REPORT TITLE:
Retail Sales Tax


DESCRIPTION:
Creates a retail sales tax, exempts food and medicine.  Repeals
general excise tax.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        
HOUSE OF REPRESENTATIVES                H.B. NO.1734       
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO A SALES TAX.



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

 1      SECTION 1.  The general excise tax levied on persons
 
 2 engaging in business is a broad-based privilege tax that has
 
 3 allowed the State to retain a relatively low rate and ensure
 
 4 adequate tax revenue.  The problem with such a broad base tax is
 
 5 the ultimate consumer may end up paying general excise tax that
 
 6 has been passed on to the consumer more than once on the same
 
 7 purchase.  This pyramiding of taxes can be solved by establishing
 
 8 a retail sales tax instead of a privilege tax.  To ensure a
 
 9 relatively revenue neutral transition the sales tax rate would
 
10 have to be higher than the general excise tax rate because the
 
11 tax base is narrowed substantially.  
 
12      The department of taxation has reported a retailing tax base
 
13 of approximately $15,300,000,000 for fiscal year ending June 30,
 
14 1998, producing $610,000,000 in general excise tax revenues of a
 
15 total of $1,300,000,000 in general excise tax revenues for fiscal
 
16 year 1997-1998.  The general excise tax figures from fiscal year
 
17 1996-1997 to fiscal year 1997-1998 showed decreases in every
 
18 area.  To make the transition from a general excise tax to a
 
19 sales tax revenue neutral the rate must be adjusted to ensure
 

 
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                                     H.B. NO.1734       
                                                        
                                                        

 
 1 that adequate funds are realized by the state general fund. It is
 
 2 estimated that setting a retail sales tax rate of eight and
 
 3 three-quarters would allow the State to make the transition from
 
 4 a broad-based privilege tax to a strict retail sales tax.
 
 5      The purpose of this Act is establish retail sales tax and
 
 6 repeal the general excise tax.
 
 7      SECTION 2.  The Hawaii Revised Statutes is amended by adding
 
 8 a new chapter to be appropriately designated and to read as
 
 9 follows: 
 
10                             "CHAPTER
 
11                         RETAIL SALES TAX
 
12         -1  Definitions.  When used in this chapter, unless
 
13 otherwise required by the context, the definitions contained in
 
14 this section shall govern.
 
15      "Department" means the department of taxation.
 
16      "Director" means the director of taxation.
 
17      "Gross receipts" means the total sales price received by
 
18 vendors as a consideration for retails sales.
 
19       "Penalty" or "penalties", when used in connection with the
 
20 additions to the tax imposed for delinquency in payment, includes
 
21 interest as well.
 
22      "Person" or "company" includes every individual,
 
23 partnership, society, unincorporated association, joint venture,
 

 
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                                     H.B. NO.1734       
                                                        
                                                        

 
 1 group, hui, joint stock company, corporation, trustee, personal
 
 2 representative, trust estate, decedent's estate, trust, trustee
 
 3 in bankruptcy, or other entity, whether such persons are doing
 
 4 business for themselves or in a fiduciary capacity, and whether
 
 5 the individuals are residents or nonresidents of the State, and
 
 6 whether the corporation or other association is created or
 
 7 organized under the laws of the State or of another jurisdiction.
 
 8 Any person who has in the person's possession, for sale in the
 
 9 State, the property of a nonresident owner, other than as an
 
10 employee of such owner, shall be deemed the seller of the
 
11 property, when sold.
 
12      "Purchaser" means a person who purchases tangible personal
 
13 property from the retail sale of which are taxable under this
 
14 chapter and includes a buyer, vendee, lessee, licensee, or
 
15 grantee.
 
16      "Sale" or "sales" includes the transfer of title or
 
17 possession, or both, exchange, barter, lease, rental, conditional
 
18 or otherwise, of tangible personal property for a consideration,
 
19 in any manner, or by any means whatsoever.
 
20      "Sale at retail" or "retail sale" means a sale of tangible
 
21 personal property for any purpose other than resale in the
 
22 regular course of business.
 
