Bill Text: HI SB2329 | 2012 | Regular Session | Introduced
Bill Title: Income Tax; General Excise Tax; Use Tax; Exemptions
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2012-01-23 - (S) Referred to EDT, WAM. [SB2329 Detail]
Download: Hawaii-2012-SB2329-Introduced.html
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THE SENATE |
S.B. NO. |
2329 |
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TWENTY-SIXTH LEGISLATURE, 2012 |
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STATE OF HAWAII |
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A BILL FOR AN ACT
RELATING TO TAXATION.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. In 2009, the legislature faced an unprecedented budget challenge – a shortfall of approximately $2,100,000,000 through the end of the fiscal biennium. Despite adoption of a balanced budget and financial plan in 2009, in 2010 the legislature was confronted with an additional budget shortfall of approximately $1,200,000,000 through the end of the fiscal biennium. As the economy continued the struggle toward recovery, the legislature in 2011 was again faced with a large shortfall, estimated at $1,300,000,000. The council on revenues is forecasting state revenue to grow at a rate of 11.5 per cent during the fiscal year ending in June 2011. The forecast is lower than the 14.5 per cent increase the council on revenues predicted earlier.
The guiding principles for the biennium budget are to first identify and support the State's core functions – those programs and services that the State should be providing – and secondly to make strategic investments in people and programs that encourage economic growth, lower long-term future costs, and provide meaningful public services. The governor implemented across-the-board spending restrictions equivalent to the savings that three furlough days per month would yield. Departments met these required savings targets most notably through the implementation of two furlough days per month. A reduction in force of approximately one thousand state workers, the reduction of vacant positions, and a number of other measures were implemented to further reduce state spending. Clearly, increased state revenues are a necessity in order for Hawaii to pay its obligations and avoid program and personnel reductions, and in Hawaii taxes are the chief source of revenues.
Advocates of tax cuts argue that reducing taxes improves the economy by boosting spending. Those who oppose them say that tax cuts only help the rich because it can lead to a reduction in government services upon which lower income people rely. In other words, there are two distinct sides to this economic balancing scale.
In Hawaii, income taxes account for roughly a quarter of general fund realizations, and general excise taxes produce about fifty per cent of revenues. Non-tax revenues comprise the remainder.
The legislature finds that there is a potential to increase state tax revenues by repealing the income tax and making up for the revenue loss by increasing the excise and use taxes and repealing exemptions on the state excise and use taxes. The legislature believes that such tax initiatives and fundamental restructuring of the tax code would elevate the financial stability of Hawaii's hard working low income and middle income families.
The purpose of this Act is to repeal the income tax, increase the excise and use taxes, and repeal various exemptions on the state excise and use taxes.
PART I. GENERAL EXCISE AND USE TAX RATES
SECTION 2. Section 237-13, Hawaii Revised Statutes, is amended to read as follows:
"§237-13 Imposition of tax. There is hereby levied and shall be assessed and collected annually privilege taxes against persons on account of their business and other activities in the State measured by the application of rates against values of products, gross proceeds of sales, or gross income, whichever is specified, as follows:
(1) Tax on manufacturers.
(A) Upon every
person engaging or continuing within the State in the business of
manufacturing, including compounding, canning, preserving, packing, printing,
publishing, milling, processing, refining, or preparing for sale, profit, or
commercial use, either directly or through the activity of others, in whole or
in part, any article or articles, substance or substances, commodity or
commodities, the amount of the tax to be equal to the value of the articles,
substances, or commodities, manufactured, compounded, canned, preserved,
packed, printed, milled, processed, refined, or prepared for sale, as shown by
the gross proceeds derived from the sale thereof by the manufacturer or person
compounding, preparing, or printing them, multiplied by [one-half of one]
per cent.
(B) The measure of the tax on manufacturers is the value of the entire product for sale, regardless of the place of sale or the fact that deliveries may be made to points outside the State.
(C) If any person liable for the tax on manufacturers ships or transports the person's product, or any part thereof, out of the State, whether in a finished or unfinished condition, or sells the same for delivery to points outside the State (for example, consigned to a mainland purchaser via common carrier f.o.b. Honolulu), the value of the products in the condition or form in which they exist immediately before entering interstate or foreign commerce, determined as hereinafter provided, shall be the basis for the assessment of the tax imposed by this paragraph. This tax shall be due and payable as of the date of entry of the products into interstate or foreign commerce, whether the products are then sold or not. The department shall determine the basis for assessment, as provided by this paragraph, as follows:
(i) If the products at the time of their entry into interstate or foreign commerce already have been sold, the gross proceeds of sale, less the transportation expenses, if any, incurred in realizing the gross proceeds for transportation from the time of entry of the products into interstate or foreign commerce, including insurance and storage in transit, shall be the measure of the value of the products;
(ii) If the products have not been sold at the time of their entry into interstate or foreign commerce, and in cases governed by clause (i) in which the products are sold under circumstances such that the gross proceeds of sale are not indicative of the true value of the products, the value of the products constituting the basis for assessment shall correspond as nearly as possible to the gross proceeds of sales for delivery outside the State, adjusted as provided in clause (i), or if sufficient data are not available, sales in the State, of similar products of like quality and character and in similar quantities, made by the taxpayer (unless not indicative of the true value) or by others. Sales outside the State, adjusted as provided in clause (i), may be considered when they constitute the best available data. The department shall prescribe uniform and equitable rules for ascertaining the values;
(iii) At the election of the taxpayer and with the approval of the department, the taxpayer may make the taxpayer's returns under clause (i) even though the products have not been sold at the time of their entry into interstate or foreign commerce; and
(iv) In all cases in which products leave the State in an unfinished condition, the basis for assessment shall be adjusted so as to deduct the portion of the value as is attributable to the finishing of the goods outside the State.
(2) Tax on business of selling tangible personal property; producing.
(A) Upon every
person engaging or continuing in the business of selling any tangible personal
property whatsoever (not including, however, bonds or other evidence of
indebtedness, or stocks), there is likewise hereby levied, and shall be
assessed and collected, a tax equivalent to [four]
per cent of the gross proceeds of sales of the business; provided that insofar
as the sale of tangible personal property is a wholesale sale under section [[]237-4(a)(8)[]],
the sale shall be subject to section 237-13.3. Upon every person engaging or
continuing within this State in the business of a producer, the tax shall be
equal to [one-half of one] per
cent of the gross proceeds of sales of the business, or the value of the
products, for sale, if sold for delivery outside the State or shipped or
transported out of the State, and the value of the products shall be determined
in the same manner as the value of manufactured products covered in the cases
under paragraph (1)(C).
(B) Gross proceeds of sales of tangible property in interstate and foreign commerce shall constitute a part of the measure of the tax imposed on persons in the business of selling tangible personal property, to the extent, under the conditions, and in accordance with the provisions of the Constitution of the United States and the Acts of the Congress of the United States which may be now in force or may be hereafter adopted, and whenever there occurs in the State an activity to which, under the Constitution and Acts of Congress, there may be attributed gross proceeds of sales, the gross proceeds shall be so attributed.
(C) No manufacturer or producer, engaged in such business in the State and selling the manufacturer's or producer's products for delivery outside of the State (for example, consigned to a mainland purchaser via common carrier f.o.b. Honolulu), shall be required to pay the tax imposed in this chapter for the privilege of so selling the products, and the value or gross proceeds of sales of the products shall be included only in determining the measure of the tax imposed upon the manufacturer or producer.
(D) When a manufacturer or producer, engaged in such business in the State, also is engaged in selling the manufacturer's or producer's products in the State at wholesale, retail, or in any other manner, the tax for the privilege of engaging in the business of selling the products in the State shall apply to the manufacturer or producer as well as the tax for the privilege of manufacturing or producing in the State, and the manufacturer or producer shall make the returns of the gross proceeds of the wholesale, retail, or other sales required for the privilege of selling in the State, as well as making the returns of the value or gross proceeds of sales of the products required for the privilege of manufacturing or producing in the State. The manufacturer or producer shall pay the tax imposed in this chapter for the privilege of selling its products in the State, and the value or gross proceeds of sales of the products, thus subjected to tax, may be deducted insofar as duplicated as to the same products by the measure of the tax upon the manufacturer or producer for the privilege of manufacturing or producing in the State; provided that no producer of agricultural products who sells the products to a purchaser who will process the products outside the State shall be required to pay the tax imposed in this chapter for the privilege of producing or selling those products.
(E) A taxpayer selling to a federal cost-plus contractor may make the election provided for by paragraph (3)(C), and in that case the tax shall be computed pursuant to the election, notwithstanding this paragraph or paragraph (1) to the contrary.
(F) The department, by rule, may require that a seller take from the purchaser of tangible personal property a certificate, in a form prescribed by the department, certifying that the sale is a sale at wholesale; provided that:
(i) Any purchaser who furnishes a certificate shall be obligated to pay to the seller, upon demand, the amount of the additional tax that is imposed upon the seller whenever the sale in fact is not at wholesale; and
(ii) The absence of a certificate in itself shall give rise to the presumption that the sale is not at wholesale unless the sales of the business are exclusively at wholesale.
(3) Tax upon contractors.
(A) Upon every
person engaging or continuing within the State in the business of contracting,
the tax shall be equal to [four]
per cent of the gross income of the business.
(B) In computing the tax levied under this paragraph, there shall be deducted from the gross income of the taxpayer so much thereof as has been included in the measure of the tax levied under subparagraph (A), on:
(i) Another taxpayer who is a contractor, as defined in section 237-6;
(ii) A specialty contractor, duly licensed by the department of commerce and consumer affairs pursuant to section 444-9, in respect of the specialty contractor's business; or
(iii) A specialty contractor who is not licensed by the department of commerce and consumer affairs pursuant to section 444-9, but who performs contracting activities on federal military installations and nowhere else in this State;
provided that any person claiming a deduction under this paragraph shall be required to show in the person's return the name and general excise number of the person paying the tax on the amount deducted by the person.
(C) In computing the tax levied under this paragraph against any federal cost-plus contractor, there shall be excluded from the gross income of the contractor so much thereof as fulfills the following requirements:
(i) The gross income exempted shall constitute reimbursement of costs incurred for materials, plant, or equipment purchased from a taxpayer licensed under this chapter, not exceeding the gross proceeds of sale of the taxpayer on account of the transaction; and
(ii) The taxpayer making the sale shall have certified to the department that the taxpayer is taxable with respect to the gross proceeds of the sale, and that the taxpayer elects to have the tax on gross income computed the same as upon a sale to the state government.
(D) A person who, as a business or as a part of a business in which the person is engaged, erects, constructs, or improves any building or structure, of any kind or description, or makes, constructs, or improves any road, street, sidewalk, sewer, or water system, or other improvements on land held by the person (whether held as a leasehold, fee simple, or otherwise), upon the sale or other disposition of the land or improvements, even if the work was not done pursuant to a contract, shall be liable to the same tax as if engaged in the business of contracting, unless the person shows that at the time the person was engaged in making the improvements the person intended, and for the period of at least one year after completion of the building, structure, or other improvements the person continued to intend to hold and not sell or otherwise dispose of the land or improvements. The tax in respect of the improvements shall be measured by the amount of the proceeds of the sale or other disposition that is attributable to the erection, construction, or improvement of such building or structure, or the making, constructing, or improving of the road, street, sidewalk, sewer, or water system, or other improvements. The measure of tax in respect of the improvements shall not exceed the amount which would have been taxable had the work been performed by another, subject as in other cases to the deductions allowed by subparagraph (B). Upon the election of the taxpayer, this paragraph may be applied notwithstanding that the improvements were not made by the taxpayer, or were not made as a business or as a part of a business, or were made with the intention of holding the same. However, this paragraph shall not apply in respect of any proceeds that constitute or are in the nature of rent; all such gross income shall be taxable under paragraph (9); provided that insofar as the business of renting or leasing real property under a lease is taxed under section 237-16.5, the tax shall be levied by section 237-16.5.
