REPORT TITLE:
General Excise Tax


DESCRIPTION:
Expands the definition of "wholesaler" to include wholesale
services to alleviate the pyramiding of general excise taxes.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                            1306        
HOUSE OF REPRESENTATIVES                H.B. NO.           
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO GENERAL EXCISE TAX.



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

 1      SECTION 1.  Section 237-4, Hawaii Revised Statutes, is
 
 2 amended to read as follows:
 
 3      "237-4 "Wholesaler", "jobber", defined.  (a)  "Wholesaler"
 
 4 or "jobber" applies only to a person making sales at wholesale.
 
 5 Only the following are sales at wholesale:
 
 6      (1)  Sales to a licensed retail merchant, jobber, or other
 
 7           licensed seller for purposes of resale;
 
 8      (2)  Sales to a licensed manufacturer of material or
 
 9           commodities which are to be incorporated by the
 
10           manufacturer into a finished or saleable product
 
11           (including the container or package in which the
 
12           product is contained) during the course of its
 
13           preservation, manufacture, or processing, including
 
14           preparation for market, and which will remain in such
 
15           finished or saleable product in such form as to be
 
16           perceptible to the senses, which finished or saleable
 
17           product is to be sold and not otherwise used by the
 
18           manufacturer;
 
19      (3)  Sales to a licensed producer or cooperative association
 

 
Page 2                                         1306        
                                     H.B. NO.           
                                                        
                                                        

 
 1           of materials or commodities which are to be
 
 2           incorporated by the producer or by the cooperative
 
 3           association into a finished or saleable product which
 
 4           is to be sold and not otherwise used by the producer or
 
 5           cooperative association, including specifically
 
 6           materials or commodities expended as essential to the
 
 7           planting, growth, nurturing, and production of
 
 8           commodities which are sold by the producer or by the
 
 9           cooperative association;
 
10      (4)  Sales to a licensed contractor, of material or
 
11           commodities which are to be incorporated by the
 
12           contractor into the finished work or project required
 
13           by the contract and which will remain in such finished
 
14           work or project in such form as to be perceptible to
 
15           the senses;
 
16      (5)  Sales to a licensed producer, or to a cooperative
 
17           association described in section 237-23(a)(7) for sale
 
18           to such producer, or to a licensed person operating a
 
19           feed lot, of poultry or animal feed, hatching eggs,
 
20           semen, replacement stock, breeding services for the
 
21           purpose of raising or producing animal or poultry
 
22           products for disposition as described in section 237-5
 
23           or to be incorporated in a manufactured product as
 

 
Page 3                                         1306        
                                     H.B. NO.           
                                                        
                                                        

 
 1           described in paragraph (2) or for the purpose of
 
 2           breeding, hatching, milking, or egg laying other than
 
 3           for the customer's own consumption of the meat,
 
 4           poultry, eggs, or milk so produced; provided that in
 
 5           the case of a feed lot operator, only the segregated
 
 6           cost of the feed furnished by the feed lot operator as
 
 7           part of the feed lot operator's service to a licensed
 
 8           producer of poultry or animals to be butchered or to a
 
 9           cooperative association described in section
 
10           237-23(a)(7) of such licensed producers shall be deemed
 
11           to be a sale at wholesale; and provided further that
 
12           any amount derived from the furnishing of feed lot
 
13           services, other than the segregated cost of feed, shall
 
14           be deemed taxable at the service business rate.  This
 
15           paragraph shall not apply to the sale of feed for
 
16           poultry or animals to be used for hauling,
 
17           transportation, or sports purposes;
 
18      (6)  Sales to a licensed producer, or to a cooperative
 
19           association described in section 237-23(a)(7) for sale
 
20           to the producer, of seed for producing agricultural
 
21           products, or bait for catching fish (including the
 
22           catching of bait for catching fish), which agricultural
 
23           products or fish are to be disposed of as described in
 

 
Page 4                                         1306        
                                     H.B. NO.           
                                                        
                                                        

 
 1           section 237-5 or to be incorporated in a manufactured
 
 2           product as described in paragraph (2);
 
 3      (7)  Sales to a licensed producer, or to a cooperative
 
 4           association described in section 237-23(a)(7) for sale
 
 5           to such producer; of polypropylene shade cloth; of
 
 6           polyfilm; of polyethylene film; of cartons and such
 
 7           other containers, wrappers, and sacks, and binders to
 
 8           be used for packaging eggs, vegetables, fruits, and
 
 9           other agricultural products; of seedlings and cuttings
 
10           for producing nursery plants; or of chick containers;
 
11           which cartons and such other containers, wrappers, and
 
12           sacks, binders, seedlings, cuttings, and containers are
 
13           to be used as described in section 237-5, or to be
 
14           incorporated in a manufactured product as described in
 
15           paragraph (2);
 