23      "Sales price" means the total amount paid by a purchaser to
 

 
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                                     H.B. NO.1734       
                                                        
                                                        

 
 1 a vendor as consideration for a retail sale, valued in money or
 
 2 otherwise.
 
 3      "Taxpayer" means any person liable for any tax hereunder.
 
 4      "Vendor" means a retailer or other person selling tangible
 
 5 personal property of a kind the gross receipts from the retail
 
 6 sale of which are required to be included in the measure of the
 
 7 tax imposed by this chapter.
 
 8         -2 Permit for retail sales.  (a)  Before any person can
 
 9 make sales at retail within the State the person shall obtain a
 
10 retail sales permit from the department, upon a one time payment
 
11 of the sum of twenty dollars.  The permit shall be issued on the
 
12 condition that the person shall collect and pay the taxes
 
13 accruing to the State under this chapter.  The permit shall not
 
14 be transferable and shall be valid only for the person in whose
 
15 name it is issued.  The permit may be inspected and examined, and
 
16 shall at all times be conspicuously displayed at the place for
 
17 which it is issued.
 
18      (b)  Permits and applications therefor shall be in the form
 
19 as the department shall prescribe.  The permit provided for by
 
20 this section shall be effective until canceled in writing.  Any
 
21 application for the reissuance of a previously canceled permit
 
22 identification number shall be regarded as a new permit
 
23 application and subject to the payment of the one-time permit fee
 

 
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                                     H.B. NO.1734       
                                                        
                                                        

 
 1 of twenty dollars.  The director may revoke or cancel any permit
 
 2 issued under this chapter for cause as provided by rules adopted
 
 3 pursuant to chapter 91.
 
 4      (c)  If the permit fee is paid, the department shall not
 
 5 refuse to issue a license or revoke or cancel a permit for the
 
 6 exercise of a privilege protected by the First Amendment of the
 
 7 Constitution of the United States, or for the carrying on of
 
 8 interstate or foreign commerce, or for any privilege the exercise
 
 9 of which, under the Constitution and laws of the United States,
 
10 cannot be restrained on account of nonpayment of taxes, nor shall
 
11 section -18 be invoked to restrain the exercise of that
 
12 privilege, or the carrying on of commerce.
 
13         -3  Imposition and rate of tax.(a)  There is hereby
 
14 imposed a retail sales tax on every sale at retail within the
 
15 State of tangible personal property.  The rate of tax shall be
 
16 eight and three-quarters per cent of the sales price.
 
17      (b)  The tax hereby imposed shall be paid by the purchaser
 
18 to the vendor, and each vendor shall add to the sales price and
 
19 shall collect from the purchaser the full amount of the tax
 
20 imposed by this chapter, or an amount as nearly as possible or
 
21 practical.  The tax shall be a debt from the purchaser to the
 
22 vendor, when so added to the sales price, and shall be
 
23 recoverable by law.
 

 
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 1      (c)  Upon each sale of tangible personal property subject to
 
 2 the provisions of this chapter, the amount of tax collected by 
 
 3 the vendor from the purchaser shall be stated and charged
 
 4 separately from the sales price on any record made at the time of
 
 5 the sale, or on any evidence of sale issued; provided the retail
 
 6 sales tax of liquor and cigarette and tobacco do not need to be
 
 7 stated separately.
 
 8         -4 Sales exempt from tax.  (a)  This chapter shall not
 
 9 apply to the sales of food products for home consumption.
 
10      (1)  "Food products" includes:
 
11           (A)  Cereals and cereal products, flour and flour
 
12                products, milk and milk products, including ice
 
13                cream, oleomargarine, meat and meat products, fish
 
14                and fish products, eggs and egg products,
 
15                vegetables and vegetable products, fruit and fruit
 
16                products, soft drinks, herbs, spices, salt, sugar
 
17                and sugar products, candy, and confectionery;
 
18           (B)  Coffee and coffee substitutes, tea, cocoa and
 
19                cocoa products; and
 
20           (C)  Ice when used for household consumption.
 
