Four Kailua Entrepreneurs open Massage School, By Malia Zimmerman
In addition, Hawaii Healing Arts College students and other field professionals will be invited throughout the year to classes and workshops at the school, with select classes open to the public. Though the Hawaii economy is still repressive for many small business owners, Snellback says the four partners were willing to make a sizeable investment to form the college as the field of massage therapy is on an upswing. The growth, in part, comes as more people are discovering the healing and relaxation powers of massage and investing in their own preventive healthcare. "As people discover that massage can be of benefit to everyone including expecting mothers, new infants, children, baby boomers and the elderly, they continue to seek our services," Snellback says. That boom in clientele is driving more massage students into the field, increasing the demand for training. "As the industry gathers momentum, fueled in part by the rising number hospital-based massage therapy programs and spas around the world offering massage, a great need has developed for well-trained massage therapists. Those hired are confident, effective in any therapeutic capacity, able to interact with medical professionals, and can contribute to the overall care of the individual." The industry is facing its own challenges similar to the physical therapy profession, she says, becoming more regulated and organized. Part of the reason the partners are successful in keeping ahead of these trends and changes, is their consistent focus on the customer, a practice that will continue at the Hawaii Healing Arts College. "We will strive for the best possible balanced curriculum for students, emphasizing the importance of education and intuition," she says. The school is set to open in October. The clinic has remained open, even increasing hours of operation to seven days a week. Promotional hourly rates of $25(apprentice) or $40 (licensed therapist) are offered. For more information on Massage Professionals or Hawaii Healing Arts College, located in the Kailua Medical Arts Building, call 266-2468 or log onto massageprofessionalshawaii.com.
 Copy Shop Deonates $5,000 to State General Fund by Brian Zinn, Copy Shop, Inc. Each time a new Tax Director is appointed I again try to make this one understand what is wrong with how certain expenses in my business are taxed. This issue is unique to my business and needs some explanation. Marie Okamura was the third Director of Taxation presented with the following information, and to my dismay she typically referred back to the last decision made in 1999 denying any remedy. As a printer, I pay .005% excise tax on such items as paper, inks, and other raw materials. These items are involved in the production of an end product, which in this case are printed materials sold to a customer and taxed at 4%. Therefore, other consumable raw materials such as toner, developer, and fuser oils that are used in a copy machine for the production of the end product are also taxed at .005%. As a matter of simplicity for themselves and their customers Xerox, IKON and other leading providers of copy equipment, bill customers with a per copy charge which includes all of the consumable items listed above, as well as their maintenance service charges. In our case, over $4,000.00 per month in combined expenses. Based on Director Kamikawa's decision in 1999, which was probably based on Director Kahle's decision before him, Director Okamura concludes, "that under existing law, equipment maintenance service charges are considered overhead costs to our business, and therefore are subject to a 4% GET rate". She is correct in that statement as it applies to the charges for maintenance being billed at 4%. What they repeatedly fail to address is that approximately 1/3 of the monthly charges are consumables, which should be taxed at the allowable .005% rate. Using a 1/3 factor for consumables as a simple formula, I have donated in excess of $5000.00 over the years to the State of Hawaii. As usual, the easiest way out for a state employee is rely on their initial public worker training, which seems to be to "just say no" to any problem posed. I know the state needs the money to support its huge payroll and benefit packages offered to their employees and retirees, but I actually need it for the same reasons. As we negotiate expiring agreements with our suppliers, we are being forced to separate these items going against national cost and labor saving trends. The result is more accounting work for us, as well as Xerox, IKON, and other leading providers. Nothing personal Marie, but when can I expect to address the next director?
