll have to invoice everything I do.
“They need to worry about other things other than that.”
Fujitani said the department is aware of the challenges of keeping track of sales for vendors who do fast-paced transactions.
She said the department recommends that they keep a tally sheet nearby so that each item sold can be easily marked.
If the bill is adopted, Fujitani said the department would still be focused on putting education before penalties. Warnings would be given first.
“Even with the warning, what they try to do is first visit and do education,” she said of inspectors.
“The second time around they may give a reminder.
“They do try to give everyone some benefit of the doubt first to make sure they are fully aware of the requirements.”
The state has three tax inspectors but is looking to fill another three vacant positions, Fujitani said.