16      (8)  Sales of tangible personal property to a licensed
 
17           person engaged in the service business; provided that
 
18           [(A) the property is not consumed or incidental to the
 
19           performance of the services; (B) there is a resale of
 
20           the article at the retail rate of four per cent; and
 
21           (C) the resale of the article is separately charged or
 
22           billed by the person rendering the services;]:
 
23           (A)  The property is sold upon the order or request of
 

 
Page 5                                         1306        
                                     H.B. NO.           
                                                        
                                                        

 
 1                the licensed person for the purpose of rendering a
 
 2                service in the course of the person's service
 
 3                business or calling; and
 
 4           (B)  The property becomes or is used as an integral
 
 5                part of the service rendered;
 
 6      (9)  Sales to a licensed leasing company of capital goods
 
 7           which have a depreciable life, are purchased by the
 
 8           leasing company for lease to its customers, and are
 
 9           thereafter leased as a service to others[.  Capital
 
10           goods means goods which have a depreciable life and
 
11           which are purchased by the leasing company for lease to
 
12           its customers.]; and
 
13     (10)  Sales of services to a licensed person engaging in a
 
14           business or calling whenever:
 
15           (A)  Either:
 
16                (i)  In the context of a service-to-service
 
17                     transaction, a service is rendered upon the
 
18                     order or request of a licensed person for the
 
19                     purpose of rendering another service in the
 
20                     course of the seller's service business or
 
21                     calling; or
 
22               (ii)  In the context of a service-to-goods
 
23                     transaction, a service is rendered upon the
 

 
Page 6                                         1306        
                                     H.B. NO.           
                                                        
                                                        

 
 1                     order or request of a licensed person for the
 
 2                     purpose of manufacturing, producing,
 
 3                     preparing, or acquiring tangible personal
 
 4                     property to be sold; and
 
 5           (B)  The benefit of the service passes to the customer
 
 6                of the licensed person as an integral part of the
 
 7                other service or property to be sold.
 
 8      (b)  If the use tax law is finally held by a court of
 
 9 competent jurisdiction to be unconstitutional or invalid insofar
 
10 as it purports to tax the use or consumption of tangible personal
 
11 property imported into the State in interstate or foreign
 
12 commerce or both, wholesalers and jobbers shall be taxed
 
13 thereafter under this chapter in accordance with the following
 
14 definition (which shall supersede the preceding paragraph
 
15 otherwise defining "wholesaler" or "jobber"):  "Wholesaler" or
 
16 "jobber" means a person, or a definitely organized division
 
17 thereof, definitely organized to render and rendering a general
 
18 distribution service which buys and maintains at the person's
 
19 place of business a stock or lines of merchandise which the
 
20 person distributes; and which, through salespersons, advertising,
 
21 or sales promotion devices, sells to licensed retailers, to
 
22 institutional or licensed commercial or industrial users, in
 
23 wholesale quantities and at wholesale rates.  A corporation
 

 
Page 7                                         1306        
                                     H.B. NO.           
                                                        
                                                        

 
 1 deemed not to be carrying on a trade or business in this State
 
 2 under section 235-6 shall nevertheless be deemed to be a
 
 3 wholesaler and shall be subject to the tax imposed by this
 
 4 chapter."
 
 5      SECTION 2.  Section 237-7, Hawaii Revised Statutes, is
 
 6 amended to read as follows:
 
 7      "237-7 "Service business or calling", defined."Service
 
 8 business or calling" includes all activities engaged in for other
 
 9 persons for a consideration which involve the rendering of a
 
10 service, including professional services and transient
 
11 accommodations services, as distinguished from the sale of
 
12 tangible property or the production and sale of tangible
 
13 property.  "Service business or calling" does not include the
 
14 services rendered by an employee to the employee's employer."
 
15      SECTION 3.  Section 237-13, Hawaii Revised Statutes, is
 
16 amended to read as follows:
 
17      "237-13  Imposition of tax.  There is hereby levied and
 
18 shall be assessed and collected annually privilege taxes against
 
19 persons on account of their business and other activities in the
 
20 State measured by the application of rates against values of
 
21 products, gross proceeds of sales, or gross income, whichever is
 
22 specified, as follows:
 
23      (1)  Tax on manufacturers.
 