(4) Tax upon theaters, amusements, radio broadcasting stations, etc.
(A) Upon every
person engaging or continuing within the State in the business of operating a
theater, opera house, moving picture show, vaudeville, amusement park, dance
hall, skating rink, radio broadcasting station, or any other place at which amusements
are offered to the public, the tax shall be equal to [four]
per cent of the gross income of the business, and in the case of a sale of an
amusement at wholesale under section 237-4(a)(13), the tax shall be subject to
section 237-13.3.
(B) The department may require that the person rendering an amusement at wholesale take from the licensed seller a certificate, in a form prescribed by the department, certifying that the sale is a sale at wholesale; provided that:
(i) Any licensed seller who furnishes a certificate shall be obligated to pay to the person rendering the amusement, upon demand, the amount of additional tax that is imposed upon the seller whenever the sale is not at wholesale; and
(ii) The absence of a certificate in itself shall give rise to the presumption that the sale is not at wholesale unless the person rendering the sale is exclusively rendering the amusement at wholesale.
(5) Tax upon sales
representatives, etc. Upon every person classified as a representative or purchasing
agent under section 237-1, engaging or continuing within the State in the
business of performing services for another, other than as an employee, there
is likewise hereby levied and shall be assessed and collected a tax equal to [four]
per cent of the commissions and other
compensation attributable to the services so rendered by the person.
(6) Tax on service business.
(A) Upon every
person engaging or continuing within the State in any service business or
calling including professional services not otherwise specifically taxed under
this chapter, there is likewise hereby levied and shall be assessed and
collected a tax equal to [four]
per cent of the gross income of the business, and in the case of a wholesaler
under section 237-4(a)(10), the tax shall be equal to [one-half of one]
per cent of the gross income of the business. Notwithstanding the foregoing, a
wholesaler under section 237-4(a)(10) shall be subject to section 237-13.3.
(B) The department may require that the person rendering a service at wholesale take from the licensed seller a certificate, in a form prescribed by the department, certifying that the sale is a sale at wholesale; provided that:
(i) Any licensed seller who furnishes a certificate shall be obligated to pay to the person rendering the service, upon demand, the amount of additional tax that is imposed upon the seller whenever the sale is not at wholesale; and
(ii) The absence of a certificate in itself shall give rise to the presumption that the sale is not at wholesale unless the person rendering the sale is exclusively rendering services at wholesale.
(C) Where any person is engaged in the business of selling interstate or foreign common carrier telecommunication services within and without the State, other than as a home service provider, the tax shall be imposed on that portion of gross income received by a person from service which is originated or terminated in this State and is charged to a telephone number, customer, or account in this State notwithstanding any other state law (except for the exemption under section 237-23(a)(1)) to the contrary. If, under the Constitution and laws of the United States, the entire gross income as determined under this paragraph of a business selling interstate or foreign common carrier telecommunication services cannot be included in the measure of the tax, the gross income shall be apportioned as provided in section 237-21; provided that the apportionment factor and formula shall be the same for all persons providing those services in the State.
(D) Where any person is engaged in the business of a home service provider, the tax shall be imposed on the gross income received or derived from providing interstate or foreign mobile telecommunications services to a customer with a place of primary use in this State when such services originate in one state and terminate in another state, territory, or foreign country; provided that all charges for mobile telecommunications services which are billed by or for the home service provider are deemed to be provided by the home service provider at the customer's place of primary use, regardless of where the mobile telecommunications originate, terminate, or pass through; provided further that the income from charges specifically derived from interstate or foreign mobile telecommunications services, as determined by books and records that are kept in the regular course of business by the home service provider in accordance with section 239-24, shall be apportioned under any apportionment factor or formula adopted under subparagraph (C). Gross income shall not include:
(i) Gross receipts from mobile telecommunications services provided to a customer with a place of primary use outside this State;
(ii) Gross receipts from mobile telecommunications services that are subject to the tax imposed by chapter 239;
(iii) Gross receipts from mobile telecommunications services taxed under section 237-13.8; and
(iv) Gross receipts of a home service provider acting as a serving carrier providing mobile telecommunications services to another home service provider's customer.
For the purposes of this paragraph, "charges for mobile telecommunications services", "customer", "home service provider", "mobile telecommunications services", "place of primary use", and "serving carrier" have the same meaning as in section 239-22.
(7) Tax on insurance
producers. Upon every person engaged as a licensed producer pursuant to
chapter 431, there is hereby levied and shall be assessed and collected a tax
equal to [0.15] per cent of the
commissions due to that activity.
(8) Tax on receipts of
sugar benefit payments. Upon the amounts received from the United States
government by any producer of sugar (or the producer's legal representative or
heirs), as defined under and by virtue of the Sugar Act of 1948, as amended, or
other Acts of the Congress of the United States relating thereto, there is
hereby levied a tax of [one-half of one]
per cent of the gross amount received; provided that the tax levied hereunder
on any amount so received and actually disbursed to another by a producer in
the form of a benefit payment shall be paid by the person or persons to whom
the amount is actually disbursed, and the producer actually making a benefit
payment to another shall be entitled to claim on the producer's return a
deduction from the gross amount taxable hereunder in the sum of the amount so
disbursed. The amounts taxed under this paragraph shall not be taxable under
any other paragraph, subsection, or section of this chapter.
(9) Tax on other
business. Upon every person engaging or continuing within the State in any
business, trade, activity, occupation, or calling not included in the preceding
paragraphs or any other provisions of this chapter, there is likewise hereby
levied and shall be assessed and collected, a tax equal to [four]
per cent of the gross income thereof. In addition, the rate prescribed by this
paragraph shall apply to a business taxable under one or more of the preceding
paragraphs or other provisions of this chapter, as to any gross income thereof
not taxed thereunder as gross income or gross proceeds of sales or by taxing an
equivalent value of products, unless specifically exempted."
SECTION 3. Section 237-13.3, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:
"(a) Sections 237-4(a)(8), 237-4(a)(10), 237-4(a)(13), 237-13(2)(A), 237-13(4)(A), and 237-13(6)(A) to the contrary notwithstanding, instead of the tax levied under section 237‑13(2)(A) on wholesale sales subject to section 237‑4(a)(8)(B), under section 237-13(4)(A) on a wholesaler subject to section 237-4(a)(13), and under section 237-13(6)(A) on a wholesaler subject to section 237-4(a)(10) at one-half of one per cent, during the period January 1, 2000, to December 31, 2005, the tax shall be as follows:
(1) In calendar year 2000, 3.5 per cent;
(2) In calendar year 2001, 3.0 per cent;
(3) In calendar year 2002, 2.5 per cent;
(4) In calendar year 2003, 2.0 per cent;
(5) In calendar year 2004, 1.5 per cent;
(6) In calendar year 2005, 1.0 per cent; [and]
(7) In calendar year 2006 [and thereafter, the tax
shall be] through June 30, 2013, 0.5 per cent[.]; and
(8) On July 1, 2013, and thereafter, the tax shall be per cent."
SECTION 4. Section 237-16.5, Hawaii Revised Statutes, is amended as follows:
1. By amending subsection (a) to read:
"(a) This section relates to the leasing
of real property by a lessor to a lessee. There is hereby levied, and shall be
assessed and collected annually, a privilege tax against persons engaging or
continuing within the State in the business of leasing real property to
another, equal to [four] per cent
of the gross proceeds or gross income received or derived from the leasing;
provided that where real property is subleased by a lessee to a sublessee, the
lessee, as provided in this section, shall be allowed a deduction from the
amount of gross proceeds or gross income received from its sublease of the real
property. The deduction shall be in the amount allowed under this section.
All deductions under this section and the name and general excise tax number of the lessee's lessor shall be reported on the general excise tax return. Any deduction allowed under this section shall only be allowed with respect to leases and subleases in writing and relating to the same real property."
2. By amending subsections (f) and (g) to read:
"(f) This section shall not cause the tax
upon a lessor, with respect to any item of the lessor's gross proceeds or gross
income, to exceed [four] per cent.
(g) After allocation under subsection (c), if necessary, the deduction under this section shall be allowed from the gross proceeds or gross income of the lessee received from its sublease in an amount calculated by multiplying the gross proceeds or gross income paid by the lessee to its lessor for the lease of the real property by the following amount:
(1) In calendar year 1998, .125;
(2) In calendar year 1999, .25;
(3) In calendar year 2000, .375;
(4) In calendar year 2001, .50;
(5) In calendar year 2002, .625;
(6) In calendar year 2003, .75; [and]
(7) In calendar year 2004[, and thereafter,] through
June 30, 2013, .875[.]; and
(8) On July 1, 2013, and thereafter, .
The amount calculated under paragraphs (1) to (7) shall be deducted by the lessee from the lessee's total reported gross proceeds or gross income. The deduction allowed by this subsection may be taken by the fiscal and calendar year lessees."
SECTION 5. Section 237-17, Hawaii Revised Statutes, is amended to read as follows:
"§237-17 Persons with impaired sight,
hearing, or who are totally disabled. Anything in section 237-13 to the
contrary notwithstanding, the privilege tax levied, assessed, and collected on
account of the business or other activities of individuals who are blind, deaf,
or totally disabled, corporations all of whose outstanding shares are owned by
individuals who are blind, deaf, or totally disabled, general, limited, or
limited liability partnerships, all of whose partners are blind, deaf, or
totally disabled, or limited liability companies, all of whose members are
blind, deaf, or totally disabled, shall not exceed [one-half of one]
per cent of the proceeds, sales, income, or other receipts subject to tax. For
the purpose of this chapter "blind", "deaf", or
"totally disabled" is defined as in section 235-1. The impairment of
sight or hearing, or the disability, shall be certified to as provided in
section 235-1."
SECTION 6. Section 237-18, Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows:
"(c) Where, through the activity of a
person taxable under section 237-13(6), a product has been milled, processed,
or otherwise manufactured upon the order of another taxpayer who is a
manufacturer taxable upon the value of the entire manufactured products, which
consists in part of the value of the services taxable under section 237-13(6),
so much gross income as is derived from the rendering of the services shall be
subjected to tax on the person rendering the services at the rate of [one‑half
of one] per cent, and the value of
the entire product shall be included in the measure of the tax imposed on the
other taxpayer as elsewhere provided."