21      (2)  "Food products" does not include:
 
22           (A)  Alcoholic beverages subject to chapter 244D;
 
23           (B)  Meals consisting of any of the items in paragraph
 

 
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                                     H.B. NO.1734       
                                                        
                                                        

 
 1                (1) for consumption on or off the premises where
 
 2                sold.
 
 3      (3)  For the purposes of this chapter:
 
 4           (A)  "Meals" means any food or beverage, or both,
 
 5                prepared for human consumption and provided by a
 
 6                restaurant, where the food or beverage is intended
 
 7                for consumption on or off the restaurant premises,
 
 8                and includes food or beverages sold on a "take
 
 9                out" or "to-go" basis, whether or not they are
 
10                wrapped or packaged and wether or not they are
 
11                taken from the premises of the restaurant.
 
12           (B)  "Restaurant" means any eating establishment where
 
13                food products, or beverages are provided and for
 
14                which a charge is made, including a cafe, lunch
 
15                counter, private or social club, cocktail lounge,
 
16                hotel dining room, catering business, tavern,
 
17                diner, snack bar, dining room, vending machine,
 
18                and any other place or establishment where food or
 
19                beverages are provided whether stationary or
 
20                mobile, or temporary or permanent.
 
21      (c)  This chapter shall not apply to sales of medicine,
 
22 insulin needles and insulin syringes on prescriptions of licensed
 
23 physicians and sales of insulin, oxygen, blood or blood plasma,
 

 
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                                     H.B. NO.1734       
                                                        
                                                        

 
 1 artificial devices individually designed and constructed solely
 
 2 for the use of a particular person as to become a brace support,
 
 3 support, supplement, correction or substitution for the bodily
 
 4 structure including the extremities of the individual, sales of
 
 5 artificial limbs, artificial eyes, hearing aids and other
 
 6 equipment worn as a correction or substitution for any
 
 7 functioning portion of the body, sales of artificial teeth by a
 
 8 dentist and the materials used by a dentist in dental treatment,
 
 9 sales of eyeglasses, when especially designed or prescribed by an
 
10 ophthalmologist, oculist, or optometrist for the personal use of
 
11 the owner or purchaser, sales of crutches and wheel chairs, the
 
12 rental, sales, and repairs of kidney dialysis machines, feeding
 
13 devices, suction machines, oxygen concentrators, oxygen
 
14 regulators, oxygen humidifiers, oxygen masks, life sustaining
 
15 resuscitators, incubators, heart pacemakers, canes, all types of
 
16 hospital beds for home use, tripod canes, breast prosthesis, and
 
17 patient lifts when prescribed by a licensed physician.
 
18         -5 Monthly, quarterly, or semiannual return,
 
19 computation of tax; payment.  (a)  The taxes levied hereunder
 
20 shall be payable in monthly installments on or before the last
 
21 day of the calendar month following the month in which they
 
22 accrue.  The taxpayer, on or before the last day of the calendar
 
23 month following the month in which the taxes accrue, shall make
 

 
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                                     H.B. NO.1734       
                                                        
                                                        

 
 1 out and sign a return of the installment of tax for which the
 
 2 taxpayer is liable for the preceding month and transmit the same,
 
 3 together with a remittance, in the form required by section
 
 4    -6, for the amount of the tax, to the office of the department
 
 5 in the appropriate district hereinafter designated.
 
 6      (b)  Notwithstanding subsection (a), the director, for good
 
 7 cause, may permit a taxpayer to file the taxpayer's return
 
 8 required under this section and make payments thereon:
 
 9      (1)  On a quarterly basis during the calendar or fiscal
 
10           year, the return and payment to be made on or before
 
11           the last day of the calendar month after the close of
 
12           each quarter as follows: for calendar year taxpayers,
 
13           on or before April 30, July 31, October 31, and January
 
14           31 or, for fiscal year taxpayers, on or before the last
 
15           day of the fourth month, seventh month, and tenth month
 
16           from the beginning of the fiscal year and on or before
 
17           the last day of the month following the close of the
 
18           fiscal year; provided that the director is satisfied
 
19           that the grant of the permit will not unduly jeopardize
 
20           the collection of the taxes due thereon and the
 
21           taxpayer's total tax liability for the calendar or
 
22           fiscal year under this chapter will not exceed $2,000;
 