 
Page 8                                         1306        
                                     H.B. NO.           
                                                        
                                                        

 
 1           (A)  Upon every person engaging or continuing within
 
 2                the State in the business of manufacturing,
 
 3                including compounding, canning, preserving,
 
 4                packing, printing, publishing, milling,
 
 5                processing, refining, or preparing for sale,
 
 6                profit, or commercial use, either directly or
 
 7                through the activity of others, in whole or in
 
 8                part, any article or articles, substance or
 
 9                substances, commodity or commodities, the amount
 
10                of the tax to be equal to the value of the
 
11                articles, substances, or commodities,
 
12                manufactured, compounded, canned, preserved,
 
13                packed, printed, milled, processed, refined, or
 
14                prepared, for sale, as shown by the gross proceeds
 
15                derived from the sale thereof by the manufacturer
 
16                or person compounding, preparing, or printing
 
17                them, multiplied by one-half of one per cent.
 
18           (B)  The measure of the tax on manufacturers is the
 
19                value of the entire product for sale, regardless
 
20                of the place of sale or the fact that deliveries
 
21                may be made to points outside the State.
 
22           (C)  If any person liable for the tax on manufacturers
 
23                ships or transports the person's product, or any
 

 
Page 9                                         1306        
                                     H.B. NO.           
                                                        
                                                        

 
 1                part thereof, out of the State, whether in a
 
 2                finished or unfinished condition, or sells the
 
 3                same for delivery outside of the State (for
 
 4                example, consigned to a mainland purchaser via
 
 5                common carrier f.o.b. Honolulu), the value of the
 
 6                products in the condition or form in which they
 
 7                exist immediately before entering interstate or
 
 8                foreign commerce, determined as hereinafter
 
 9                provided, shall be the basis for the assessment of
 
10                the tax imposed by this paragraph.  This tax shall
 
11                be due and payable as of the date of entry of the
 
12                products into interstate or foreign commerce,
 
13                whether the products are then sold or not.  The
 
14                department of taxation shall determine the basis
 
15                for assessment, as provided by this paragraph, as
 
16                follows:
 
17                (i)  If the products at the time of their entry
 
18                     into interstate or foreign commerce already
 
19                     have been sold, the gross proceeds of sale,
 
20                     less the transportation expenses, if any,
 
21                     incurred in realizing the gross proceeds for
 
22                     transportation from the time of entry of the
 
23                     products into interstate or foreign commerce,
 

 
Page 10                                        1306        
                                     H.B. NO.           
                                                        
                                                        

 
 1                     including insurance and storage in transit,
 
 2                     shall be the measure of the value of the
 
 3                     products.
 
 4               (ii)  If the products have not been sold at the
 
 5                     time of their entry into interstate or
 
 6                     foreign commerce, and in cases governed by
 
 7                     clause (i) in which the products are sold
 
 8                     under circumstances such that the gross
 
 9                     proceeds of sale are not indicative of the
 
10                     true value of the products, the value of the
 
11                     products constituting the basis for
 
12                     assessment shall correspond as nearly as
 
13                     possible to the gross proceeds of sales for
 
14                     delivery outside the State, adjusted as
 
15                     provided in clause (i), or if sufficient data
 
16                     are not available, sales in the State, of
 
17                     similar products of like quality and
 
18                     character and in similar quantities, made by
 
19                     the taxpayer (unless not indicative of the
 
20                     true value) or by others.  Sales outside the
 
21                     State, adjusted as provided in clause (i),
 
22                     may be considered when they constitute the
 
23                     best available data.  The department shall
 

 
Page 11                                        1306        
                                     H.B. NO.           
                                                        
                                                        

 
 1                     prescribe uniform and equitable rules for
 
 2                     ascertaining the values.
 
 3              (iii)  At the election of the taxpayer and with the
 
 4                     approval of the department, the taxpayer may
 
 5                     make the taxpayer's returns under clause (i)
 
 6                     even though the products have not been sold
 
 7                     at the time of their entry into interstate or
 
 8                     foreign commerce.
 
 9               (iv)  In all cases in which products leave the
 
10                     State in an unfinished condition, the basis
 
11                     for assessment shall be adjusted so as to
 
12                     deduct the portion of the value as is
 
13                     attributable to the finishing of the goods
 
14                     outside the State.
 
15      (2)  Tax on business of selling tangible personal property;
 
16           producing.
 
17           (A)  Upon every person engaging or continuing in the
 
18                business of selling any tangible personal property
 
19                whatsoever (not including, however, bonds or other
 
20                evidence of indebtedness, or stocks), there is
 
21                likewise hereby levied, and shall be assessed and
 
22                collected, a tax equivalent to four per cent of
 
23                the gross proceeds of sales of the business;
 

 
Page 12                                        1306        
                                     H.B. NO.           
                                                        
                                                        

 
 1                provided that insofar as certain retailing is
 
 2                taxed by section 237-16, the tax shall be that
 
 3                levied by section 237-16, and in the case of a
 
 4                wholesaler, the tax shall be equal to one-half of
 
 5                one per cent of the gross proceeds of sales of the
 
 6                business.  Upon every person engaging or
 
 7                continuing within this State in the business of a
 
 8                producer, the tax shall be equal to one-half of
 
 9                one per cent of the gross proceeds of sales of the
 
10                business, or the value of the products, for sale,
 
11                if sold for delivery outside the State or shipped
 
12                or transported out of the State, and the value of
 
13                the products shall be determined in the same
 
14                manner as the value of manufactured products
 
15                covered in the cases under paragraph (1)(C).
 