SECTION 7. Section 238-2, Hawaii Revised Statutes, is amended to read as follows:
"§238-2 Imposition of tax on tangible personal property; exemptions. There is hereby levied an excise tax on the use in this State of tangible personal property which is imported by a taxpayer in this State whether owned, purchased from an unlicensed seller, or however acquired for use in this State. The tax imposed by this chapter shall accrue when the property is acquired by the importer or purchaser and becomes subject to the taxing jurisdiction of the State. The rates of the tax hereby imposed and the exemptions thereof are as follows:
(1) If the importer or purchaser is licensed under chapter 237 and is:
(A) A wholesaler or jobber importing or purchasing for purposes of sale or resale; or
(B) A manufacturer importing or purchasing material or commodities which are to be incorporated by the manufacturer into a finished or saleable product (including the container or package in which the product is contained) wherein it will remain in such form as to be perceptible to the senses, and which finished or saleable product is to be sold in such manner as to result in a further tax on the activity of the manufacturer as the manufacturer or as a wholesaler, and not as a retailer,
there shall be no tax; provided that if the wholesaler, jobber, or manufacturer is also engaged in business as a retailer (so classed under chapter 237), paragraph (2) shall apply to the wholesaler, jobber, or manufacturer, but the director of taxation shall refund to the wholesaler, jobber, or manufacturer, in the manner provided under section 231-23(c) such amount of tax as the wholesaler, jobber, or manufacturer shall, to the satisfaction of the director, establish to have been paid by the wholesaler, jobber, or manufacturer to the director with respect to property which has been used by the wholesaler, jobber, or manufacturer for the purposes stated in this paragraph;
(2) If the importer or purchaser is licensed under chapter 237 and is:
(A) A retailer or other person importing or purchasing for purposes of sale or resale, not exempted by paragraph (1);
(B) A manufacturer importing or purchasing material or commodities which are to be incorporated by the manufacturer into a finished or saleable product (including the container or package in which the product is contained) wherein it will remain in such form as to be perceptible to the senses, and which finished or saleable product is to be sold at retail in this State, in such manner as to result in a further tax on the activity of the manufacturer in selling such products at retail;
(C) A contractor importing or purchasing material or commodities which are to be incorporated by the contractor into the finished work or project required by the contract and which will remain in such finished work or project in such form as to be perceptible to the senses;
(D) A person engaged in a service business or calling as defined in section 237-7, or a person furnishing transient accommodations subject to the tax imposed by section 237D-2, in which the import or purchase of tangible personal property would have qualified as a sale at wholesale as defined in section 237-4(a)(8) had the seller of the property been subject to the tax in chapter 237; or
(E) A publisher of magazines or similar printed materials containing advertisements, when the publisher is under contract with the advertisers to distribute a minimum number of magazines or similar printed materials to the public or defined segment of the public, whether or not there is a charge to the persons who actually receive the magazines or similar printed materials,
the tax shall be [one-half of one]
per cent of the purchase price of the property, if the purchase and sale are
consummated in Hawaii; or, if there is no purchase price applicable thereto, or
if the purchase or sale is consummated outside of Hawaii, then [one‑half
of one] per cent of the value of such
property; and
(3) In all other cases, [four]
per cent of the value of the property.
For purposes of this section, tangible personal property is property that is imported by the taxpayer for use in this State, notwithstanding the fact that title to the property, or the risk of loss to the property, passes to the purchaser of the property at a location outside this State."
SECTION 8. Section 238-2.3, Hawaii Revised Statutes, is amended to read as follows:
"§238-2.3 Imposition of tax on imported services or contracting; exemptions. There is hereby levied an excise tax on the value of services or contracting as defined in section 237-6 that are performed by an unlicensed seller at a point outside the State and imported or purchased for use in this State. The tax imposed by this chapter shall accrue when the service or contracting as defined in section 237-6 is received by the importer or purchaser and becomes subject to the taxing jurisdiction of the State. The rates of the tax hereby imposed and the exemptions from the tax are as follows:
(1) If the importer or purchaser is licensed under chapter 237 and is:
(A) Engaged in a service business or calling
in which the imported or purchased services or contracting become identifiable
elements, excluding overhead, of the services rendered by the importer or
purchaser, and the gross income of the importer or purchaser is subject to the
tax imposed under chapter 237 on services at the rate of [one-half of one]
per cent or the rate of tax imposed under
section 237-13.3; or
(B) A manufacturer importing or purchasing services or contracting that become identifiable elements, excluding overhead, of a finished or saleable product (including the container or package in which the product is contained) and the finished or saleable product is to be sold in a manner that results in a further tax on the manufacturer as a wholesaler, and not a retailer;
there shall be no tax imposed on the value of the imported or purchased services or contracting; provided that if the manufacturer is also engaged in business as a retailer as classified under chapter 237, paragraph (2) shall apply to the manufacturer, but the director of taxation shall refund to the manufacturer, in the manner provided under section 231-23(c), that amount of tax that the manufacturer, to the satisfaction of the director, shall establish to have been paid by the manufacturer to the director with respect to services that have been used by the manufacturer for the purposes stated in this paragraph.
(2) If the importer or purchaser is a person licensed under chapter 237 and is:
(A) Engaged in a service business or calling in which the imported or purchased services or contracting become identifiable elements, excluding overhead, of the services rendered by the importer or purchaser, and the gross income from those services when sold by the importer or purchaser is subject to the tax imposed under chapter 237 at the highest rate;
(B) A manufacturer importing or purchasing services or contracting that become identifiable elements, excluding overhead, of the finished or saleable manufactured product (including the container or package in which the product is contained) and the finished or saleable product is to be sold in a manner that results in a further tax under chapter 237 on the activity of the manufacturer as a retailer; or
(C) A contractor importing or purchasing services or contracting that become identifiable elements, excluding overhead, of the finished work or project required, under the contract, and where the gross proceeds derived by the contractor are subject to the tax under section 237-13(3) as a contractor,
the tax shall be [one-half of one]
per cent of the value of the imported or purchased services or contracting; and
(3) In all other cases, the importer or purchaser is
subject to the tax at the rate of [four]
per cent on the value of the imported or purchased services or contracting."
PART II. GENERAL EXCISE TAX EXEMPTIONS
SECTION 9. Section 346-369, Hawaii Revised Statutes, is amended to read as follows:
"[[]§346-369[]] Exemptions.
(a) [Any compensation received by a provider agency for services rendered
to homeless families or individuals, or in operating or managing a homeless
facility authorized by this part, is exempt from taxation under chapter 237.
(b)] Any county mayor may exempt, by
executive order, donors and provider agencies from real property taxes, water
and sewer development fees, rates collected for water supplied to consumers and
for use of sewers, and any other county taxes, charges, or fees; provided that
any county may enact ordinances to regulate the exemptions granted by this
subsection.
[(c)] (b) Any provider agency
operating or managing a homeless facility or any other program for the homeless
authorized by this part is exempt, for purposes of those facilities or
programs, from any requirements contained in part VIII of chapter 346 and
chapters 467 and 521."
SECTION 10. Section 373K-2, Hawaii Revised Statutes, is amended to read as follows:
"[[]§373K-2[]]
Professional employment organization; employee rights[; payroll cost
exemption]. (a) Where any client company uses the services of
assigned employees and co-employs assigned employees with a professional
employment organization, the client company and the professional employment
organization, with respect to the assigned employees, shall not be exempt from
the requirements of any federal, state, or county law, including labor or
employment laws, collective bargaining rights, anti-discrimination provisions,
or other laws with respect to the protection and rights of employees, including
chapters 377 and 378, that would apply to the assigned employees if the
assigned employees were employees of the client company alone, and were not co-employees
of the professional employment organization.
These employee rights shall not be abrogated by any contract or agreement between the client company and the professional employment organization, or the professional employment organization and the assigned employee, which contains terms or conditions that could not be lawfully contained in a contract or agreement directly between the client company and the assigned employee in which no professional employment organization is involved. Notwithstanding any statute, local ordinance, executive order, rule, or regulation to the contrary, where the laws, rights, and protections referred to in this section define or require a determination of the "employer", the employer shall be deemed to be the client company and not the professional employment organization. The department of labor and industrial relations shall notify the department of taxation in writing of any violation of this subsection.
(b) The client company shall be deemed to have satisfied its obligations with respect to any assigned employee under any applicable law, including, without limitation, workers' compensation laws including chapter 386, employee insurance coverage laws including chapters 383, 385, 392, and 393, and tax withholding and reporting laws, if and to the extent that those obligations are satisfied by the professional employment organization acting in its capacity as co-employer of such assigned employee.
[(c) Amounts received by a
professional employment organization from a client company in amounts equal to
and that are disbursed by the professional employment organization for employee
wages, salaries, payroll taxes, insurance premiums, and benefits, including
retirement, vacation, sick leave, health benefits, and similar employment
benefits with respect to assigned employees at a client company shall not be
subject to the general excise tax as provided by section 237-24.75.
(d) The general excise tax exemption under
section 237‑24.75 shall not apply to the professional employment
organization if:
(1) By or through any contract between the
client company and any professional employment organization, or otherwise,
employees are excluded from any employee rights or employee benefits required
by law to be provided to employees of the client company by the client company;
or
(2) The professional employment
organization fails to pay any tax withholding for assigned employees or any
federal or state taxes for which the professional employment organization is
responsible.]"
SECTION 11. Section 237-16.8, Hawaii Revised Statutes, is repealed.
["[§237-16.8] Exemption of certain
convention, conference, and trade show fees. In addition to any
other applicable exemption provided under this chapter, there shall be exempted
from the measure of taxes imposed by this chapter all of the value or gross
income derived by a fraternal benefit, religious, charitable, scientific,
educational, or other nonprofit organization under section 501(c) of the
Internal Revenue Code of 1986, as amended, from fees for convention,
conference, or trade show exhibit or display spaces; provided that the gross
proceeds of sales by a vendor through the use of exhibit or display space at a
conference, convention, or trade show shall be subject to the imposition of the
general excise tax under section 237-13."]
SECTION 12. Section 237-23, Hawaii Revised Statutes, is repealed.
["§237-23 Exemptions, persons
exempt, applications for exemption. (a) This chapter shall not
apply to the following persons:
(1) Public service companies as that term
is defined in section 239-2, with respect to the gross income, either actual
gross income or gross income estimated and adjusted, that is included in the
measure of the tax imposed by chapter 239;
(2) Public utilities owned and operated by
the State or any county, or other political subdivision thereof;
(3) Fraternal benefit societies, orders, or
associations, operating under the lodge system, or for the exclusive benefit of
the members of the fraternity itself, operating under the lodge system, and
providing for the payment of death, sick, accident, prepaid legal services, or
other benefits to the members of the societies, orders, or associations, and to
their dependents;
(4) Corporations, associations, trusts, or
societies organized and operated exclusively for religious, charitable,
scientific, or educational purposes, as well as that of operating senior
citizens housing facilities qualifying for a loan under the laws of the United
States as authorized by section 202 of the Housing Act of 1959, as amended, as
well as that of operating a prepaid legal services plan, as well as that of
operating or managing a homeless facility, or any other program for the
homeless authorized under part XVII of chapter 346;
(5) Business leagues, chambers of commerce,
boards of trade, civic leagues, agricultural and horticultural organizations,
and organizations operated exclusively for the benefit of the community and for
the promotion of social welfare that shall include the operation of a prepaid
legal service plan, and from which no profit inures to the benefit of any
private stockholder or individual;
(6) Hospitals, infirmaries, and sanitaria;
(7) Cooperative associations incorporated
under chapter 421 or Code section 521 cooperatives which fully meet the
requirements of section 421-23, except Code section 521 cooperatives need not
be organized in Hawaii; provided that:
(A) The exemption shall apply only
to the gross income derived from activities that are pursuant to purposes and
powers authorized by chapter 421, except those provisions pertaining to or requiring
corporate organization in Hawaii do not apply to Code section 521 cooperatives;
(B) The exemption shall not relieve
any person who receives any proceeds of sale from the association of the duty
of returning and paying the tax on the total gross proceeds of the sales on
account of which the payment was made, in the same amount and at the same rate
as would apply thereto had the sales been made directly by the person, and all
those persons shall be so taxable; and
(C) As used in this paragraph,
"section 521 cooperatives" mean associations that qualify as a
cooperative under section 521 (with respect to exemption of farmers'
cooperatives from tax) of the Internal Revenue Code of 1986, as amended;
(8) Persons affected with Hansen's disease
and kokuas, with respect to business within the county of Kalawao;
(9) Corporations, companies, associations,
or trusts organized for the establishment and conduct of cemeteries no part of
the net earnings of which inures to the financial benefit of any private stockholder
or individual; provided that the exemption shall apply only to the activities
of those persons in the conduct of cemeteries and shall not apply to any
activity the primary purpose of which is to produce income, even though the
income is to be used for or in the furtherance of the exempt activities of
those persons; and
(10) Nonprofit shippers associations
operating under part 296 of the Civil Aeronautics Board Economic Regulations.
