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TAXWatch: Do Laws Still Apply?

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H ere we are, still amid the COVID-19 emergency, and there appears to be some confusion over what laws still apply.  The Governor and Mayors have put out orders using emergency authority, and the Governor has suspended many laws.

We need to keep in mind that most of the laws we have still apply, and we need to think about the consequences if we are going to break them.

Sometimes, it is very tempting to think that when we are trying to do good then all laws should fall by the wayside.  

For example, consider Maui Brewing Company.  A recent news article pointed out that the company donated more than 1,000 gallons of hand sanitizer to first responders and others.  The company then decided to give away some bottles of sanitizer to customers who purchased food, drink, or both – and got into trouble with Maui Liquor Control because you’re not allowed to offer incentives to purchase alcohol.

“Of course we’re trying to encourage some business, but is it wrong?” the company’s president is quoted as saying.  The short answer is that yes, it is wrong.  We expect no liquor licensees to offer incentives to purchase alcohol.  If we think the law needs to be changed, there’s a process for doing that.

The Maui News reports that the sanitizer will be sold going forward.

Another interesting story involves an Oahu nurse, as reported by KHON2.  She was worried about the shortage of personal protective equipment for health care workers like herself.  But she didn’t just accept her fate.  She found someone with access to N95 masks in China.  With her daughter, she started a GoFundMe page.  The page raised more than $20,000.  She took the money, bought personal protective equipment including N95 masks, and then donated the equipment to many local hospitals. 

That may sound like a heartwarming story, but it does raise a couple of questions.  For example, why can a random nurse here in Hawaii buy personal protective equipment in China while thousands of hospitals, clinics, states, counties, and towns here and elsewhere in our country are scouring the universe looking for this stuff?  Is the equipment reliable, or is it going to be a cheap knockoff of a reliable product that either is contaminated to begin with, or is destined to fail in hours or minutes?  And what kind of price is being paid?  Is our nurse getting gouged?  And is anyone concerned that $20 grand is leaving this country and is going to China?

Also, and we hope our big-hearted nurse realizes, there are taxes that need to be paid.  If anyone – a business, an individual, or a nonprofit – imports $20,000 worth of equipment, that someone must report the import and pay Use Tax of 4.5% on it.  It doesn’t matter that the importer “intended to do good.”  It doesn’t matter that the imported goods were donated to tax-exempt 501(c)(3) hospitals.  (If the hospitals imported the equipment themselves, they would be liable for the tax.)  

A genuine desire to do good, or to do the right thing, is not a license to disregard all other laws that might get in the way of that desire.  If I, in my excitement about delivering five cartons of N95 masks to Waianae Coast Comprehensive Health Center, barrel down the H-1 freeway at 90 mph with the equipment, I should be prepared to deal with the consequences of perhaps getting a speeding ticket or, God forbid, getting into a motor vehicle accident.  Maybe some laws should be suspended under the circumstances; but I don’t have the authority to make that call.

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About Tom Yamachika

Tom Yamachika
Tom Yamachika is the President of the Tax Foundation of Hawaii, a private, nonprofit educational organization dedicated to informing the taxpaying public about the finances of our state and local governments in Hawaii. Tom is also a tax attorney in solo practice and has been since early 2013. Prior to 2013, he was with the accounting firm Accuity LLP, which was formed in 2006 from the Honolulu office of Coopers & Lybrand (which later became PricewaterhouseCoopers). Before that, he served as an Administrative Rules Specialist in the State of Hawaii Department of Taxation from 1994 to 1996, where he drafted rules, interpretive releases, and legislation on several different state taxes. Prior to that, he practiced litigation and tax law with Cades Schutte Fleming & Wright in Honolulu.

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