16           (B)  Gross proceeds of sales of tangible property in
 
17                interstate and foreign commerce shall constitute a
 
18                part of the measure of the tax imposed on persons
 
19                in the business of selling tangible personal
 
20                property, to the extent, under the conditions, and
 
21                in accordance with the provisions of the
 
22                Constitution of the United States and the Acts of
 
23                the Congress of the United States which may be now
 

 
Page 13                                        1306        
                                     H.B. NO.           
                                                        
                                                        

 
 1                in force or may be hereafter adopted, and whenever
 
 2                there occurs in the State an activity to which,
 
 3                under the Constitution and Acts of Congress, there
 
 4                may be attributed gross proceeds of sales, the
 
 5                gross proceeds shall be so attributed.
 
 6           (C)  No manufacturer or producer, engaged in such
 
 7                business in the State and selling the
 
 8                manufacturer's or producer's products for delivery
 
 9                outside of the State (for example, consigned to a
 
10                mainland purchaser via common carrier f.o.b.
 
11                Honolulu), shall be required to pay the tax
 
12                imposed in this chapter for the privilege of so
 
13                selling the products, and the value or gross
 
14                proceeds of sales of the products shall be
 
15                included only in determining the measure of the
 
16                tax imposed upon the manufacturer or producer.
 
17           (D)  When a manufacturer or producer, engaged in such
 
18                business in the State, also is engaged in selling
 
19                the manufacturer's or producer's products in the
 
20                State at wholesale, retail, or in any other
 
21                manner, the tax for the privilege of engaging in
 
22                the business of selling the products in the State
 
23                shall apply to the manufacturer or producer as
 

 
Page 14                                        1306        
                                     H.B. NO.           
                                                        
                                                        

 
 1                well as the tax for the privilege of manufacturing
 
 2                or producing in the State, and the manufacturer or
 
 3                producer shall make the returns of the gross
 
 4                proceeds of the wholesale, retail, or other sales
 
 5                required for the privilege of selling in the
 
 6                State, as well as making the returns of the value
 
 7                or gross proceeds of sales of the products
 
 8                required for the privilege of manufacturing or
 
 9                producing in the State.  The manufacturer or
 
10                producer shall pay the tax imposed in this chapter
 
11                for the privilege of selling its products in the
 
12                State, and the value or gross proceeds of sales of
 
13                the products, thus subjected to tax, may be
 
14                deducted insofar as duplicated as to the same
 
15                products by the measure of the tax upon the
 
16                manufacturer or producer for the privilege of
 
17                manufacturing or producing in the State; except
 
18                that no producer of agricultural products who
 
19                sells the products to a purchaser who will process
 
20                the products outside the State shall be required
 
21                to pay the tax imposed in this chapter for the
 
22                privilege of producing or selling those products.
 
23           (E)  A taxpayer selling to a federal cost-plus
 

 
Page 15                                        1306        
                                     H.B. NO.           
                                                        
                                                        

 
 1                contractor may make the election provided for by
 
 2                paragraph (3)(C), and in that case the tax shall
 
 3                be computed pursuant to the election,
 
 4                notwithstanding this paragraph or paragraph (1) to
 
 5                the contrary.
 
 6           (F)  The department, by rule, may provide that a seller
 
 7                may take from the purchaser of tangible personal
 
 8                property a certificate, in a form [as the]
 
 9                prescribed by the department [shall prescribe],
 
10                certifying that the sale is a sale at wholesale[.
 
11                If the certificate is so provided for by rule of
 
12                the department:]; provided that:
 
13                (i)  Any purchaser who furnishes a certificate
 
14                     shall be obligated to pay to the seller, upon
 
15                     demand, [if the sale in fact is not at
 
16                     wholesale,] the amount of the additional tax
 
17                     [which by reason thereof] that is imposed
 
18                     upon the seller[;] whenever the sale in fact
 
19                     is not at wholesale; and
 
20               (ii)  The absence of a certificate[, unless the
 
21                     sales of the business are exclusively at
 
22                     wholesale,] in itself shall give rise to the
 
23                     presumption that the sale is not at
 

 
Page 16                                        1306        
                                     H.B. NO.           
                                                        
                                                        

 
 1                     wholesale[.] unless the sales of the business
 
 2                     are exclusively at wholesale.
 
 3      (3)  Tax upon contractors.
 