(b) The exemptions enumerated in subsection
(a)(3) to (6) shall apply only:
(1) To those persons who shall have
registered with the department of taxation by filing a written application for
registration in such form as the department shall prescribe, shall have paid
the registration fee of $20, and shall have had the exemption allowed by the
department or by a court or tribunal of competent jurisdiction upon appeal from
any assessment resulting from disallowance of the exemption by the department;
(2) To activities from which no profit
inures to the benefit of any private stockholder or individual, except for
death or other benefits to the members of fraternal societies; and
(3) To the fraternal, religious,
charitable, scientific, educational, communal, or social welfare activities of
such persons, or to the activities of such hospitals, infirmaries, and
sanitaria as such, and not to any activity the primary purpose of which is to
produce income even though the income is to be used for or in furtherance of
the exempt activities of such persons.
(c) To obtain allowance of an exemption:
(1) A person under subsection (a)(3) to
(6), who has received or applied for recognition of tax exempt status under
section 501(c)(3), (4), (6), or (8) of the Internal Revenue Code of 1986, as
amended, or who is a subordinate person of a person who has received a group
exemption letter under section 501(c)(3), (4), (6), or (8) of the Internal
Revenue Code of 1986, as amended, shall register with the department by filing
a statement attaching a copy of the exemption or application for recognition of
exempt status and any particular facts that the department may require; and
(2) All other persons under subsection
(a)(3) to (6) shall file an application for exemption in the form of an
affidavit or affidavits setting forth in general all facts affecting the right
to the exemption and such particular facts as the department may require, to
which shall be attached such records, papers, and other information as the
department may prescribe.
(d) For all persons, the statement
registering the person with the department or application for exemption shall
be filed on or before March 31 of the first year of registration or within
three months after the commencement of business. In the event of allowance of
the exemption, no further statement or application therefor need be filed
unless there is a material change in the facts. In the event of disallowance
of the exemption, a license may be obtained upon payment of the required fee as
provided by section 237-9, less the $20 already paid under this section, which
shall be credited thereon. In the event the registrant has a license under
this chapter, no further fee shall be required for registration under this
section.
(e) The department for good cause may
extend the time for registration or the time for filing an application for
exemption."]
SECTION 13. Section 237-23.5, Hawaii Revised Statutes, is repealed.
["§237-23.5 Related
entities; common paymaster; certain exempt transactions. (a) This chapter
shall not apply to amounts received, charged, or attributable to services
furnished by one related entity to another related entity or to imputed or
stated interest attributable to loans, advances, or use of capital between
related entities.
As used in this subsection:
"Related entities" means:
(1) An affiliated group of corporations
within the meaning of section 1504 (with respect to affiliated group defined)
of the federal Internal Revenue Code of 1986, as amended;
(2) A controlled group of corporations
within the meaning of section 1563 (with respect to definitions and special
rules) of the federal Internal Revenue Code of 1986, as amended;
(3) Those entities connected through
ownership of at least eighty per cent of the total value and at least eighty
per cent of the total voting power of each such entity (or combination
thereof), including partnerships, associations, trusts, S corporations,
nonprofit corporations, limited liability partnerships, or limited liability
companies; and
(4) Any group or combination of the
entities described in paragraph (3) constituting a unitary business for income
tax purposes;
whether or not the entity is located within or
without the State or licensed under this chapter.
"Services" means legal and
accounting services, the use of computer software and hardware, information
technology services, database management, and those managerial and
administrative services performed by an employee, officer, partner, trustee,
sole proprietor, member, or manager in the person's capacity as an employee,
officer, partner, trustee, sole proprietor, member, or manager of one of the
related entities and shall include overhead costs attributable to those
services.
(b) This chapter shall not apply to amounts
received by common paymasters which are disbursed as remuneration to employees
of two or more related corporations where the common paymaster is making such
remunerations on behalf of such corporations. Such amounts received or
disbursed by the common paymaster shall include payments of payroll taxes and
employee benefits which the common paymaster is making on behalf of related
corporations and which payments are related to the employees being
remunerated. The definitions of related corporations, common paymaster,
multiple common paymasters, and concurrent employment contained in 26 Code of
Federal Regulations, section 31.3121(s)-1(b) are incorporated and made a part
of this subsection.
To the extent not covered by subsection (a),
the exemption allowed by this subsection shall not apply to the cost of
services, or reimbursements of such cost by one corporation to another
corporation, of an employee disbursing the amounts exempted under this
subsection. Each related corporation using a common paymaster or multiple
common paymaster shall keep separate payroll records and other documentation
required to prove the existence of concurrent employment. Such records and
documents shall be available for inspection by the director of taxation during
normal business hours."]
SECTION 14. Section 237-24, Hawaii Revised Statutes, is repealed.
["§237-24 Amounts not taxable.
This chapter shall not apply to the following amounts:
(1) Amounts received under life insurance
policies and contracts paid by reason of the death of the insured;
(2) Amounts received (other than amounts
paid by reason of death of the insured) under life insurance, endowment, or
annuity contracts, either during the term or at maturity or upon surrender of
the contract;
(3) Amounts received under any accident
insurance or health insurance policy or contract or under workers' compensation
acts or employers' liability acts, as compensation for personal injuries,
death, or sickness, including also the amount of any damages or other
compensation received, whether as a result of action or by private agreement
between the parties on account of the personal injuries, death, or sickness;
(4) The value of all property of every kind
and sort acquired by gift, bequest, or devise, and the value of all property
acquired by descent or inheritance;
(5) Amounts received by any person as
compensatory damages for any tort injury to the person, or to the person's
character reputation, or received as compensatory damages for any tort injury
to or destruction of property, whether as the result of action or by private
agreement between the parties (provided that amounts received as punitive
damages for tort injury or breach of contract injury shall be included in gross
income);
(6) Amounts received as salaries or wages
for services rendered by an employee to an employer;
(7) Amounts received as alimony and other
similar payments and settlements;
(8) Amounts collected by distributors as
fuel taxes on "liquid fuel" imposed by chapter 243, and the amounts
collected by such distributors as a fuel tax imposed by any Act of the Congress
of the United States;
(9) Taxes on liquor imposed by chapter 244D
on dealers holding permits under that chapter;
(10) The amounts of taxes on cigarettes and
tobacco products imposed by chapter 245 on wholesalers or dealers holding
licenses under that chapter and selling the products at wholesale;
(11) Federal excise taxes imposed on
articles sold at retail and collected from the purchasers thereof and paid to
the federal government by the retailer;
(12) The amounts of federal taxes under
chapter 37 of the Internal Revenue Code, or similar federal taxes, imposed on
sugar manufactured in the State, paid by the manufacturer to the federal
government;
(13) An amount up to, but not in excess of,
$2,000 a year of gross income received by any blind, deaf, or totally disabled
person engaging, or continuing, in any business, trade, activity, occupation,
or calling within the State; a corporation all of whose outstanding shares are
owned by an individual or individuals who are blind, deaf, or totally disabled;
a general, limited, or limited liability partnership, all of whose partners are
blind, deaf, or totally disabled; or a limited liability company, all of whose
members are blind, deaf, or totally disabled;
(14) Amounts received by a producer of
sugarcane from the manufacturer to whom the producer sells the sugarcane,
where:
(A) The producer is an independent
cane farmer, so classed by the Secretary of Agriculture under the Sugar Act of
1948 (61 Stat. 922, Chapter 519) as the Act may be amended or supplemented;
(B) The value or gross proceeds of
the sale of the sugar, and other products manufactured from the sugarcane, are
included in the measure of the tax levied on the manufacturer under section 237‑13(1)
or (2);
(C) The producer's gross proceeds of
sales are dependent upon the actual value of the products manufactured
therefrom or the average value of all similar products manufactured by the
manufacturer; and
(D) The producer's gross proceeds of
sales are reduced by reason of the tax on the value or sale of the manufactured
products;
(15) Money paid by the State or eleemosynary
child-placing organizations to foster parents for their care of children in
foster homes;
(16) Amounts received by a cooperative
housing corporation from its shareholders in reimbursement of funds paid by the
corporation for lease rental, real property taxes, and other expenses of
operating and maintaining the cooperative land and improvements; provided that
the cooperative corporation is a corporation:
(A) Having one and only one class of
stock outstanding;
(B) Each of the stockholders of
which is entitled solely by reason of the stockholder's ownership of stock in
the corporation, to occupy for dwelling purposes a house, or an apartment in a
building owned or leased by the corporation; and
(C) No stockholder of which is
entitled (either conditionally or unconditionally) to receive any distribution
not out of earnings and profits of the corporation except in a complete or
partial liquidation of the corporation; and
(17) Amounts received by a
managed care support contractor of the TRICARE program that is established
under Title 10 United States Code chapter 55, as amended, for the actual cost
or advancement to third party health care providers pursuant to a contract with
the United States."]
SECTION 15. Section 237-24.3, Hawaii Revised Statutes, is repealed.
