RELATING TO DUE PROCESS FOR ESTABLISHING PERSONAL LIABILITY FOR TAX.
Summary
SB3277 would amend Hawaii’s general excise tax law to clarify how the Department of Taxation may establish personal liability against officers, members, managers, or other responsible persons when a business fails to pay general excise tax amounts held in trust for the State. The bill states that these amounts include tax collected from customers as a separately stated charge, as well as an imputed tax amount when the tax is not separately stated. It makes responsible persons personally liable only if they willfully fail to pay or cause payment of the tax, and it excludes nonprofit organizations from this personal-liability provision.
The measure also limits liability to taxes, interest, and penalties that became due during the period the person had control or responsibility, and it provides a good-cause exemption determined by the director. It further specifies that dissolution of the business or surrender of its authority to do business in Hawaii does not erase the liability. Most importantly, the bill says a determination of personal liability is an assessment subject to the normal assessment and appeal procedures under sections 237-36 and 237-42, giving the alleged responsible person access to the same dispute-resolution and judicial-review process available for other tax assessments.
Impact
SB3277 would amend section 237-41.5 of the Hawaii Revised Statutes to expressly treat a personal-liability determination for unpaid general excise taxes as an assessment, bringing it within the standard tax protest, assessment, and appeal framework. This would change the procedural rights of alleged responsible persons by allowing them to challenge the liability through ordinary tax dispute processes rather than being forced to pay under protest first. The bill would also reinforce the State’s ability to pursue unpaid trust-tax amounts from responsible individuals while narrowing the scope of liability through willfulness, time-period, nonprofit, and good-cause limitations.
Sentiment
The bill appears to have a generally protective, due-process-oriented purpose, with the stated intent of giving allegedly responsible persons the same procedural protections as other taxpayers. The available context shows no recorded votes or committee testimony, so there is no direct evidence of organized support or opposition in the provided materials. The referral to WAM/JDC suggests the measure was still under committee consideration at the time of the last action.
Contention
The main point of contention identified in the bill text is procedural fairness versus tax collection enforcement. The legislature notes that the Department of Taxation has taken the position that disputed personal liability must be paid under protest before judicial review, which the bill suggests may be impractical for someone with only a small ownership interest in a business facing a large tax debt. Potentially affected parties include business officers, members, managers, and other persons with control over tax funds, while nonprofits are expressly exempted from this liability provision. Another possible issue is the bill’s preservation of liability after dissolution, which favors collection authority over business closure as a defense.