 4           (A)  Upon every person engaging or continuing within
 
 5                the State in the business of contracting, the tax
 
 6                shall be equal to four per cent of the gross
 
 7                income of the business; provided that insofar as
 
 8                the business of contracting is taxed by section
 
 9                237-16, which relates to certain retailing, the
 
10                tax shall be that levied by section 237-16.
 
11           (B)  In computing the tax levied under this paragraph
 
12                or section 237-16, there shall be deducted from
 
13                the gross income of the taxpayer so much thereof
 
14                as has been included in the measure of the tax
 
15                levied under subparagraph (A) or section 237-16,
 
16                on:
 
17                (i)  Another taxpayer who is a contractor, as
 
18                     defined in section 237-6;
 
19               (ii)  A specialty contractor, duly licensed by the
 
20                     department of commerce and consumer affairs
 
21                     pursuant to section 444-9, in respect of the
 
22                     specialty contractor's business; or
 
23              (iii)  A specialty contractor who is not licensed by
 

 
Page 17                                        1306        
                                     H.B. NO.           
                                                        
                                                        

 
 1                     the department of commerce and consumer
 
 2                     affairs pursuant to section 444-9, but who
 
 3                     performs contracting activities on federal
 
 4                     military installations and nowhere else in
 
 5                     this State;
 
 6                but any person claiming a deduction under this
 
 7                paragraph shall be required to show in the
 
 8                person's return the name and general excise number
 
 9                of the person paying the tax on the amount
 
10                deducted by the person.
 
11           (C)  In computing the tax levied under this paragraph
 
12                against any federal cost-plus contractor, there
 
13                shall be excluded from the gross income of the
 
14                contractor so much thereof as fulfills the
 
15                following requirements:
 
16                (i)  The gross income exempted shall constitute
 
17                     reimbursement of costs incurred for
 
18                     materials, plant, or equipment purchased from
 
19                     a taxpayer licensed under this chapter, not
 
20                     exceeding the gross proceeds of sale of the
 
21                     taxpayer on account of the transaction; and
 
22               (ii)  The taxpayer making the sale shall have
 
23                     certified to the department that the taxpayer
 

 
Page 18                                        1306        
                                     H.B. NO.           
                                                        
                                                        

 
 1                     is taxable with respect to the gross proceeds
 
 2                     of the sale, and that the taxpayer elects to
 
 3                     have the tax on gross income computed the
 
 4                     same as upon a sale to the state government.
 
 5           (D)  A person who, as a business or as a part of a
 
 6                business in which the person is engaged, erects,
 
 7                constructs, or improves any building or structure,
 
 8                of any kind or description, or makes, constructs,
 
 9                or improves any road, street, sidewalk, sewer, or
 
10                water system, or other improvements on land held
 
11                by the person (whether held as a leasehold, fee
 
12                simple, or otherwise), upon the sale or other
 
13                disposition of the land or improvements, even if
 
14                the work was not done pursuant to a contract,
 
15                shall be liable to the same tax as if engaged in
 
16                the business of contracting, unless the person
 
17                shows that at the time the person was engaged in
 
18                making the improvements it was, and for the period
 
19                of at least one year after completion of the
 
20                building, structure, or other improvements, it
 
21                continued to be the person's purpose to hold and
 
22                not sell or otherwise dispose of the land or
 
23                improvements.  The tax in respect of the
 

 
Page 19                                        1306        
                                     H.B. NO.           
                                                        
                                                        

 
 1                improvements shall be measured by the amount of
 
 2                the proceeds of the sale or other disposition that
 
 3                is attributable to the erection, construction, or
 
 4                improvement of such building or structure, or the
 
 5                making, constructing, or improving of the road,
 
 6                street, sidewalk, sewer, or water system, or other
 
 7                improvements.  The measure of tax in respect of
 
 8                the improvements shall not exceed the amount which
 
 9                would have been taxable had the work been
 
10                performed by another, subject as in other cases to
 
11                the deductions allowed by subparagraph (B).  Upon
 
12                the election of the taxpayer, this paragraph may
 
13                be applied notwithstanding the improvements were
 
14                not made by the taxpayer, or were not made as a
 
15                business or as a part of a business, or were made
 
16                with the intention of holding the same.  However,
 
17                this paragraph shall not apply in respect of any
 
18                proceeds that constitute or are in the nature of
 
19                rent; all such gross income shall be taxable under
 
20                paragraph [(10);] (9); provided that insofar as
 
21                the business of renting or leasing real property
 
22                under a lease is taxed under section 237-16.5, the
 
23                tax shall be levied by section 237-16.5.
 