["§237-24.3 Additional
amounts not taxable. In addition to the amounts not taxable under section
237-24, this chapter shall not apply to:
(1) Amounts
received from the loading, transportation, and unloading of agricultural
commodities shipped for a producer or produce dealer on one island of this
State to a person, firm, or organization on another island of this State. The
terms "agricultural commodity", "producer", and
"produce dealer" shall be defined in the same manner as they are
defined in section 147-1; provided that agricultural commodities need not have
been produced in the State;
(2) Amounts
received from sales of:
(A) Intoxicating
liquor as the term "liquor" is defined in chapter 244D;
(B) Cigarettes
and tobacco products as defined in chapter 245; and
(C) Agricultural,
meat, or fish products;
to any person or common carrier in interstate
or foreign commerce, or both, whether ocean-going or air, for consumption
out-of-state on the shipper's vessels or airplanes;
(3) Amounts
received by the manager, submanager, or board of directors of:
(A) An
association of owners of a condominium property regime established in
accordance with chapter 514A or 514B; or
(B) A
nonprofit homeowners or community association incorporated in accordance with
chapter 414D or any predecessor thereto and existing pursuant to covenants
running with the land,
in
reimbursement of sums paid for common expenses;
(4) Amounts
received or accrued from:
(A) The
loading or unloading of cargo from ships, barges, vessels, or aircraft, whether
or not the ships, barges, vessels, or aircraft travel between the State and
other states or countries or between the islands of the State;
(B) Tugboat
services including pilotage fees performed within the State, and the towage of
ships, barges, or vessels in and out of state harbors, or from one pier to
another; and
(C) The
transportation of pilots or governmental officials to ships, barges, or vessels
offshore; rigging gear; checking freight and similar services; standby charges;
and use of moorings and running mooring lines;
(5) Amounts
received by an employee benefit plan by way of contributions, dividends,
interest, and other income; and amounts received by a nonprofit organization or
office, as payments for costs and expenses incurred for the administration of
an employee benefit plan; provided that this exemption shall not apply to any
gross rental income or gross rental proceeds received after June 30, 1994, as
income from investments in real property in this State; and provided further
that gross rental income or gross rental proceeds from investments in real
property received by an employee benefit plan after June 30, 1994, under written
contracts executed prior to July 1, 1994, shall not be taxed until the
contracts are renegotiated, renewed, or extended, or until after December 31,
1998, whichever is earlier. For the purposes of this paragraph, "employee
benefit plan" means any plan as defined in section 1002(3) of title 29 of
the United States Code, as amended;
(6) Amounts
received for purchases made with United States Department of Agriculture food
coupons under the federal food stamp program, and amounts received for
purchases made with United States Department of Agriculture food vouchers under
the Special Supplemental Foods Program for Women, Infants and Children;
(7) Amounts
received by a hospital, infirmary, medical clinic, health care facility,
pharmacy, or a practitioner licensed to administer the drug to an individual
for selling prescription drugs or prosthetic devices to an individual; provided
that this paragraph shall not apply to any amounts received for services
provided in selling prescription drugs or prosthetic devices. As used in this
paragraph:
"Prescription
drugs" are those drugs defined under section 328-1 and dispensed by
filling or refilling a written or oral prescription by a practitioner licensed
under law to administer the drug and sold by a licensed pharmacist under
section 328-16 or practitioners licensed to administer drugs; and
"Prosthetic
device" means any artificial device or appliance, instrument, apparatus,
or contrivance, including their components, parts, accessories, and
replacements thereof, used to replace a missing or surgically removed part of
the human body, which is prescribed by a licensed practitioner of medicine,
osteopathy, or podiatry and which is sold by the practitioner or which is
dispensed and sold by a dealer of prosthetic devices; provided that
"prosthetic device" shall not mean any auditory, ophthalmic, dental,
or ocular device or appliance, instrument, apparatus, or contrivance;
(8) Taxes on
transient accommodations imposed by chapter 237D and passed on and collected by
operators holding certificates of registration under that chapter;
(9) Amounts
received as dues by an unincorporated merchants association from its membership
for advertising media, promotional, and advertising costs for the promotion of
the association for the benefit of its members as a whole and not for the
benefit of an individual member or group of members less than the entire
membership;
(10) Amounts
received by a labor organization for real property leased to:
(A) A
labor organization; or
(B) A
trust fund established by a labor organization for the benefit of its members,
families, and dependents for medical or hospital care, pensions on retirement
or death of employees, apprenticeship and training, and other membership
service programs.
As used in this
paragraph, "labor organization" means a labor organization exempt
from federal income tax under section 501(c)(5) of the Internal Revenue Code,
as amended;
(11) Amounts
received from foreign diplomats and consular officials who are holding cards
issued or authorized by the United States Department of State granting them an
exemption from state taxes; and
(12) Amounts received as rent for the rental
or leasing of aircraft or aircraft engines used by the lessees or renters for
interstate air transportation of passengers and goods. For purposes of this
paragraph, payments made pursuant to a lease shall be considered rent
regardless of whether the lease is an operating lease or a financing lease.
The definition of "interstate air transportation" is the same as in
49 U.S.C. 40102."]
SECTION 16. Section 237-24.5, Hawaii Revised Statutes, is repealed.
["§237-24.5 Additional exemptions.
(a) In addition to the amounts exempt under section 237-24, this chapter shall
not apply to amounts received by:
(1) An exchange from:
(A) Transaction fees charged
exchange members by the exchange for:
(i) The sale or purchase of
securities or products, or both, bought or sold on an exchange by exchange
members for their own account or an account for which they have responsibility
as an agent, broker, or fiduciary;
(ii) Order book executions made for
purposes of effecting transactions; and
(iii) Trade processing performed by an
exchange in matching trades, keypunching, record keeping, post cashiering, and
notarization;
(B) Membership dues, fees, charges,
assessments, and fines from individuals or firms, including charges for firm
symbols (member identification), application processing, registration,
initiation, membership transfers, floor or post privileges, transaction time
extensions, expediting transactions, crossover trades (trading out of assigned
functions) and rule infractions;
(C) Service fees charged to members
including fees for communications, badges, forms, documents, and reports;
(D) Listing fees and listing
maintenance fees charged to companies that wish to be listed and have their
securities or products traded on the exchange; and
(E) Participation in the
communication network consortium operated collectively by United States
exchanges or other markets recognized by the Securities and Exchange
Commission, the Commodities Futures Trading Commission, or similar regulatory
authorities outside the United States that provides last sale and quote
securities information to subscribers or that connects such markets or
exchanges for purposes of data transmission;
(2) Exchange members by reason of executing
a securities or product transaction on an exchange; provided that this
exemption shall apply only to amounts received by exchange members from brokers
or dealers registered with the Securities and Exchange Commission, from futures
commission merchants, brokers, or associates registered with the Commodities
Futures Trading Commission, or from similar individuals or firms registered
with similar regulatory authorities outside the United States; and
(3) Exchange members as proceeds from the
sale of their exchange memberships.
(b) As used in this section:
"Exchange" means an exchange or
board of trade as defined in 15 United States Code section 78c(a)(1) or in 7
United States Code section 7, respectively, which is subject to regulation by
the Securities and Exchange Commission or the Commodities Futures Trading
Commission or an organization subject to similar regulation under the laws of a
jurisdiction outside the United States.
"Exchange member" means an
individual or firm that is qualified by an exchange as a member and pays
membership dues to an exchange in order to trade securities or products on an
exchange.
"Securities" means securities as
defined in 15 United States Code section 78c and "products" means
contracts of sale of commodities for future delivery, futures contracts,
options, calls, puts, and similar rights as defined in 7 United States Code
section 2, which securities or products are permitted to be traded on an
exchange."]
SECTION 17. Section 237-24.7, Hawaii Revised Statutes, is repealed.
["§237-24.7 Additional amounts not taxable. In addition to the amounts not taxable under section
237-24, this chapter shall not apply to:
(1) Amounts
received by the operator of a hotel from the owner of the hotel or from a time
share association, and amounts received by the suboperator of a hotel from the
owner of the hotel, from a time share association, or from the operator of the
hotel, in amounts equal to and which are disbursed by the operator or
suboperator for employee wages, salaries, payroll taxes, insurance premiums,
and benefits, including retirement, vacation, sick pay, and health benefits.
As used in this paragraph:
"Employee"
means employees directly engaged in the day-to-day operation of the hotel and
employed by the operator or suboperator.
"Hotel"
means an operation as defined in section 445-90 or a time share plan as defined
in section 514E-1.
"Operator"
means any person who, pursuant to a written contract with the owner of a hotel
or time share association, operates or manages the hotel for the owner or time
share association.
"Owner"
means the fee owner or lessee under a recorded lease of a hotel.
"Suboperator"
means any person who, pursuant to a written contract with the operator,
operates or manages the hotel as a subcontractor of the operator.
"Time
share association" means an "association" as that term is
defined in section 514E-1;
(2) Amounts
received by the operator of a county transportation system operated under an
operating contract with a political subdivision, where the political
subdivision is the owner of the county transportation system. As used in this
paragraph:
"County
transportation system" means a mass transit system of motorized buses
providing regularly scheduled transportation within a county.
"Operating
contract" or "contract" means a contract to operate and manage a
political subdivision's county transportation system, which provides that:
(A) The
political subdivision shall exercise substantial control over all aspects of
the operator's operation;
(B) The
political subdivision controls the development of transit policy, service
planning, routes, and fares; and
(C) The
operator develops in advance a draft budget in the same format as prescribed
for agencies of the political subdivision. The budget must be subject to the
same constraints and controls regarding the lawful expenditure of public funds
as any public sector agency, and deviations from the budget must be subject to
approval by the appropriate political subdivision officials involved in the
budgetary process.
"Operator"
means any person who, pursuant to an operating contract with a political
subdivision, operates or manages a county transportation system.
"Owner"
means a political subdivision that owns or is the lessee of all the properties
and facilities of the county transportation system (including buses, real
estate, parking garages, fuel pumps, maintenance equipment, office supplies,
etc.), and that owns all revenues derived therefrom;
(3) Surcharge
taxes on rental motor vehicles imposed by chapter 251 and passed on and
collected by persons holding certificates of registration under that chapter;
(4) Amounts
received by the operator of orchard properties from the owner of the orchard
property in amounts equal to and which are disbursed by the operator for
employee wages, salaries, payroll taxes, insurance premiums, and benefits,
including retirement, vacation, sick pay, and health benefits. As used in this
paragraph:
"Employee"
means an employee directly engaged in the day-to-day operations of the orchard
properties and employed by the operator.
"Operator"
means a producer who, pursuant to a written contract with the owner of the
orchard property, operates or manages the orchard property for the owner where
the property contains an area sufficient to make the undertaking economically
feasible.
"Orchard
property" means any real property that is used to raise trees with a
production life cycle of fifteen years or more producing fruits or nuts having
a normal period of development from the initial planting to the first
commercially saleable harvest of not less than three years.
"Owner"
means a fee owner or lessee under a recorded lease of orchard property;
(5) Taxes on
nursing facility income imposed by chapter 346E and passed on and collected by
operators of nursing facilities;
(6) Amounts
received under property and casualty insurance policies for damage or loss of
inventory used in the conduct of a trade or business located within the State
or a portion thereof that is declared a natural disaster area by the governor
pursuant to section 209‑2;
(7) Amounts
received as compensation by community organizations, school booster clubs, and
nonprofit organizations under a contract with the chief election officer for
the provision and compensation of precinct officials and other election-related
personnel, services, and activities, pursuant to section 11-5;
(8) Interest
received by a person domiciled outside the State from a trust company (as
defined in section 412:8-101) acting as payment agent or trustee on behalf of
the issuer or payees of an interest bearing instrument or obligation, if the
interest would not have been subject to tax under this chapter if paid directly
to the person domiciled outside the State without the use of a paying agent or
trustee; provided that if the interest would otherwise be taxable under this
chapter if paid directly to the person domiciled outside the State, it shall
not be exempt solely because of the use of a Hawaii trust company as a paying
agent or trustee;
(9) Amounts
received by a management company from related entities engaged in the business
of selling interstate or foreign common carrier telecommunications services in
amounts equal to and which are disbursed by the management company for employee
wages, salaries, payroll taxes, insurance premiums, and benefits, including
retirement, vacation, sick pay, and health benefits. As used in this
paragraph:
"Employee"
means employees directly engaged in the day-to-day operation of related
entities engaged in the business of selling interstate or foreign common
carrier telecommunications services and employed by the management company.