23           or
 

 
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                                     H.B. NO.1734       
                                                        
                                                        

 
 1      (2)  On a semiannual basis during the calendar or fiscal
 
 2           year, the return and payment to be made on or before
 
 3           the last day of the calendar month after the close of
 
 4           each six-month period, as follows: for calendar year
 
 5           taxpayers, on July 31 and January 31 or, for fiscal
 
 6           year taxpayers, on or before the last day of the
 
 7           seventh month following the beginning of the fiscal
 
 8           year and on or before the last day of the month
 
 9           following the close of the fiscal year; provided that
 
10           the director is satisfied that the grant of the permit
 
11           will not unduly jeopardize the collection of the taxes
 
12           due thereon and the taxpayer's total tax liability for
 
13           the calendar or fiscal year under this chapter will not
 
14           exceed $1,000.  The director, for good cause, may
 
15           permit a taxpayer to make monthly payments based on the
 
16           taxpayer's estimated quarterly or semiannual liability,
 
17           provided the taxpayer files a reconciliation return at
 
18           the end of each quarter or at the end of each six-month
 
19           period during the calendar or fiscal year, as provided
 
20           in this section.
 
21      (c)  If a taxpayer filing the taxpayer's return on a
 
22 quarterly or semiannual basis, as provided in this section,
 
23 becomes delinquent in either the filing of the taxpayer's return
 

 
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                                     H.B. NO.1734       
                                                        
                                                        

 
 1 or the payment of the taxes due thereon, or if the liability of a
 
 2 taxpayer, who possesses a permit to file the taxpayer's return
 
 3 and to make payments on a semiannual basis exceeds $1,000 in
 
 4 general excise taxes during the calendar year or exceeds $2,000
 
 5 in general excise taxes during the calendar year if making
 
 6 payments on a quarterly basis, or if the director determines that
 
 7 any  quarterly or semiannual filing of return would unduly
 
 8 jeopardize the proper administration of this chapter, including
 
 9 the assessment or collection of the general excise tax, the
 
10 director may, at any time, revoke a taxpayer's permit, in which
 
11 case the taxpayer will then be required to file the taxpayer's
 
12 return and make payments thereon as herein provided in subsection
 
13 (a).
 
14      (d)  The director may adopt rules to carry out the purposes
 
15 of this section.
 
16      (e)  Section 232-2 does not apply to a monthly return.
 
17         -6 Remittances.  All remittances of taxes imposed by
 
18 this chapter shall be made by money, bank draft, check, cashier's
 
19 check, money order, or certificate of deposit to the office of
 
20 the department to which the return was transmitted. The
 
21 department shall issue its receipts therefor to the taxpayer and
 
22 shall pay the moneys into the state treasury as a state
 
23 realization, to be kept and accounted for as provided by law
 

 
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                                     H.B. NO.1734       
                                                        
                                                        

 
 1 provided that the sum from all retail sales tax revenues realized
 
 2 by the State that represents the difference between $90,000,000
 
 3 and the proceeds from the sale of any general obligation bonds
 
 4 authorized for that fiscal year for the purposes of the state
 
 5 educational facilities improvement special fund shall be
 
 6 deposited in the state treasury in each fiscal year to the credit
 
 7 of the state educational facilities improvement special fund;
 
 8 provided further that a sum, not to exceed $5,000,000, from all
 
 9 retail sales tax revenues realized by the State shall be
 
10 deposited in the state treasury in each fiscal year to the credit
 
11 of the compound interest bond reserve fund.
 
12         -7 Penalties.  Penalties and interest shall be added to
 
13 and become a part of the tax, when and as provided by section
 
14 231-39.
 
