Bill Text: HI SR125 | 2016 | Regular Session | Introduced

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Bill Title: General Excise Tax Exemption; Federal Goods and Services;

Spectrum: Moderate Partisan Bill (Democrat 9-1)

Status: (Passed) 2016-04-07 - Report and Resolution Adopted. [SR125 Detail]

Download: Hawaii-2016-SR125-Introduced.html

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THE SENATE	S.R. NO.	125
TWENTY-EIGHTH LEGISLATURE, 2016
STATE OF HAWAII

SENATE RESOLUTION

 

 

Requesting the Department of Business, Economic Development, and Tourism, IN CONSULTATION WITH THE Department of Budget and Finance, and Department of Taxation, to Conduct a study On The Economic Impact of Granting an Exemption for the Sale of Goods and Services to the Federal Government from the state general excise tax.

 

 

     WHEREAS, contracts to provide goods and services to the federal government are a vital part of Hawaii's economy, and these contracts provide opportunities for Hawaii small businesses to establish themselves and to create well-paying careers for Hawaii residents; and

 

     WHEREAS, of the approximately $2,000,000,000 of federal contracts that are available for bid annually in Hawaii, approximately $900,000,000 is set aside for small businesses; and

 

     WHEREAS, businesses are assessed a State's general excise tax rate of four percent for the sale of goods and services to the federal government and another half percent surcharge for the sale of goods and services on Oahu, but goods and services used and consumed outside the State are not taxed under the general excise tax; and

 

     WHEREAS, Hawaii is one of only three states in the nation — the others being Washington and Vermont — that apply the general excise tax to the provision and sale of goods and services by businesses domiciled in their states to the federal government; and

 

     WHEREAS, federal agencies overseeing the bidding process have opined that since the sale of goods to the federal government is not subject to the State's general excise tax, the federal government will not enforce the State's tax on out-of-state small businesses bidding to provide goods and services to the federal government; and

 

     WHEREAS, the Hawaii Department of Taxation has admitted that they are unable to effectively track the sale of goods and services that are made to the federal government by out-of-state vendors, and are unable to accurately determine and report on the aggregate amount of excise taxes that are due and are owed to the State from these out-of-state vendors; and

 

     WHEREAS, because businesses domiciled and based in Hawaii are assessed the State's general excise tax, but businesses outside the State are not, Hawaii businesses are effectively at a disadvantage when they bid on federal contracts for goods and services, and as a result most of these contracts are awarded to out-of-state businesses; and

 

     WHEREAS, when Hawaii's small businesses lose these contracts for providing goods and services to the federal government in Hawaii, the overall economic activity decreases within the State, which negatively affects the State's tax revenue and economy; and

 

     WHEREAS, this body would like to better understand the effect of granting an exemption from the general excise tax for the sale of goods and services to the federal government, especially as it relates to federal contracts awarded to in-state small businesses, economic activity in the State, job creation in the State, personal and corporate income, and the state tax revenue; and

 

     WHEREAS, three state agencies have expertise over various aspects of this issue:

 

     (1)  The Department of Business, Economic Development, and Tourism is responsible for fostering economic development within the State;

 

     (2)  The Department of Budget and Finance is responsible for administering the state budget and developing near and long range financial plans for the State; and

 

     (3)  The Department of Taxation is responsible for administering the tax laws of the State; now, therefore,

 

     BE IT RESOLVED by the Senate of the Twenty-eighth Legislature of the State of Hawaii, Regular Session of 2016, that the Department of Business, Economic Development, and Tourism, in consultation with the Department of Budget and Finance and Department of Taxation, is requested to determine the potential increase in economic activity, including the number of jobs, personal and corporate income, and personal and corporate taxes that would result from granting an exemption for the sale of goods and services to the federal government from the state general excise tax; and

 

     BE IT FURTHER RESOLVED that the Department of Budget and Finance and Department of Taxation are requested to cooperate and assist the Department of Business, Economic Development, and Tourism; and

 

     BE IT FURTHER RESOLVED that the Director of Business, Economic Development, and Tourism is requested to submit findings, recommendations, any proposed legislation, and a clear narrative of the methodology the departments used to conduct this analysis to the Legislature no later than twenty days prior to the convening of the Regular Session of 2017; and

 

     BE IT FURTHER RESOLVED that certified copies of this Resolution be transmitted to the Director of Business, Economic Development, and Tourism; Director of Finance; and Director of Taxation.

 

 

 

	OFFERED BY:	_____________________________

Report Title: 

General Excise Tax Exemption; Federal Goods and Services;