"Management
company" means any person who, pursuant to a written contract with a
related entity engaged in the business of selling interstate or foreign common
carrier telecommunications services, provides managerial or operational
services to that entity.
"Related
entities" means:
(A) An
affiliated group of corporations within the meaning of section 1504 (with
respect to affiliated group defined) of the federal Internal Revenue Code of
1986, as amended;
(B) A
controlled group of corporations within the meaning of section 1563 (with
respect to definitions and special rules) of the federal Internal Revenue Code
of 1986, as amended;
(C) Those
entities connected through ownership of at least eighty per cent of the total
value and at least eighty per cent of the total voting power of each such
entity (or combination thereof), including partnerships, associations, trusts,
S corporations, nonprofit corporations, limited liability partnerships, or
limited liability companies; and
(D) Any
group or combination of the entities described in paragraph (C) constituting a
unitary business for income tax purposes;
whether or
not the entity is located within or without the State or licensed under this
chapter; and
(10) Amounts
received as grants under section 206M-15."]
SECTION 18. Section 237-24.75, Hawaii Revised Statutes, is repealed.
["§237-24.75 Additional exemptions.
In addition to the amounts exempt under section 237-24, this chapter shall not
apply to:
(1) Amounts received as a beverage
container deposit collected under chapter 342G, part VIII;
(2) Amounts received by the operator of the
Hawaii convention center for reimbursement of costs or advances made pursuant
to a contract with the Hawaii tourism authority under section 201B‑7[;
and]
[(3) Amounts received] by a professional
employment organization from a client company equal to amounts that are
disbursed by the professional employment organization for employee wages,
salaries, payroll taxes, insurance premiums, and benefits, including
retirement, vacation, sick leave, health benefits, and similar employment
benefits with respect to assigned employees at a client company; provided that
this exemption shall not apply to a professional employment organization upon
failure of the professional employment organization to collect, account for,
and pay over any income tax withholding for assigned employees or any federal
or state taxes for which the professional employment organization is
responsible. As used in this paragraph, "professional employment
organization", "client company", and "assigned
employee" shall have the meanings provided in section 373K-1."]
SECTION 19. Section 237-24.8, Hawaii Revised Statutes, is repealed.
["§237-24.8 Amounts not taxable for
financial institutions. (a) In addition to the amounts not taxable
under section 237-24, this chapter shall not apply to amounts received by:
(1) Financial institutions from:
(A) Interest, discount, points,
commitment fees, loan fees, loan origination charges, and finance charges which
are part of the computed annual percentage rate of interest and which are
contracted and received for the use of money;
(B) Leasing of personal property;
(C) Fees or charges relating to the
administration of deposits;
(D) Gains resulting from changes in
foreign currency exchange rates but not including commissions or compensation
derived from the purchase or sale of foreign currency or numismatic currency
whether legal tender or not;
(E) The servicing and sale of loans contracted
for and received by the financial institution; and
(F) Interest received from the
investment of deposits received by the financial institution from financial or
debt instruments;
(2) Trust companies or trust departments of
financial institutions from:
(A) Trust agreements and retirement
plans where the trust companies or trust departments are acting as fiduciaries;
(B) Custodial agreements; and
(C) Activities relating to the
general servicing of fiduciary/custodial accounts held by the trust companies
or trust departments; and
(3) Financial corporations acting as
interbank brokers as defined by chapter 241 from brokerage services.
(b) As used in this section:
"Activities relating to the general
servicing of fiduciary or custodial accounts" means those activities
performed by trust companies that are directly or indirectly performed within
the fiduciary or custodial relationship between the trust company or trust
department of a financial institution and its client and that are not offered
to any person outside of the fiduciary or custodial relationship.
"Annual percentage rate" and
"finance charge" have the same meanings as defined in the federal
Truth in Lending Act (15 United States Code Sections 1605(a) to (c) and 1606).
"Deposit" means:
(1) Money or its equivalent received or
held by a financial institution in the usual course of business and for which
it has given or is obligated to give credit to:
(A) A commercial (including public
deposits), checking, savings, time, or thrift account;
(B) A check or draft drawn against a
deposit account and certified by the financial institution;
(C) A letter of credit; or
(D) A traveler's check, on which the
financial institution is primarily liable;
(2) Trust funds received or held by a
financial institution, whether held in the trust department or held or
deposited in any other department of the financial institution;
(3) Money received or held by a financial
institution, or the credit given for money or its equivalent received or held
by a financial institution in the usual course of business for a special or
specific purpose, regardless of the legal relationship thereby established,
including without being limited to, escrow funds, funds held as security for an
obligation due the financial institution or others (including funds held as
dealers' reserves) or for securities loaned by the financial institution, funds
deposited by a debtor to meet maturing obligations, funds deposited as advance
payment on subscriptions to United States government securities, funds held for
distribution or purchase of securities, funds held to meet the financial
institution's acceptances or letters of credit, and withheld taxes;
(4) Outstanding drafts, cashier's checks,
money orders, or other officer's checks issued in the usual course of business
for any purpose; or
(5) Money or its equivalent held as a
credit balance by a financial institution on behalf of its customer if the
financial institution is engaged in soliciting and holding the balances in the
regular course of its business.
"Financial institution" means
banks, building and loan associations, development companies, financial
corporations, financial services loan companies, small business investment
companies, financial holding companies, and trust companies all as defined in
chapter 241, and mortgage loan originator companies as defined in chapter 454F.
"Leasing of personal property"
occurs if:
(1) The lease is to serve as the functional
equivalent of an extension of credit to the lessee of the property;
(2) The property to be leased is acquired
specifically for the leasing transaction under consideration, or was acquired
specifically for an earlier leasing transaction;
(3) The lease is on a nonoperating basis
where the financial institution may not, directly or indirectly:
(A) Provide for the maintenance,
repair, replacement, or servicing of the leased property during the lease term;
(B) Purchase parts and accessories
in bulk or for an individual property after the lessee has taken delivery of
the property; or
(C) Purchase insurance for the
lessee;
(4) At the inception of the lease, the
effect of the transaction will yield a return that will compensate the lessor
financial institution for not less than the lessor's full investment in the
property plus the estimated total cost of financing the property over the term
of the lease, from:
(A) Rentals;
(B) Estimated tax benefits,
including capital goods excise tax credit, net economic gain from tax deferral
from accelerated depreciation, and other tax benefits with a substantially
similar effect; and
(C) The estimated residual value of
the property at the expiration of the initial term of the lease;
(5) The maximum lease term during which the
lessor financial institution shall recover the lessor's full investment in the
property, plus the estimated total cost of financing the property, shall be
forty years; and
(6) At the expiration of the lease,
including any renewals or extensions with the same lessee, all interest in the
property shall be either liquidated or leased again on a nonoperating basis as
soon as practicable but in no event later than two years from the expiration of
the lease; provided that in no case shall the lessor retain any interest in the
property beyond fifty years after the lessor's acquisition of the property."]
SECTION 20. Section 237-24.9, Hawaii Revised Statutes, is repealed.
["§237-24.9 Aircraft service and
maintenance facility. (a) This chapter shall not apply to amounts
received from the servicing and maintenance of aircraft or from the
construction of an aircraft service and maintenance facility in the State.
(b) As used in this section:
"Aircraft" means any craft or
artificial contrivance of whatever description engaged in intrastate,
interstate, or international scheduled commercial use as defined in chapter
263, that operates with two or more jet engines.
"Aircraft service and maintenance"
means all scheduled and unscheduled tasks performed within an aircraft service
and maintenance facility for the inspection, modification, maintenance, and
repair of aircraft and related components including engines, hydraulic and
electrical systems, and all other components which are an integral part of an
aircraft.
"Aircraft service and maintenance
facility" means a facility for aircraft service and maintenance that is
not less than thirty thousand square feet in area, and which may include
ancillary space which is integral to the facility, such as parts and inventory
warehouse space, tool rooms, and related administrative and employee space.
"Construction of an aircraft service
and maintenance facility" means all design, engineering, labor, and
material costs associated with the construction of facilities the principle
purpose of which is the provision of facilities for aircraft service and
maintenance.
"Maintenance" means the upkeep of
aircraft engines, hydraulic and electrical systems, and all other components
which are an integral part of an aircraft, but does not include refueling,
janitorial services or cleaning, restocking of aircraft and passenger supplies,
or loading or unloading of cargo and passenger baggage."]
SECTION 21. Section 237-25, Hawaii Revised Statutes, is repealed.
["§237-25 Exemptions of sales and
gross proceeds of sales to federal government, and credit unions.
(a) Any provision of law to the contrary notwithstanding, there shall be
exempted from, and excluded from the measures of, the tax imposed by chapter
237 all sales, and the gross proceeds of all sales, of:
(1) Intoxicating liquor, as defined in
chapter 281, hereafter sold by any person licensed under chapter 281 to the
United States (including any agency or instrumentality of the United States
that is wholly owned or otherwise so constituted as to be immune from the levy
of a tax under chapter 238 or 244D but not including national banks), or to any
organization to which that sale is permitted by the proviso of "Class
3" of section 281-31, located on any Army, Navy, or Air Force reservation,
but the person making the sale shall nevertheless, within the meaning of
chapters 237, 244D, and 281 be deemed to be a licensed seller;
(2) Tobacco products and cigarettes, as
defined in chapter 245, sold by any person licensed under the chapter to the
United States (including any agency or instrumentality thereof that is wholly
owned or otherwise so constituted as to be immune from the levy of a tax under
chapter 238 or 245 but not including national banks), but the person making the
sale shall nevertheless, within the meaning of chapters 237 and 245, be deemed
to be a licensed seller;
(3) Other tangible personal property sold
by any person licensed under this chapter to the United States (including any
agency, instrumentality, or federal credit union thereof but not including
national banks), and to any state-chartered credit union, but the person making
such sale shall nevertheless, within the meaning of this chapter, be deemed a
licensed seller; and
(4) When the amount of property sold by a
licensee turns upon the amount of the property sold through a vending machine
or similar device to the customer using the device, there shall not be deemed
to have occurred any sale covered by an exemption under paragraph (1), (2), or
(3).
(b) Nothing in this section shall be deemed
to exempt any sales to or by a federal cost-plus contractor, as defined in
chapter 237, or the gross proceeds thereof; with respect to all such activities
and transactions, taxes shall be levied, returned, computed, and assessed the
same as if this section had not been enacted, and in the case of an election
made under sections 237-13(2)(F) and 237-13(3)(C)(ii), the tax shall be
computed the same as upon a sale to the state government.
(c) Nothing in this section shall be deemed
to exempt any person engaging or continuing in a service business or calling
from any part of the tax imposed upon the person for such activity, and the
person shall not be entitled to deduct any amount for tangible personal
property furnished in conjunction therewith even though the person separately
bills or otherwise shows the amount of the gross income of the business derived
from the furnishing of the property.
(d) The exemption granted by this section
shall apply to the seller of products sold in the State as provided in
subsection (a) in respect of the privilege of manufacturing or producing, as
well as the privilege of selling, and the value or gross proceeds of sales of
the products so sold shall be excluded from the measure of the tax imposed by
chapter 237 upon the seller as a manufacturer or producer."]
SECTION 22. Section 237-26, Hawaii Revised Statutes, is repealed.