 
Page 20                                        1306        
                                     H.B. NO.           
                                                        
                                                        

 
 1      (4)  Tax upon theaters, amusements, radio broadcasting
 
 2           stations, etc.  Upon every person engaging or
 
 3           continuing within the State in the business of
 
 4           operating a theater, opera house, moving picture show,
 
 5           vaudeville, amusement park, dance hall, skating rink,
 
 6           radio broadcasting station, or any other place at which
 
 7           amusements are offered to the public, the tax shall be
 
 8           equal to four per cent of the gross income of the
 
 9           business.
 
10      (5)  Tax upon sales representatives, etc.  Upon every person
 
11           classified as a representative or purchasing agent
 
12           under section 237-1, engaging or continuing within the
 
13           State in the business of performing services for
 
14           another, other than as an employee, there is likewise
 
15           hereby levied and shall be assessed and collected a tax
 
16           equal to four per cent of the commissions and other
 
17           compensation attributable to the services so rendered
 
18           by the person.
 
19      (6)  Tax on service business.
 
20           (A)  Upon every person engaging or continuing within
 
21                the State in any service business or calling [not
 
22                otherwise specifically taxed under this chapter,]
 
23                there is likewise hereby levied and shall be
 

 
Page 21                                        1306        
                                     H.B. NO.           
                                                        
                                                        

 
 1                assessed and collected a tax equal to four per
 
 2                cent of the gross income of the business[;
 
 3                provided that where any person engaging or
 
 4                continuing within the State in any service
 
 5                business or calling renders those services upon
 
 6                the order of or at the request of another taxpayer
 
 7                who is engaged in the service business and who, in
 
 8                fact, acts as or acts in the nature of an
 
 9                intermediary between the person rendering those
 
10                services and the ultimate recipient of the
 
11                benefits of those services, so much of the gross
 
12                income as is received by the person rendering the
 
13                services shall be subjected to the tax at the rate
 
14                of one-half of one per cent and all of the gross
 
15                income received by the intermediary from the
 
16                principal shall be subjected to a tax at the rate
 
17                of four per cent; and provided that where], and in
 
18                the case of a wholesaler, the tax shall be equal
 
19                to one-half of one per cent of the gross income of
 
20                the business.
 
21           (B)  The department, by rule, may require that the
 
22                person rendering the service take from the
 
23                licensed person a certificate, in the form as
 

 
Page 22                                        1306        
                                     H.B. NO.           
                                                        
                                                        

 
 1                prescribed by the department, certifying that the
 
 2                sale is a sale at wholesale; provided that:
 
 3                (i)  Any licensed person who furnishes a
 
 4                     certificate shall be obligated to pay to the
 
 5                     person rendering the service whenever the
 
 6                     sale in fact is not a sale at wholesale; and
 
 7               (ii)  The absence of a certificate in itself shall
 
 8                     give rise to the presumption that the sale is
 
 9                     not a sale at wholesale unless the person
 
10                     rendering the sale is exclusively rendering
 
11                     service at wholesale.
 
12           (C)  Where any person is engaged in the business of
 
13                selling interstate or foreign common carrier
 
14                telecommunication services within and without the
 
15                State, the tax shall be imposed on that portion of
 
16                gross income received by a person from service
 
17                which is originated or terminated in this State
 
18                and is charged to a telephone number, customer, or
 
19                account in this State notwithstanding any other
 
20                state law (except for the exemption under section
 
21                237-23(a)(1)) to the contrary.  If, under the
 
22                Constitution and laws of the United States, the
 
23                entire gross income as determined under this
 

 
Page 23                                        1306        
                                     H.B. NO.           
                                                        
                                                        

 
 1                paragraph of a business selling interstate or
 
 2                foreign common carrier telecommunication services
 
 3                cannot be included in the measure of the tax, the
 
 4                gross income shall be apportioned as provided in
 
 5                section 237-21; provided that the apportionment
 
 6                factor and formula shall be the same for all
 
 7                persons providing those services in the State.
 
 8      (7)  Tax on insurance solicitors and agents.  Upon every
 
 9           person engaged as a licensed solicitor, general agent,
 
10           or subagent pursuant to chapter 431, there is hereby
 
11           levied and shall be assessed and collected a tax equal
 
12           to .15 per cent of the commissions due to that
 
13           activity.
 
14     [(8)  Professions.  Upon every person engaging or continuing
 
15           within the State in the practice of a profession,
 
16           including those expounding the religious doctrines of
 
17           any church, there is likewise hereby levied and shall
 
18           be assessed and collected a tax equal to four per cent
 
19           of the gross income on the practice or exposition.
 
