General Excise Tax; Exempt
State and Counties

Exempts the state and counties from the general excise tax.

HOUSE OF REPRESENTATIVES                H.B. NO.1262       
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            

                   A  BILL  FOR  AN  ACT



 1      SECTION 1.  The legislature finds that the State of Hawaii
 2 and the various cities and counties within the state pay a 4%
 3 general excise tax on all their purchases made with any vendor or
 4 merchant doing business in Hawaii.  While the state is afforded
 5 the 4% return of its monies paid in that tax, merchants are
 6 allowed to charge 4.166% to compensate for the income of the 4%
 7 collection; therefore making an even return on the states
 8 payables.  There is absolutely no benefit afforded to the state
 9 in additional income made on their own purchases.  Moreover, the
10 4% in which the state pays, can remain in the general fund and
11 continue to collect interest instead of being paid out, waiting
12 for the next month's end of the month's general excise return
13 filing to redeposit those original funds.
14      The respect to the various counties, the counties are not
15 afforded the ability to regain the tax paid out, therefore
16 rendering the necessity of needing larger funding from the state
17 to operate.
18      Both the state and the counties are facing financial
19 deficits within their budgeting and actual payables.  This bill

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                                     H.B. NO.1262       

 1 would enable the state to retain the 4% paid out and reduce the
 2 amount of funding city and county departments need to operate.
 3      Should the state and the counties prefer to make their
 4 purchases out of the state to relieve the burden of the tax, they 
 5 are then faced with shipping expenses to have the items brought
 6 to the islands.  The local economy then becomes burdened with the
 7 loss of additional income and the outflux of our state's cash
 8 flow.
 9      The benefits of eliminating the state and counties from
10 general excise tax exceed just benefits to the state's general
11 fund, but also benefits the local businesses and the local
12 economy.  The exceeded benefits to the local economy would be due
13 to the fact that the state and the counties would be more apt to
14 purchase their goods locally due to the cost reduction;
15 therefore, stimulating the local economy by awarding local
16 merchants their business.  This offers local businesses an
17 increase in revenues in which the state's general fund will
18 continue to benefit in the form of income tax payments.  Also,
19 these purchases will keep Hawaii's cash flow within the state.
20 Businesses will have yet another benefit by the ability to file
21 state and county purchases on the exemption line of their monthly
22 general excise tax reports.
23      The implementation of this bill will assist in stimulating

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                                     H.B. NO.1262       

 1 the local economy and in keeping the cash flow within the state.
 2 State funding to the counties will be reduced, allowing the state
 3 to retain these funds in wither an interest earning account or
 4 the making available of extra funding by the state, for other
 5 budgeting arrangements.
 6      SECTION 2.  Chapter 237, Hawaii Revised Statutes, is amended
 7 by adding a new section to be appropriately designated and to
 8 read as follows:
 9      "237-    General excise tax received from the state and the
10 counties; exemption.  All amounts received from any state
11 department or agency or any county department or agency is exempt
12 from the general excise tax as provided in this chapter."
13      SECTION 3.  New statutory material is underscored.
14      SECTION 4.  This Act shall take effect on July 1, 1999.
16                           INTRODUCED BY:  _______________________