["§237-26 Exemption of certain
scientific contracts with the United States. (a) Any provision of
law to the contrary notwithstanding, there shall be exempted from the measure
of the taxes imposed by chapter 237, all of the gross proceeds derived by a
contractor or subcontractor arising from the performance of any scientific work
as defined in subsection (b), under a contract or subcontract entered into with
the United States (including any agency or instrumentality thereof but not
including national banks), and all of the gross proceeds derived from the sale
of tangible personal property by a seller of such tangible personal property to
such contractor or subcontractor; provided the exemption herein shall apply
only to such tangible personal property which is to be affixed to, or to become
a physical, integral part of the scientific facility, or which is to be
entirely consumed during the performance of the service required by the
contract or subcontract.
(b) For purposes of this section,
"scientific work" is work involving primarily the research and
development for, or the design, manufacture, instrumentation, installation,
maintenance, or operation of aerospace, agricultural, astronomical, biomedical,
electronic, geophysical, oceanographic, test range, or other scientific
facilities. Maintenance or operation, for purposes of this section, shall
include housekeeping functions in providing certain nonscientific logistic and
support services."]
SECTION 23. Section 237-27, Hawaii Revised Statutes, is repealed.
["§237-27 Exemption of certain
petroleum refiners. (a) As used in this section:
(1) "Petroleum products" means
petroleum, any distillate, fraction, or derivative of petroleum, natural gas or
its components, gas manufactured from a petroleum product, and any product
derived from the gas or from the manufacture thereof, such as benzene, xylene,
toluene, acetylene, tars, components of tars, and ammonia.
(2) "Refiner" means any person
who, in the State, engages in the business of refining petroleum products and
is taxable under this chapter, upon the value or gross proceeds of sales of the
petroleum products resultant from the business. A person who is engaged in
business as a refiner and also in other business shall be deemed a refiner only
in respect of the business that produces the products included in the measure
of the tax imposed by this chapter.
(3) "Refining" means:
(A) Any process performed by a refiner
that includes a change in the character or properties of a petroleum product
through the application of heat, or
(B) The compounding by a refiner of
a petroleum product with a product that has been refined by the refiner by the
process stated in clause (A).
(b) There shall be excluded from the
measure of the tax on a refiner such part of the petroleum products resultant
from the refiner's business as is to be further refined by another refiner, to
the extent that the petroleum products resultant from such further refining
will be (or but for this subsection would be) included in the measure of the
tax on such other refiner, and where petroleum products are to be used partly
for such refining and partly for other purposes, the proportion used for each
purpose shall be determined upon the basis of weight or BTU content."]
SECTION 24. Section 237-27.5, Hawaii Revised Statutes, is repealed.
["§237-27.5 Air pollution control
facility. (a) As used in this section, "air pollution control
facility" shall mean a new identifiable treatment facility, equipment,
device, or the like, which is used to abate or control atmospheric pollution or
contamination by removing, reducing, or rendering less noxious air contaminants
emitted into the atmosphere from a point immediately preceding the point of
such removal, reduction, or rendering to the point of discharge of air, meeting
emission standards as established by the department of health, excluding air
conditioner, fan, or other similar facility for the comfort of persons at a
place of business.
(b) Any provision of law to the contrary
notwithstanding, and upon receipt of the certification required by subsection
(c), there shall be exempted from, and excluded from the measure of, the taxes
imposed by this chapter, all of the gross proceeds arising from, and all of the
amount of tangible personal property furnished in conjunction with, the
construction, reconstruction, erection, operation, use, or maintenance of an
air pollution control facility.
(c) Application for the exemption provided
by this section shall first be made with the director of health who, if
satisfied that the facility meets the pollution emission criteria established
by the department of health, shall certify to that fact. A new certificate
shall be obtained from the director of health and filed with the director of
taxation every five years certifying that the pollution control facility
complies with the pollutant emission criteria established by the department of
health."]
SECTION 25. Section 237-27.6, Hawaii Revised Statutes, is repealed.
["§237-27.6 Solid waste processing,
disposal, and electric generating facility; certain amounts exempt.
(a) Any provision of the law to the contrary notwithstanding, there shall be
exempted from, and excluded from the measure of, the taxes imposed by this
chapter all of the amounts enumerated in subsection (b) arising from a
transaction involving a sale and leaseback of a solid waste processing,
disposal, and electric generating facility entered into by a political
subdivision of the State under section 46-19.1 where the facility is owned or
under construction by the subdivision before May 10, 1988.
(b) Amounts are exempted or excluded from
taxation under this chapter only to the extent that they:
(1) Are received by an operator of a
facility under an operating contract with a political subdivision, where the:
(A) Operator, or its successor,
entered into an operating contract prior to May 10, 1988;
(B) Operator enters into a lease of
the facility from the owner at a time that coincides with the time the owner
and the political subdivision entering into a sale and leaseback transaction;
and
(C) Amounts are used by the operator
to make rental payments to the owner;
(2) Are received as rental payments by the
owner of the facility from the operator of the facility;
(3) Do not exceed the payments made by the
owner of the facility under the sale and leaseback transaction to the political
subdivision; and
(4) In no case exceed debt service costs incurred
by the political subdivision for the construction of the facility.
(c) For the purposes of this section:
"Debt service costs" means
payments of principal and interest on general obligation bonds issued at any
time by a political subdivision for the construction of the facility.
"Sale and leaseback" means a
transaction in which a facility is sold by a political subdivision to a private
entity for cash, under an installment sale, a financing lease, or similar
arrangement, or any combination thereof, where the political subdivision has
the right to repurchase the facility at a later date, and where the facility is
leased to an operator of the facility.
"Solid waste processing, disposal, and
electric generating facility" or "facility" means a facility for
the processing and disposal of solid waste or the generation of electric
energy, or both, the construction of which has been financed pursuant to
section 47-4 and constitutes an undertaking as defined in section 49-1.
"Operator" means a private entity
who enters into an agreement or other arrangement with the owner of a solid
waste processing, disposal, and electric generating facility for the purpose of
operating such facility for a political subdivision of the State.
"Owner" means any person who purchases
a solid waste processing, disposal, and electric generating facility under
section 46-19.1. "]
SECTION 26. Section 237-28.1, Hawaii Revised Statutes, is repealed.
["[§237-28.1] Exemption of certain
shipbuilding and ship repair business. There shall be exempted
from, and excluded from the measure of, the taxes imposed by this chapter all
of the gross proceeds arising from shipbuilding and ship repairs rendered to
surface vessels federally owned or engaged in interstate or international
trade."]
SECTION 27. Section 237-29, Hawaii Revised Statutes, is repealed.
["§237-29 Exemptions for certified
or approved housing projects. (a) All gross income received by any
qualified person or firm for the planning, design, financing, construction,
sale, or lease in the State of a housing project that has been certified or
approved under section 201H-36 shall be exempt from general excise taxes.
(b) All gross income received by a
nonprofit or a limited distribution mortgagor for a low- and moderate-income
housing project certified or approved under section 201H-36 shall be exempt
from general excise taxes.
(c) The director of taxation and the Hawaii
housing finance and development corporation shall adopt rules pursuant to
chapter 91 for the purpose of this section, including any time limitation for
the exemptions."]
SECTION 28. Section 237-29.5, Hawaii Revised Statutes, is repealed.
["§237-29.5 Exemption for sales of
tangible personal property shipped out of the State. (a) There
shall be exempted from, and excluded from the measure of, the taxes imposed by
this chapter all of the value or gross proceeds arising from the manufacture,
production, or sale of tangible personal property:
(1) Shipped by the manufacturer, producer,
or seller to a point outside the State where the property is resold or
otherwise consumed or used outside the State; or
(2) The sale of which is exempt under
section 237-24.3(2).
(b) For the purposes of this section, the
manufacturer, producer, or seller shall take from the purchaser, a certificate,
in such form as the department shall prescribe, certifying that the tangible
personal property purchased is to be resold or otherwise consumed or used
outside the State. Any purchaser who shall furnish such a certificate shall be
obligated to pay to the seller, upon demand, if the property purchased is not
resold or otherwise consumed or used outside the State, the amount of the
additional tax which by reason thereof is imposed upon the seller."]
SECTION 29. Section 237-29.53, Hawaii Revised Statutes, is repealed.
["§237-29.53 Exemption for
contracting or services exported out of State. (a) There shall be
exempted from, and excluded from the measure of, taxes imposed by this chapter,
all of the value or gross income derived from contracting (as defined under
section 237-6) or services performed by a person engaged in a service business
or calling in the State for use outside the State where:
(1) The contracting or services are for
resale, consumption, or use outside the State; and
(2) The value or gross income derived from
the contracting or services performed would otherwise be subject to the tax
imposed under this chapter on contracting or services at the highest rate.
For the purposes of this subsection, the seller
or person rendering the contracting or services exported and resold, consumed,
or used outside the State shall take from the customer, a certificate or an
equivalent, in a form the department prescribes, certifying that the
contracting or service purchased is to be otherwise resold, consumed, or used
outside the State. Any customer who furnishes this certificate or an
equivalent shall be obligated to pay the seller or person rendering the
contracting or services, upon demand, if the contracting or service purchased
is not resold or otherwise consumed or used outside the State, the amount of
the additional tax which by reason thereof is imposed upon the seller or person
rendering the contracting or service.
(b) There shall be exempted from, and
excluded from the measure of, taxes imposed by this chapter, all of the value
or gross income derived from contracting (as defined in section 237-6) or
services performed by a person engaged in a service business or calling in the
State for a purchaser who resells all of the contracting or services for
resale, consumption, or use outside the State pursuant to subsection (a). For
the purposes of this subsection, the seller or person rendering the contracting
or services for a purchaser who resells the contracting or services for resale,
consumption, or use outside the State shall take from the purchaser, a
certificate or an equivalent, in a form that the department prescribes,
certifying that the contracting or services purchased is to be for resale,
consumption, or use outside the State pursuant to subsection (a). Any
purchaser who furnishes this certificate or an equivalent shall be obligated to
pay the seller or person rendering the contracting or services, upon demand, if
the contracting or services purchased is not resold in its entirety to a
customer of the purchaser who has complied with subsection (a), the amount of
the additional tax which by reason thereof is imposed upon the seller or the
person rendering the contracting or service."]
SECTION 30. Section 237-29.55, Hawaii Revised Statutes, is repealed.
["[§237-29.55] Exemption
for sale of tangible personal property for resale at wholesale. (a) There
shall be exempted from, and excluded from the measure of, the taxes imposed by
this chapter all of the gross proceeds or gross income arising from the sale of
tangible personal property imported to Hawaii from a foreign or domestic source
to a licensed taxpayer for subsequent resale for the purpose of wholesale as
defined under section 237-4.
(b) The department, by rule, may provide
that a seller may take from the purchaser of imported tangible personal
property, a certificate, in a form that the department shall prescribe,
certifying that the purchaser of the imported tangible personal property shall
resell the imported tangible personal property at wholesale as defined under
section 237-4. Any purchaser who furnishes a certificate shall be obligated to
pay to the seller, upon demand, if the sale in fact is not a sale for the
purpose of resale at wholesale, the amount of the additional tax which by
reason thereof is imposed upon the seller. The absence of a certificate,
unless the sales of the business are exclusively a sale for the purpose of
resale at wholesale, in itself, shall give rise to the presumption that the
sale is not a sale for the purpose of resale at wholesale."]
SECTION 31. Section 237-29.7, Hawaii Revised Statutes, is repealed.
