Hawaii 2023 Loan-Out GET Tax Rule FAQs
1. How has Hawaii changed its production tax incentive law for 2023?
Starting 1/1/2023, all production companies seeking a Hawaii production tax credit incentive must withhold and report Hawaii general excise tax (HI GET) from the gross pay of loan-outs attributable to Hawaii work. The Hawaii Department of Taxation (HI DoTax) won’t accept withholdings or reporting attributable to the withheld loan-out unless the loan-out has a HI GET number. The new HI GET loan-out law is not applicable to productions not seeking a Hawaii production tax credit.
2. What happens if a production’s loan-out doesn’t have a HI GET number?
The new incentive law disqualifies the production’s entire tax credit even if only a single loan-out payment HI GET withholding is missed. The penalty is 100% of the missed withholding. While HI DoTax issued an advisory on 12/23/22 which states that HI DoTax will only disqualify that portion of the production’s loan-out spend for which HI GET withholding was missed, it can withdraw this leniency at any time. EP recommends that productions work with the utmost urgency to ensure their loan-outs secure the needed HI GET number to protect the production’s incentive and avoid penalties and the risk of losing the tax credit on the loan-out payments for which no withholding occurred.
3. What if the loan-out is in the process of getting the HI GET number?
The new law does not grant special relief for loan-outs that are in the process of obtaining a HI GET number. A loan-out applying and waiting for a HI GET number would be treated the same as one which hasn’t tried at all, which is why it is critical for productions to ensure that loan-outs secure the HI GET number before contracting for the loan-out’s services where possible.
4. What happens if a production does not have a GET number?
Productions should apply immediately for a GET number. Without a GET number the production is at risk for late penalties and interest and possibly losing the ENTIRE tax incentive. Because all of the underlying Hawaii loan-out withholding must be reported under each loan-out’s GET number as well as the production company’s GET number, a production company which does not have a HI GET number will not be able to remit and report the Hawaii loan-out GET withholdings even if each loan-out has the needed HI GET number.
5. What is the process to apply for a HI GET number?
If you are pursuing the Hawaii incentive, you must have a GET number prior to any work completion within the state. You can go to the following HI DoTax website: Hawaii Tax Online to apply for a GET number via Form BB-1. It’s the same process for the loan-outs and the production company.
6. What would cause me to lose my incentive or be at risk of tax penalties under this new law?
A production not having a GET number for the production and for all loan-out workers, including day players, could cause the loss of the entire incentive and/or the risk of tax penalties.
7. What happens if my Hawaii production has crew who are individual employees (not 1099 loan-out companies) who get 1099 box rental payments?
Individual employees who are paid a 1099 non-wage income box rental for use of the equipment rental in Hawaii will need to register, remit and report associated HI GET on the payment, but the production company tax credit applicant will not have any responsibility to withhold the HI GET. Individual crew 1099 box rental payees may be subject to penalty for failing to pay/report HI GET, but the production company tax credit applicant is unaffected. The new HI GET withholding law only applies to a Hawaii production company tax incentive applicant’s payments to 1099 loan-out companies, not 1099 non-wage payments to an individual.
8. Are loan-out payments made on my production on or after January 1, 2023, but for services rendered in Hawaii before 2023 subject to the HI GET withholding rules?
Yes, even if the services were performed in 2022, the new requirements apply and GET must be collected and remitted on the payment because the payment is being made on or after the January 1, 2023 effective date of the new law.