State Law Requires Disclosure Of Tax Number in Property Sales

posted in: April 1995 | 0

To make sure that non-residents receiving income from the sale of real property in Hawai`i pay the necessary Hawai`i taxes on that income, state law mandates that the buyer of the property must withhold taxes on payments to the non-residents. To claim an exemption from the withholding requirement, the seller must provide the buyer with a certification, contained in Department of Taxation Form N-289, that the seller is exempt from the withholding.

Reasons for exemption are as follows:

First, that the seller is a resident (that is, a corporation that is legally doing business in Hawai`i, or a private resident individual); or

Second, that a United States treaty allows for the exemption; or

Third, that the property being transferred was used as a principal residence and that the sales price does not exceed $300,000.

Whatever reason claimed for the exemption, the seller is required to provide the buyer with the seller’s address and taxpayer identification number (which can be either a Social Security number or a Federal Employee Identification number). This allows the state to track down the income to the party receiving it and — in theory, at least — the state will be able to collect all taxes due and owing on income from the sale.

— Patricia Tummons

Volume 5, Number 10 April 1995