["[§237-29.7] Exemption of
insurance companies. This chapter shall not apply to the gross
income or gross proceeds of insurance companies authorized to do business under
chapter 431; except this exemption shall not apply to any gross income or gross
proceeds received after December 31, 1991, as rents from investments in real
property in this State; provided that gross income or gross proceeds from
investments in real property received by insurance companies after December 31,
1991, under written contracts entered into before January 1, 1992, that do not
provide for the passing on of taxes or tax increases shall not be taxed until
the contracts are renegotiated, renewed, or extended."]
SECTION 32. Section 237-29.8, Hawaii Revised Statutes, is repealed.
["[§237-29.8] Call centers;
exemption; engaging in business; definitions. (a) This chapter
shall not apply to amounts received from a person operating a call center by a
person engaged in business as a telecommunications common carrier for
interstate or foreign telecommunications services, including toll-free
telecommunications, telecommunications capabilities for electronic mail, voice,
and data telecommunications, computerized telephone support, facsimile, wide
area telecommunications services, or computer-to-computer communication.
(b) The establishment of a call center in
this State by any person shall not be used by itself by the State to find that
any other part of the person's business is engaged in business in this State
for the purposes of this chapter. Gross income or gross proceeds received by a
call center for customer service and support shall be exempt from the measure
of taxes imposed by this chapter.
(c) The department, by rule, may provide
that the person providing the telecommunications service may take from the
person operating a call center a certificate, in a form that the department
shall prescribe, certifying that the amounts received for telecommunications
services are for operating a call center. If the certificate is required by
rule of the department, the absence of the certificate in itself shall give
rise to the presumption that the amounts received from the sale of
telecommunications services are not for operating a call center.
(d) As used in this section:
"Call center" means a physical or
electronic operation that focuses on providing customer service and support for
computer hardware and software companies, manufacturing companies, software
service organizations, and telecommunications support services, within an
organization in which a managed group of individuals spend most of their time
engaging in business by telephone, usually working in a computer-automated
environment; provided that the operation shall not include telemarketing or
sales.
"Customer service and support"
means product support, technical assistance, sales support, phone or
computer-based configuration assistance, software upgrade help lines, and
traditional help desk services.
"Telecommunications common
carrier" means any person that owns, operates, manages, or controls any
facility used to furnish telecommunications services for profit to the public,
or to classes of users as to be effectively available to the public, engaged in
the provision of services, such as voice, data, image, graphics, and video
services, that make use of all or part of their transmission facilities,
switches, broadcast equipment, signalling, or control devices.
"Telecommunications service" or
"telecommunications" means the offering of transmission between or
among points specified by a user, of information of the user's choosing,
including voice, data, image, graphics, and video without change in the form or
content of the information, as sent and received, by means of electromagnetic
transmission, or other similarly capable means of transmission, with or without
benefit of any closed transmission medium.
(e) This section shall not apply to gross
proceeds or gross income received after June 30, 2010."]
PART III. USE TAX EXEMPTIONS
SECTION 33. Section 238-1, Hawaii Revised Statutes, is amended to read as follows:
""Use" (and any nounal, verbal, adjectival, adverbial, and other equivalent form of the term) herein used interchangeably means any use, whether the use is of such nature as to cause the property, services, or contracting to be appreciably consumed or not, or the keeping of the property or services for such use or for sale, the exercise of any right or power over tangible or intangible personal property incident to the ownership of that property, and shall include control over tangible or intangible property by a seller who is licensed or who should be licensed under chapter 237, who directs the importation of the property into the State for sale and delivery to a purchaser in the State, liability and free on board (FOB) to the contrary notwithstanding, regardless of where title passes, but the term "use" shall not include:
(1) Temporary use of property, not of a perishable or quickly consumable nature, where the property is imported into the State for temporary use (not sale) therein by the person importing the same and is not intended to be, and is not, kept permanently in the State. For example, without limiting the generality of the foregoing language:
(A) In the case of a contractor importing permanent equipment for the performance of a construction contract, with intent to remove, and who does remove, the equipment out of the State upon completing the contract;
(B) In the case of moving picture films imported for use in theaters in the State with intent or under contract to transport the same out of the State after completion of such use; and
(C) In the case of a transient visitor importing an automobile or other belongings into the State to be used by the transient visitor while therein but which are to be used and are removed upon the transient visitor's departure from the State;
(2) Use by the taxpayer of property acquired by the taxpayer solely by way of gift;
(3) Use which is limited to the receipt of articles and the return thereof, to the person from whom acquired, immediately or within a reasonable time either after temporary trial or without trial;
(4) Use of goods imported into the State by the owner of a vessel or vessels engaged in interstate or foreign commerce and held for and used only as ship stores for the vessels;
(5) The use or keeping for use of household goods, personal effects, and private automobiles imported into the State for nonbusiness use by a person who:
(A) Acquired them in another state, territory, district, or country;
(B) At the time of the acquisition was a bona fide resident of another state, territory, district, or country;
(C) Acquired the property for use outside the State; and
(D) Made actual and substantial use thereof outside this State;
provided that as to an article acquired less than three months prior to the time of its importation into the State it shall be presumed, until and unless clearly proved to the contrary, that it was acquired for use in the State and that its use outside the State was not actual and substantial;
[(6) The leasing or renting of any aircraft
or the keeping of any aircraft solely for leasing or renting to lessees or
renters using the aircraft for commercial transportation of passengers and
goods or the acquisition or importation of any such aircraft or aircraft
engines by any lessee or renter engaged in interstate air transportation. For
purposes of this paragraph, "leasing" includes all forms of lease,
regardless of whether the lease is an operating lease or financing lease. The
definition of "interstate air transportation" is the same as in 49
U.S.C. 40102;
(7) The use of oceangoing vehicles for
passenger or passenger and goods transportation from one point to another
within the State as a public utility as defined in chapter 269;
(8) The use of material, parts, or tools
imported or purchased by a person licensed under chapter 237 which are used for
aircraft service and maintenance, or the construction of an aircraft service
and maintenance facility as those terms are defined in section 237‑24.9;
(9)] (6) The use of services or
contracting imported for resale where the contracting or services are for
resale, consumption, or use outside the State pursuant to section 237-29.53(a);
[(10)] (7) The use of contracting
imported or purchased by a contractor as defined in section 237-6 who is:
(A) Licensed under chapter 237;
(B) Engaged in business as a contractor; and
(C) Subject to the tax imposed under section 238-2.3; and
[(11)] (8) The use of property, services,
or contracting imported by foreign diplomats and consular officials who are
holding cards issued or authorized by the United States Department of State
granting them an exemption from state taxes.
With regard to purchases made and distributed under the authority of chapter 421, a cooperative association shall be deemed the user thereof."
SECTION 34. Section 238-3, Hawaii Revised Statutes, is amended to read as follows:
"§238-3 Application of tax, etc. (a) The tax imposed by this chapter shall not apply to any property, services, or contracting or to any use of the property, services, or contracting that cannot legally be so taxed under the Constitution or laws of the United States, but only so long as, and only to the extent to which the State is without power to impose the tax.
To the extent that any exemption, exclusion, or apportionment is necessary to comply with the preceding sentence, the director of taxation shall:
(1) Exempt or exclude from the tax under this chapter, property, services, or contracting or the use of property, services, or contracting exempted under chapter 237; or
(2) Apportion the gross value of services or contracting sold to customers within the State by persons engaged in business both within and without the State to determine the value of that portion of the services or contracting that is subject to taxation under chapter 237 for the purposes of section 237-21.
(b) The tax imposed by this chapter shall not apply to any use of property, services, or contracting the transfer of which property, services, or contracting to, or the acquisition of which by, the person so using the same, has actually been or actually is taxed under chapter 237.
(c) The tax imposed by this chapter shall be paid only once upon or in respect of the same property, services, or contracting; provided that nothing in this chapter contained shall be construed to exempt any property, services, or contracting, or the use thereof from taxation under any other law of the State.
(d) The tax imposed by this chapter shall be in addition to any other taxes imposed by any other laws of the State, except as otherwise specifically provided herein; provided that if it be finally held by any court of competent jurisdiction, that the tax imposed by this chapter may not legally be imposed in addition to any other tax or taxes imposed by any other law or laws with respect to the same property, services, or contracting, or the use thereof, then this chapter shall be deemed not to apply to the property, services, or contracting, or the use thereof under such specific circumstances, but such other laws shall be given full effect with respect to the property, services, or contracting, or use.
(e) The tax imposed by this chapter shall not apply to any use of property exempted by section 238-4.
(f) The tax imposed by this chapter shall not apply to any use or consumption of aircraft and vessels, the transfer of which aircraft or vessel to, or the acquisition of which by, the person so using or consuming the same, or the rental for the use of the aircraft or vessel, has actually been or actually is taxed under chapter 237.
[(g) The tax imposed by this chapter shall
not apply to any intoxicating liquor as defined in chapter 244D and cigarettes
and tobacco products as defined in chapter 245, imported into the State and
sold to any person or common carrier in interstate commerce, whether ocean-going
or air, for consumption out-of- state by the person, crew, or passengers on the
shipper's vessels or airplanes.
(h) The tax imposed by this chapter shall
not apply to any use of vessels constructed under section 189-25 prior to July
1, 1969.
(i)] (g) Each taxpayer liable
for the tax imposed by this chapter on tangible personal property, services, or
contracting shall be entitled to full credit for the combined amount or amounts
of legally imposed sales or use taxes paid by the taxpayer with respect to the
same transaction and property, services, or contracting to another state and
any subdivision thereof, but such credit shall not exceed the amount of the use
tax imposed under this chapter on account of the transaction and property,
services, or contracting. The director of taxation may require the taxpayer to
produce the necessary receipts or vouchers indicating the payment of the sales
or use tax to another state or subdivision as a condition for the allowance of
the credit.
[(j)] (h) The tax imposed by
this chapter shall not apply to any use of property, services, or contracting
exempted by section 237-26 or section 237-29.
[(k) The tax imposed by this chapter shall
not apply to any use of air pollution control facility exempted by section
237-27.5.]"
PART IV
SECTION 35. Chapter 235, Hawaii Revised Statutes, is repealed; provided that section 235-93.4, Hawaii Revised Statutes, as enacted by Act 1, Session Laws of Hawaii 2011, shall not be repealed and shall be reenacted into chapter 572B, Hawaii Revised Statutes.
PART V
SECTION 36. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 37. This Act shall take effect upon its approval; provided that:
(1) Sections 2, 3, 4, 5, and 6 of this Act shall apply to gross income, gross proceeds, or value received after June 30, 2013;
(2) Sections 7 and 8 of this Act shall apply to the value accruing after June 30, 2013;
(3) Sections 9 through 32 of this Act shall apply to gross income, gross proceeds, or value received after June 30, 2012;
(4) Sections 33 and 34 of this Act shall apply to the value accruing after June 30, 2012; and
(5) Section 35 of this Act shall apply to taxable years beginning after December 31, 2012.
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Report Title:
Income Tax; General Excise Tax; Use Tax; Exemptions
Description:
Amends the rate of imposition of the general excise and use taxes for gross income, gross proceeds, or value received after June 30, 2013, to an unspecified percentage; repeals various general excise and use tax exemptions for gross income, gross proceeds, or value received after June 30, 2013; repeals income tax code for taxable years beginning after December 31, 2012.
The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.