15         -8 Annual return; payment of tax.  On or before the
 
16 twentieth day of the fourth month following the close of the
 
17 taxable year, each taxpayer shall make a return showing the gross
 
18 receipts of sales and compute the amount of tax chargeable
 
19 against the taxpayer in accordance with this chapter and deduct
 
20 the amount of monthly payments,and transmit with the taxpayer's
 
21 report a remittance in the form required by section    -6
 
22 covering the residue of the tax chargeable against the taxpayer
 
23 to the district office of the department hereinafter designated.
 

 
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                                     H.B. NO.1734       
                                                        
                                                        

 
 1 The return shall be signed by the taxpayer, if made by an
 
 2 individual, or by the president, vice-president, secretary, or
 
 3 treasurer of a corporation, if made on behalf of a corporation.
 
 4 If made on behalf of a partnership, firm, society, unincorporated
 
 5 association, group, hui, joint venture, joint stock company,
 
 6 corporation, trust estate, decedent's estate, trust, or other
 
 7 entity, any individual delegated by the entity shall sign the
 
 8 same on behalf of the taxpayer.  If for any reason it is not
 
 9 practicable for the individual taxpayer to sign the return, it
 
10 may be done by any duly authorized agent.  The department, for
 
11 good cause shown, may extend the time for making the return on
 
12 the application of any taxpayer and grant such reasonable
 
13 additional time within which to make the same as may, by it, be
 
14 deemed advisable.
 
15      Section 232-2 applies to the annual return, but not to a
 
16 monthly return.
 
17         -9 Filing of returns; disclosure of returns unlawful;
 
18 penalty; destruction of returns.  (a)  All monthly and annual
 
19 returns shall be transmitted to the office of the taxation
 
20 district in which the privilege upon which the tax accrued is
 
21 exercised.  Where the privilege is exercised in more than one
 
22 taxation district the returns shall be transmitted to the office
 
23 of the first district.
 

 
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                                     H.B. NO.1734       
                                                        
                                                        

 
 1      (b)  All tax returns and return information required to be
 
 2 filed under this chapter, and the report of any investigation of
 
 3 the return or of the subject matter of the return, shall be
 
 4 confidential.  It shall be unlawful for any person or any officer
 
 5 or employee of the State too intentionally make known information
 
 6 imparted by any tax return or return information filed pursuant
 
 7 to this chapter, or any report of any investigation of the return
 
 8 or of the subject matter of the return, or to wilfully permit any
 
 9 return, return information, or report made, or any copy thereof,
 
10 to be seen or examined by any person; provided that for tax
 
11 purposes only the taxpayer, the taxpayer's authorized agent, or
 
12 persons with a material interest in the return, return
 
13 information, or report may examine them.  Unless otherwise
 
14 provided by law, persons with a material interest in the return,
 
15 return information, or report shall include:
 
16      (1)  Trustees;
 
17      (2)  Partners;
 
18      (3)  Persons named in a board resolution or a one per cent
 
19           shareholder in case of a corporate return;
 
20      (4)  The person authorized to act for a corporation in
 
21           dissolution;
 
22      (5)  The shareholder of an S corporation;
 
23      (6)  The personal representative, trustee, heir, or
 

 
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                                     H.B. NO.1734       
                                                        
                                                        

 
 1           beneficiary of an estate or trust in case of the
 
 2           estate's or decedent's return;
 
 3      (7)  The committee, trustee, or guardian of any person in
 
 4           paragraphs (1) to (6) who is incompetent;
 
 5      (8)  The trustee in bankruptcy or receiver, and the
 
 6           attorney-in-fact of any person in paragraphs (1) to
 
 7           (7);
 
 8      (9)  Persons duly authorized by the State in connection with
 
 9           their official duties;
 
10     (10)  Any duly accredited tax official of the United States
 
11           or of any state or territory;
 
12     (11)  The Multistate Tax Commission or its be a authorized
 
13           representative; and
 
14     (12)  Members of a limited liability company.  Any violation
 
15           of this subsection shall be a misdemeanor.
 
16      (c)  The department may destroy the monthly returns filed
 
17 pursuant to section    -5, or any of them, upon the expiration of
 
18 three years after the end of the calendar year in which the taxes
 
19 so returned accrued.
 
