Who is responsible for withholding taxes on the sale of real property owned by a non-resident in Hawaii?

The buyer is responsible for withholding taxes on the sale of real property owned by a non-resident in Hawaii. This responsibility is rooted in specific tax regulations that require buyers to ensure that tax obligations are met when purchasing property from non-resident sellers.

In Hawaii, the law mandates that buyers withhold a percentage of the sales price to cover the state income tax that non-resident sellers may owe as a result of the sale. Thus, when closing the transaction, the buyer must remit this withheld amount to the state, ensuring compliance with tax regulations and safeguarding against potential tax liabilities that the seller might incur.

This process is designed to protect the state’s interests in collecting tax revenue from non-residents who may not otherwise be required to file a tax return in Hawaii. Other parties involved in the transaction, such as escrow companies and brokers, assist in the process, but the ultimate legal responsibility for ensuring the tax is withheld falls on the buyer.