20      (9)] (8)  Tax on receipts of sugar benefit payments.  Upon
 
21           the amounts received from the United States government
 
22           by any producer of sugar (or the producer's legal
 
23           representative or heirs), as defined under and by
 

 
Page 24                                        1306        
                                     H.B. NO.           
                                                        
                                                        

 
 1           virtue of the Sugar Act of 1948, as amended, or other
 
 2           Acts of the Congress of the United States relating
 
 3           thereto, there is hereby levied a tax of one-half of
 
 4           one per cent of the gross amount received, provided
 
 5           that the tax levied hereunder on any amount so received
 
 6           and actually disbursed to another by a producer in the
 
 7           form of a benefit payment shall be paid by the person
 
 8           or persons to whom the amount is actually disbursed,
 
 9           and the producer actually making a benefit payment to
 
10           another shall be entitled to claim on the producer's
 
11           return a deduction from the gross amount taxable
 
12           hereunder in the sum of the amount so disbursed.  The
 
13           amounts taxed under this paragraph shall not be taxable
 
14           under any other paragraph, subsection, or section of
 
15           this chapter.
 
16    [(10)] (9)  Tax on other business.  Upon every person engaging
 
17           or continuing within the State in any business, trade,
 
18           activity, occupation, or calling not included in the
 
19           preceding paragraphs or any other provisions of this
 
20           chapter, there is likewise hereby levied and shall be
 
21           assessed and collected, a tax equal to four per cent of
 
22           the gross income thereof.  In addition, the rate
 
23           prescribed by this paragraph shall apply to a business
 

 
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                                     H.B. NO.           
                                                        
                                                        

 
 1           taxable under one or more of the preceding paragraphs
 
 2           or other provisions of this chapter, as to any gross
 
 3           income thereof not taxed thereunder as gross income or
 
 4           gross proceeds of sales or by taxing an equivalent
 
 5           value of products, unless specifically exempted."
 
 6      SECTION 4.  Section 237-16, Hawaii Revised Statutes, is
 
 7 amended to read as follows:
 
 8      "237-16  Tax on certain retailing.(a)  This section
 
 9 relates to certain retailing in the State as follows:
 
10      (1)  This section relates to the sale of tangible personal
 
11           property, for consumption or use by the purchaser and
 
12           not for resale, the renting of tangible personal
 
13           property, and the rendering of services by one engaged
 
14           in a service business or calling, as defined, to a
 
15           person who is not purchasing the services for resale,
 
16           but does not relate to the sale or rental of tangible
 
17           personal property or the rendering of services to the
 
18           State, its political subdivisions, or agencies or
 
19           instrumentalities of the State or a political
 
20           subdivision, or to the United States or its agencies or
 
21           instrumentalities (other than national banks), or to a
 
22           corporation, organization, or other person designated
 
23           in section 237-23 who is not subject to the tax imposed
 

 
Page 26                                        1306        
                                     H.B. NO.           
                                                        
                                                        

 
 1           by this chapter, or to a person licensed under this
 
 2           chapter in connection with the person's business.
 
 3      (2)  This section relates to the business of a contractor,
 
 4           as defined, but does not relate to contracting with, or
 
 5           any gross income or proceeds of a subcontractor if the
 
 6           principal contract is with the State, its political
 
 7           subdivisions, or agencies or instrumentalities of the
 
 8           State or a political subdivision, or with the United
 
 9           States or its agencies or instrumentalities (other than
 
10           national banks), or with a person designated in section
 
11           237-23 who is not subject to the tax imposed by this
 
12           chapter, or with a person licensed under this chapter
 
13           in connection with the person's business.
 
14      (3)  This section relates to furnishing of transient
 
15           accommodations in a hotel, apartment hotel, or other
 
16           place in which lodgings are regularly furnished to
 
17           transients for a consideration which includes the
 
18           rendering of services.
 
19      (b)  There is hereby levied, and shall be assessed and
 
20 collected annually, a privilege tax against persons engaging or
 
21 continuing within the State in the retailing to which this
 
22 section relates, on account of such retailing activities, as set
 
23 forth in subsection (a), equal to four per cent of the gross
 

 
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                                     H.B. NO.           
                                                        
                                                        

 
 1 proceeds of sale or gross income received or derived from such
 
 2 retailing.  Persons on whom a tax is imposed by this section
 
 3 hereinafter are called "retailers".
 
 4      (c)  No retailer shall advertise or hold out to the public
 
 5 in any manner, directly or indirectly, that the tax imposed by
 
 6 this section is not considered as an element in the price to the
 
 7 consumer.  Any person violating this subsection shall be fined
 
 8 not more than $50 for each offense.
 
 9      (d)  This section shall not cause the tax upon a taxpayer,
 
10 with respect to any item of the taxpayer's gross income, to
 
11 exceed four per cent.
 
12      (e)  This section shall not apply to:
 
13      (1)  Sales of tangible personal property to a licensed
 
14           person engaged in a service business or calling as
 
15           defined in section 237-4(a)(8); nor
 
16      (2)  Sales of services to a licensed person engaged in a
 
17           business or calling as defined in section
 
18           237-4(a)(10)."
 