20         -10  Consolidated reports; interrelated business.  When
 
21 any taxpayer is engaged in two or more forms of business activity
 
22 taxable under this chapter which are interrelated, or which are
 
23 of like character, the taxpayer shall file a consolidated return
 

 
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                                     H.B. NO.1734       
                                                        
                                                        

 
 1 covering all business activities, which are interrelated or of
 
 2 like character.
 
 3         -11  Erroneous returns; disallowance of exemption;
 
 4 payment.  If any return made is erroneous, or is so deficient as
 
 5 not to disclose the full tax liability, or if the taxpayer, in
 
 6 the taxpayer's return, shall disclaim liability for the tax on
 
 7 any gross receipts of sales liable to the tax, or if the taxpayer
 
 8 shall make application for an exemption under section -4 to which
 
 9 the taxpayer is not entitled, the department shall correct the
 
10 error or assess the proper amount of taxes. if the  recomputation
 
11 results in an additional tax liability, or if the department
 
12 proposes to assess any gross receipts of sales by reason of the
 
13 disallowance of an exemption claimed in the return or for which
 
14 application has been filed, the department shall first give
 
15 notice to the taxpayer of the proposed assessment, and the
 
16 taxpayer shall then have an opportunity within thirty days to
 
17 respond to the department.  After the expiration of thirty days
 
18 from the notification, the department shall assess the gross
 
19 receipts of retail sales of the taxpayer or any portion thereof
 
20 which the department believes has not been assessed, and shall
 
21 give notice to the taxpayer of the amount of the tax, and the
 
22 amount thereof shall be paid within twenty days after the date
 
23 the notice was mailed, properly addressed to the taxpayer at the
 

 
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                                     H.B. NO.1734       
                                                        
                                                        

 
 1 taxpayer's last known address or place of business.
 
 2      No preliminary notice shall be necessary where the amount of
 
 3 the tax is calculated by the department from gross receipts of
 
 4 retail sales returned by the taxpayer as subject to the tax; in
 
 5 such case the tax shall be due and payable on the tenth day after
 
 6 the date the statement was mailed.  In a case of disallowance of
 
 7 an exemption the department, before making an assessment, may
 
 8 require the applicant, by demand made upon the applicant by mail
 
 9 or delivery thereof to the address shown in the application, to
 
10 file information returns as to the applicant's gross receipts of
 
11 retail sales within a reasonable time as the department may
 
12 allow, and in the event of failure, neglect, or refusal to comply
 
13 with the demand, the department shall make an assessment under
 
14 section -13, in lieu of this section.
 
15         -12  Refunds and credits.  If the amount already paid
 
16 exceeds that which should have been paid on the basis of the tax
 
17 recomputed as provided in section -11, the excess paid shall be
 
18 immediately refunded to the taxpayer in the manner provided in
 
19 section 231-23(c).  The taxpayer, at the taxpayer's election, may
 
20 apply an overpayment credit to taxes subsequently accruing
 
21 hereunder.  All refunds and the details thereof, including the
 
22 names of the persons receiving the refund and the amount refunded
 
23 shall be accessible for the inspection of the public in the
 

 
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                                     H.B. NO.1734       
                                                        
                                                        

 
 1 office of the department in the taxation district in which the
 
 2 person receiving the refund made the person's returns.
 
 3      No recourse may be had except under section 40-35 or by
 
 4 appeal for refunds of taxes paid pursuant to an assessment by the
 
 5 director of taxation; provided that if the assessment by the
 
 6 director shall contain clerical errors, transposition of figures,
 
 7 typographical errors, and errors in calculation or if there shall
 
 8 be an illegal or erroneous assessment, the usual refunds
 
 9 procedures shall apply.  No refund or overpayment credit may be
 
10 had under this section in any event unless the original payment
 
11 of the tax was due to the law having been interpreted or applied
 
12 in respect of the taxpayer concerned differently than in respect
 
13 of taxpayers generally.  As to all tax payment for which a refund
 
14 for credit is not authorized by this section (including without
 
15 prejudice to the generality of the foregoing cases of
 
16 unconstitutionality) the remedies provided by appeal or under
 
17 section 40-35 are exclusive.
 
