REPORT TITLE:
GET; Services for Export


DESCRIPTION:
Exempts from the general excise tax all services sold out of
State.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                            733         
HOUSE OF REPRESENTATIVES                H.B. NO.           
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                     A BILL FOR AN ACT

RELATING TO TAXES ON EXPORTED SERVICES.



BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1      SECTION 1.  The legislature finds that international trade
 
 2 is vital to the economic well-being of the State.  With rising
 
 3 levels of development and high growth rates in the economies in
 
 4 the Asia-Pacific region, the opportunities for trade and business
 
 5 are substantial and growing.  Since Hawaii's services are
 
 6 primarily specialized and small-scale, the search for appropriate
 
 7 market niches is critical.  Without large-scale manufacturing and
 
 8 commodity production, Hawaii has difficulty producing enough
 
 9 exportable goods and services to balance its dependence on
 
10 tourism and imports, and to compete with other suppliers.  The
 
11 legislature finds that exemption of gross income from the general
 
12 excise tax arising from the sale of services to clients or
 
13 customers located outside the State would maximize Hawaii's
 
14 businesses with overseas markets.  In addition, this Act brings
 
15 equity into the law, putting services on equal footing with goods
 
16 sold to customers located outside the State.  This exemption
 
17 recognizes that Hawaii is a service economy and by exporting
 
18 services, the State would be encouraging the influx of capital
 
19 into the State by placing Hawaii-based services on equal
 

 
Page 2                                         733         
                                     H.B. NO.           
                                                        
                                                        

 
 1 competitive footing with service providers from the mainland or
 
 2 around the Asia-Pacific region.
 
 3      SECTION 2.  Chapter 237, Hawaii Revised Statutes, is amended
 
 4 by adding a new section to be appropriately designated and to
 
 5 read as follows:
 
 6      "�237-     Exemption for certain sales of services.  (a)
 
 7 There shall be exempted from, and excluded from the measure of,
 
 8 the taxes imposed by this chapter all of the gross proceeds
 
 9 arising from the sale of services to a purchaser at a point
 
10 outside the State for use outside the State.
 
11      As used in this section:
 
12      "Sale of services" means all activities engaged in by a
 
13 service business or calling, or other business, for other persons
 
14 which involve the rendering of a service, as distinguished from
 
15 the sale of tangible property or the production and sale of
 
16 tangible property, for which consideration was received.  "Sale
 
17 of services" includes all of the professional services as defined
 
18 in chapter 415A.  "Sale of services" does not include the
 
19 services rendered by an employee to the employee's employer.
 
20      (b)  For the purposes of this section, the seller who makes
 
21 a sale of services to a purchaser at a point outside the State
 
22 for use outside the State shall take from the purchaser a
 
23 certificate, in such form as the department shall prescribe,
 

 
Page 3                                         733         
                                     H.B. NO.           
                                                        
                                                        

 
 1 certifying that the services were purchased for use outside the
 
 2 State.  Any purchaser who furnishes such a certificate shall be
 
 3 obligated to pay to the seller, upon demand, if the services
 
 4 supplied are used in the State, the amount of additional tax
 
 5 which by reason of such use is imposed upon the seller.  The
 
 6 seller may take the necessary legal action to recover amounts due
 
 7 for the additional tax as a result of the consumption or use of
 
 8 the services in the State."
 
 9      SECTION 3.  Section 237-21, Hawaii Revised Statutes, is
 
10 amended to read as follows:
 
11      "�237-21  Apportionment.  If any person, other than persons
 
12 liable to the tax on manufacturers as provided by section
 
13 237-13(1), is engaged in business both within and without the
 
14 State or in selling goods or services for delivery outside the
 
15 State, and if under the Constitution or laws of the United States
 
16 or section 237-29.5 [or], 237-29.6, or 237-    the entire gross
 
17 income of such person cannot be included in the measure of this
 
18 tax, there shall be apportioned to the State and included in the
 
19 measure of the tax that portion of the gross income which is
 
20 derived from activities within the State, to the extent that the
 
21 apportionment is required by the Constitution or laws of the
 
22 United States or section 237-29.5 [or], 237-29.6[.], or 237-   .
 
23 In the case of a tax upon the production of property in the State
 

 
Page 4                                         733         
                                     H.B. NO.           
                                                        
                                                        

 
 1 the apportionment shall be determined as in the case of the tax
 
 2 on manufacturers.  In other cases, if and to the extent that the
 
 3 apportionment cannot be accurately made by separate accounting
 
 4 methods, there shall be apportioned to the State and included in
 
 5 the measure of this tax that proportion of the total gross
 
 6 income, so requiring apportionment, which the cost of doing
 
 7 business within the State, applicable to the gross income, bears
 
 8 to the cost of doing business both within and without the State,
 
 9 applicable to the gross income."
 
10      SECTION 4.  Statutory material to be repealed is bracketed.
 
11 New statutory material is underscored.
 
12      SECTION 5.  This Act shall take effect on July 1, 1999.
 
13 
 
14                              INTRODUCED BY:______________________