STAND. COM. REP. NO. 1437-00

                                 Honolulu, Hawaii
                                                   , 2000

                                 RE: S.B. No. 2160
                                     S.D. 1
                                     H.D. 1




Honorable Calvin K.Y. Say
Speaker, House of Representatives
Twentieth State Legislature
Regular Session of 2000
State of Hawaii

Sir:

     Your Committee on Finance, to which was referred S.B. No.
2160, S.D. 1, H.D. 1, entitled: 

     "A BILL FOR AN ACT RELATING TO GENERAL EXCISE TAX,"

begs leave to report as follows:

     The purpose of this bill is to provide tax relief for the
construction industry by allowing contractor-taxpayers to pay the
general excise tax (GET) on a cash basis, provided that the
contractor-taxpayer notifies the Department of Taxation (DOTAX)
of the basis upon which the GET is to be reported.

     Currently, many contractors use an accrual basis accounting
system.  The problem is that under this system, the contractor
must pay the GET on sales that it accrues even if the contractor
has not yet been paid.  As a result, the contractor is asked to
"front" the tax payment while waiting for payment from the
customer.

     Testifying in support of this bill were the Construction
Industry Legislative Organization, the Hawaii Construction
Industry Association, the Building Industry Association of
Hawaii, the Subcontractors' Association of Hawaii, the General
Contractors Association of Hawaii, the Plumbing and Mechanical
Contractors Association of Hawaii, and Hidano Construction, Inc.
The Tax Foundation of Hawaii offered comments.  DOTAX also
offered comments, testifying that it is not opposed to this
measure.

 
 
                                 STAND. COM. REP. NO. 1437-00
                                 Page 2

 
     As affirmed by the record of votes of the members of your
Committee on Finance that is attached to this report, your
Committee is in accord with the intent and purpose of S.B. No.
2160, S.D. 1, H.D. 1, and recommends that it pass Third Reading.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Finance,



                                   ______________________________
                                   DWIGHT Y. TAKAMINE, Chair