Workers' Comp for Owner-Employee By Ronald Heller, Attorney & CPA Under the Hawaii Workers' Compensation law, employers have to maintain insurance for the benefit of their employees. There are certain exceptions for owner-employees, but the exceptions are inconsistent and involve unofficial "rules" that have no rational basis at all. For example, the Department of Labor and Industrial Relations ("DLIR") has taken the position that the requirement of Workers' Comp coverage does not apply to a partnership when the only workers are the partners themselves. However, the DLIR says that a Limited Liability Partnership ("LLP") must have Workers' Compensation coverage even if there are no workers other than the partners. Since an LLP is a partnership under state law, it doesn't make sense to treat it differently from any other partnership. Furthermore, the different treatment for an LLP - as compared with a non-LLP partnership - is not based on any statutory law or administrative rule; it is a "policy" of the DLIR adopted without any public notice or hearing. In short, the DLIR (not the Legislature) has decided to apply different rules for some partnerships than for others. There is also an inconsistency between corporations and LLPs. For corporations, current law provides that an owner holding at least 50% of the stock is exempt from the requirement of Workers' Compensation coverage. If a business is organized as an LLP, however, then there is no exemption at all, regardless of the percentage owned. This is totally irrational - if a business is incorporated, a 50% owner is not required to have Workers' Comp coverage, but if that same business is an LLP, then even an 80% or 90% owner has to be covered. To make it even crazier, if that business is an ordinary (non-LLP) partnership, then a 1% or 2% owner may be able to elect to have no coverage. The rules for Limited Liability Companies ("LLCs") are equally strange. The DLIR says that LLCs must have Workers' Compensation coverage regardless of whether or not there are any employees other than the owners. However, there appears to be an unofficial exception for single-member LLCs. The DLIR's "policy" - which is not set forth in any law enacted by the Legislature - is that Workers' Compensation coverage is not required for a single-member LLC with no non-owner employees. (Note that if a husband and wife together are the members of an LLC, then technically it is not a single member LLC. This leads to the absurd result that Workers Comp coverage may be required if husband and wife own a business together, but not if one of them owns it alone.) The rules for LLCs are also different from corporations, because the 50% ownership exception applies only to corporations, not to LLCs. Thus, Workers' Comp coverage is required for the 95% owner of an LLC, but not for the 50% owner of a corporation. There is no logic at all behind this. The current "rules" are not only crazy, but probably invalid. The DLIR has the power to issue formal administrative rules, but only if they go through a rule-making process that involves public notice and hearings. The current DLIR policy was not adopted through that process, and therefore, by definition, is not a valid administrative rule. Unfortunately, any employer who challenges DLIR policy could end up with an expensive court battle. No employer wants to volunteer for that. Therefore, employers are pushed toward certain forms of business organization (e.g., corporation as opposed to LLC) for reasons that make no sense and may not even be legally valid. The obvious answer is to scrap all of the artificial distinctions based on whether a business is a corporation, a partnership, an LLC or an LLP. We should have a simple rule that sets an ownership threshold - I suggest 25% - and allows anyone with more than the specified percentage to opt out of Workers' Comp coverage for themselves. For purposes of the 25% test, an owner should be able to count shares held in his or her own name, held jointly with a spouse, or held by a parent or child.
STATE HEALTH DEPARTMENT SEEKS CORRECTION
The Editor's Note in your July 2000 SBA (sic) newsletter regarding the Hawaii State Hospital was incorrect. The Hospital Administrator, Barbara Peterson, was not fired. She was hired last year on a one-year term with the understanding that the department would be undertaking a nationwide search for a long-term Administrator. After a review of 20 applicants, Paul Guggenheim was recently selected for the position. Ms. Peterson is continuing at the hospital and has agreed to work closely with Mr. Guggenheim to assure a smooth transition when he begins there in August.
Janice Okubo, Information Officer Editor's Note: SBH (not SBA!) is pleased to publish the requested correction but wonders if Ms. Peterson was not fired after several legislative hearings into mismanagement of the state facility, repeated escapes, and other problems associated with the Hospital, why not? The escapes and lack of security and supervision have continued under Mr. Guggenheim's brief tenure. Both State Rep. Charles Djou and Governor Cayetano have strongly suggested privatizing the troubled facility and administration.
  
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