19      SECTION 5.  Section 238-2, Hawaii Revised Statutes, is
 
20 amended to read as follows:
 
21      "238-2 Imposition of tax; exemptions.  There is hereby
 
22 levied an excise tax on the use in this State of tangible
 
23 personal property which is imported, or purchased from an
 

 
Page 28                                        1306        
                                     H.B. NO.           
                                                        
                                                        

 
 1 unlicensed seller, for use in this State.  The tax imposed by
 
 2 this chapter shall accrue when the property is acquired by the
 
 3 importer or purchaser and becomes subject to the taxing
 
 4 jurisdiction of the State.  The rates of the tax hereby imposed
 
 5 and the exemptions thereof are as follows:
 
 6      (1)  If the importer or purchaser is licensed under chapter
 
 7           237 and is (A) a wholesaler or jobber importing or
 
 8           purchasing for purposes of resale, or (B) a
 
 9           manufacturer importing or purchasing material or
 
10           commodities which are to be incorporated by the
 
11           manufacturer into a finished or saleable product
 
12           (including the container or package in which the
 
13           product is contained) wherein it will remain in such
 
14           form as to be perceptible to the senses, and which
 
15           finished or saleable product is to be sold in such
 
16           manner as to result in a further tax on the activity of
 
17           the manufacturer as the manufacturer or as a
 
18           wholesaler, and not as a retailer, there shall be no
 
19           tax, provided that if the wholesaler, jobber, or
 
20           manufacturer is also engaged in business as a retailer
 
21           (so classed under chapter 237), paragraph (2) shall
 
22           apply to the wholesaler, jobber, or manufacturer, but
 
23           the director of taxation shall refund to the
 

 
Page 29                                        1306        
                                     H.B. NO.           
                                                        
                                                        

 
 1           wholesaler, jobber, or manufacturer, in the manner
 
 2           provided under section 231-23(c) such amount of tax as
 
 3           the wholesaler, jobber, or manufacturer shall, to the
 
 4           satisfaction of the director, establish to have been
 
 5           paid by the wholesaler, jobber, or manufacturer to the
 
 6           director with respect to property which has been used
 
 7           by the wholesaler, jobber, or manufacturer for the
 
 8           purposes stated in this paragraph.
 
 9      (2)  If the importer or purchaser is licensed under chapter
 
10           237 and is:
 
11           (A)  [a] A retailer or other person importing or
 
12                purchasing for purposes of resale, not exempted by
 
13                paragraph (1)[, or];
 
14           (B)  [a] A manufacturer importing or purchasing
 
15                material or commodities which are to be
 
16                incorporated by the manufacturer into a finished
 
17                or saleable product (including the container or
 
18                package in which the product is contained) wherein
 
19                it will remain in such form as to be perceptible
 
20                to the senses, and which finished or saleable
 
21                product is to be sold at retail in this State, in
 
22                such manner as to result in a further tax on the
 
23                activity of the manufacturer in selling such
 

 
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                                     H.B. NO.           
                                                        
                                                        

 
 1                products at retail[, or];
 
 2           (C)  [a] A contractor importing or purchasing material
 
 3                or commodities which are to be incorporated by the
 
 4                contractor into the finished work or project
 
 5                required by the contract and which will remain in
 
 6                such finished work or project in such form as to
 
 7                be perceptible to the senses[,]; or
 
 8           (D)  A person engaged in a service business or calling
 
 9                as defined in section 237-7, in which the import
 
10                or purchase of tangible personal property would
 
11                have qualified as a sale at wholesale as defined
 
12                in section 237-4(a)(8) had the person been subject
 
13                to the tax in chapter 237,
 
14           the tax shall be one-half of one per cent of the
 
15           purchase price of the property, if the purchase and
 
16           sale are consummated in Hawaii; or, if there is no
 
17           purchase price applicable thereto, or if the purchase
 
18           or sale is consummated outside of Hawaii, then one-half
 
19           of one per cent of the value of such property.
 
20      (3)  In all other cases, four per cent of the value of the
 
21           property."
 
22      SECTION 6.  Statutory material to be repealed is bracketed.
 
23 New statutory material is underscored.
 

 
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                                     H.B. NO.           
                                                        
                                                        

 
 1      SECTION 7.  This Act shall take effect July 1, 2000.
 
 2 
 
 3                           INTRODUCED BY:  _______________________
 
 4   
 
 5   _________________________               _______________________
 
 6   
 
 7   _________________________               _______________________
 
 8   
 
 9   _________________________               _______________________
 
10   
 
11   _________________________               _______________________
 
12   
 
13   _________________________               _______________________
 
14   
 
15                                           _______________________