(b) Nonresident
employee.
(1) In general. Wages paid to a
qualifying nonresident employee for services performed in the State are not
subject to withholding. The wages, however, may be subject to Hawaii income tax
as imposed by section
235-4,
HRS.
An employee is a qualifying nonresident employee for
purposes of section
235-61,
HRS, and this section if:
(A) The
employee is performing services in the State for an aggregate of not more than
sixty days during the calendar year;
(B) The employee is a nonresident as set
forth in section
235-1, HRS, or the
employer reasonably believes the employee is a nonresident;
(C) The employee is paid for services
performed from an office located outside the State;
(D) The employee's regular place of
employment (where the employee regularly performs services for the employer) is
outside the State; and
(E) The
employer does not reasonably expect the employee to perform services in the
State an aggregate of more than sixty days during the calendar year.
A qualifying nonresident employee does not include an
employee performing services for a contractor as defined in section
237-6(1),
HRS, and the contractor is performing work for a construction project located
in Hawaii.
(2)
Statement of nonresidency. To qualify for the exemption from withholding on
wages as set forth in section
235-61,
HRS, and this section, nonresident employees shall file a statement of
nonresidency on forms prescribed by the department.
(A) Filing requirement. All nonresident
employees may file a signed statement of nonresidency with their employer. The
employer then shall file the original statement of nonresidency with the
director or designee in the taxation district in which the employer's principal
place of business is located or where services are principally performed. A
copy of the form shall be retained in the records of the employer.
(B) Effective date. The employer shall cease
withholding taxes from a nonresident employee's wages on or after the first
payroll period or the first payment of wages after the statement of
nonresidency is filed with the department.
(C) Investigation of nonresidency status. An
employer, however, shall withhold taxes from the wages of a nonresident if the
employer is notified by the department of an investigation into the
nonresidency status of the employee. Notice of the investigation and the
department's determination shall be sent to both the employer and the employee.
The investigation into an employee's residency status shall be completed within
a reasonable time. The department shall notify both the employee and the
employer of the department's determination.
A notice of the department's determination shall be
effective for the first payment of wages made on or after the first day of the
calendar month which is at least thirty days after notice from the department
is received. At the option of the employer, the department's determination may
go into effect at an earlier payroll period.
(D) Change of status. If at anytime the
employee's residency status changes, the employee shall notify the employer of
the change in status within ten days. The employer then shall notify the
department of the change in the employee's residency status. The change in
status shall go into effect for the first payment of wages on or after the
first day of the calendar month which commences at least thirty days after the
department is notified. At the option of the employer, however, the change in
residency status may go into effect at an earlier payroll period if the
employee is notified of the change.