18         -13  Failure to make return.  If any person fails,
 
19 neglects, or refuses to make a return,the department may proceed
 
20 as it deems best to obtain information on which to base the
 
21 assessment of the tax.  After procuring the information the
 
22 department shall proceed to assess the tax as provided in section
 
23    -11.  The assessment shall be presumed to be correct until and
 

 
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                                     H.B. NO.1734       
                                                        
                                                        

 
 1 unless, upon an appeal duly taken as provided in this chapter,
 
 2 the contrary shall be clearly proved by the person assessed, and
 
 3 the burden of proof upon appeal shall be upon the person assessed
 
 4 to disprove the correctness of the assessment.
 
 5         -14  Audits; procedure; penalties.  For the purpose of
 
 6 verification or audit of a return made by the taxpayer, or where
 
 7 there is reasonable ground to believe that any return made is so
 
 8 deficient as not to form the basis of a satisfactory assessment
 
 9 of the tax, or for the purpose of making an assessment where no
 
10 return has been made, the department or the Multistate Tax
 
11 Commission pursuant to chapter 255 or the authorized
 
12 representative thereof may examine all account books, bank books,
 
13 bank statements, records, vouchers, taxpayer's copies of federal
 
14 tax returns, and any and all other documents and evidences having
 
15 any relevancy to the determination of the gross receipts of
 
16 retail sales of any taxpayer as required to be returned under
 
17 this chapter and may summon or require the attendance of the
 
18 person by or for whom the return, if any, has been made or whose
 
19 tax is being assessed, and any employee of the person, and may
 
20 summon or require the attendance of any person having knowledge
 
21 in the premises, naming the time and place in the summons, and
 
22 may require the production of any books, statements, or other
 
23 evidences open to examination, and may take testimony in
 

 
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                                     H.B. NO.1734       
                                                        
                                                        

 
 1 reference to any such matter relevant to the gross receipts of
 
 2 retail sales of the taxpayer for the period under consideration,
 
 3 with power to require that the person so called and appearing
 
 4 shall be interrogated under oath and to administer  the oath.
 
 5      If the department determines that any gross receipts of
 
 6 retails sales liable to the tax have not been assessed the
 
 7 department may assess the same as provided in sections    -11 and
 
 8    -13.
 
 9      Any individual knowingly giving false testimony under oath
 
10 at any hearing before the department shall be guilty of perjury
 
11 and shall be punished as provided by law.
 
12      Any person refusing or neglecting to obey any summons issued
 
13 by the department, and any individual appearing and refusing to
 
14 testify under oath, shall be fined $50 dollars for the first
 
15 offense and one hundred dollars for each succeeding offense.
 
16         -15  Limitation period.  (a)  General rule.  The amount
 
17 of sales taxes imposed by this chapter shall be assessed or
 
18 levied within three years after the annual return was filed, or
 
19 within three years of the due date prescribed for the filing of
 
20 said return, whichever is later, and no proceeding in court
 
21 without assessment for the collection of any such taxes shall be
 
22 begun after the expiration of the period.
 
23      (b)  Exceptions.  In the case of a false or fraudulent
 

 
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                                     H.B. NO.1734       
                                                        
                                                        

 
 1 return with intent to evade tax, or of a failure to file the
 
 2 annual return, the tax may be assessed or levied at any time;
 
 3 however, in the case of a return claimed to be false or
 
 4 fraudulent with intent to evade tax, the determination as to the
 
 5 claim shall first be made by a judge of the circuit court as
 
 6 provided in section 235-111(c) which shall apply to the tax
 
 7 imposed by this chapter
 
 8      (c)  Extension by agreement.  Where, before the expiration
 
 9 of the period prescribed in subsection (a) or (d), both the
 
10 department and the taxpayer have consented in writing to the
 
11 assessment or levy of the tax after the date fixed by subsection
 
12 (a) or the credit or refund of the tax after the date fixed by
 
13 subsection (d), the tax may be assessed or levied or the
 
14 overpayment, if any, may be credited or refunded at any time
 
15 prior to the expiration of the period agreed upon.  The period so
 
16 agreed upon may be extended by subsequent agreements in writing
 
17 made before the expiration of the period previously agreed upon.
 
