What is HARPTA?
When a homeowner who is not a legal resident of the state of Hawaii decides to sell their property, HARPTA goes into effect to ensure that the state collects taxes it may be due if the property owner had not paid enough general excise or transient taxes while they owned the property. Also, HARPTA was enacted to provide a means for the state to collect capital gains taxes from absentee owners.
To clarify, it is a withholding "tax" on sales of Hawaii real property by non-resident persons. The "witholding obligation" is generally imposed on the transferee/buyer when a Hawaii real property interest is acquired from a nonresident person. The Hawaii Department of Taxation will want 7.25% of the sale of the property. This witholding serves to collect Hawaii income tax that may be owed by the nonresident person(s).
THIS IS NOT A TAX---it is a witholding similar to a deposit to make sure you file and pay the required Hawaii income, general excise (GE), and transient accommodations taxes (TAT), as applicable. The amount witheld is only a rough estimate. When the selling owner subsequently files a Hawaii tax return, the owner then computes the property tax liability and can then get a refund of any tax previously paid, but that is not owed. HARPTA is a payment of tax just like wage witholding or estimated taxes would be.
If you have no gain at all on your Hawaii property sale and you are current on your GE and TAT taxes you might get ALL of the witheld fee (7.25% of the sale of the property) back as a refund. If you DO OWE capital gains, general excise, and transient accommadations taxes, then it is possible that you might actually owe MORE tax than the amount witheld.
How Do I Get A Refund of HARPTA Witholdings from the state?
A non-resident Hawaii tax return must be filed for the year of the sale. Any over-payment would be refunded after the return is processed. You can file form N15 to obtain your refund. If you sell your property in April, the N15 tax form for that year will not be available until January of the following year--just like most income tax returns. Fortunately, Hawaii also offers form N288C which can be completed and filed to get your money back much sooner!
We can definitely assist you in the filing of the proper forms to the state of Hawaii to help you obtain any refunds that may be due to you. Please contact our office at (808) 529-1040 with any questions or email us at support@myhawaiitax.com.