18      (d)  Refunds.  No credit or refund shall be allowed for any
 
19 tax imposed by this chapter, unless a claim for such credit or
 
20 refund shall be filed as follows:
 
21      (1)  If an annual return is timely filed, or is filed within
 
22           three years after the date prescribed for filing the
 
23           annual return, then the credit or refund shall be
 

 
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                                     H.B. NO.1734       
                                                        
                                                        

 
 1           claimed within three years after the date the annual
 
 2           return was filed or the date prescribed for filing the
 
 3           annual return, whichever is later.
 
 4      (2)  If an annual return is not filed, or is filed more than
 
 5           three years after the date prescribed for filing the
 
 6           annual return, a claim for credit or refund shall be
 
 7           filed within:
 
 8           (A)  Three years after the payment of the tax; or
 
 9           (B)  Three years after the date prescribed for the
 
10                filing of the annual return,
 
11           whichever is later.
 
12 Paragraphs (1) and (2) are mutually exclusive.  The limitation
 
13 shall not apply to a credit or refund pursuant to an appeal
 
14 provided for by section    -17.
 
15         -16  Records to be kept; examination.  Every taxpayer
 
16 shall keep in the English language within the State, and preserve
 
17 for a period of three years, suitable records of gross receipts
 
18 0f retail sales, and  other books, records of account, and
 
19 invoices as may be required by the department of taxation, and
 
20 all books, records, and invoices shall be open for examination at
 
21 any time by the department or the Multistate Tax Commission
 
22 pursuant to chapter 255, or the authorized representative
 
23 thereof.
 

 
Page 23                                                    
                                     H.B. NO.1734       
                                                        
                                                        

 
 1         -17  Appeals.  Any person aggrieved by any assessment of
 
 2 the tax for any month or any year may appeal from the assessment
 
 3 in the manner and within the time and in all other respects as
 
 4 provided in the case of income tax appeals by section 235-114,
 
 5 provided the tax so assessed shall have been paid.
 
 6         -18  Collection by suit; injunction.  The department may
 
 7 collect taxes due and unpaid under this chapter, together with
 
 8 all accrued penalties, by action in assumpsit or other
 
 9 appropriate proceedings in the circuit court of the judicial
 
10 circuit in which the retail sales have occurred.  After
 
11 delinquency shall have continued for sixty days, or if any person
 
12 lawfully required so to do under this chapter shall fail to apply
 
13 for and secure a permit as provided by this chapter for a period
 
14 of sixty days after the first date when the person was required
 
15 under this chapter to secure the same, the department may proceed
 
16 in the circuit court of the judicial circuit in which the retail
 
17 sales have occurred, to obtain an injunction restraining the
 
18 further retail sales until full payment shall have been made of
 
19 all taxes and penalties and interest due under this chapter, or
 
20 until a permit is secured, or both, as the circumstances of the
 
21 case may require.
 
22         -19  District judges; concurrent civil jurisdiction in
 
23 tax collections.  Except as otherwise specifically provided by
 

 
Page 24                                                    
                                     H.B. NO.1734       
                                                        
                                                        

 
 1 this chapter, the several district judges shall have concurrent
 
 2 jurisdiction with the circuit courts to hear and determine all
 
 3 civil actions at law in assumpsit for the collection and
 
 4 enforcement of collection and payment of all taxes assessed under
 
 5 this chapter, irrespective of the amount claimed.
 
 6         -20  Unfair competition; penalty.  No taxpayer shall
 
 7 advertise or hold out to the public in any manner, directly or
 
 8 indirectly, that the tax hereby imposed upon the taxpayer is not
 
 9 considered as an element in the price to the purchaser.  Any
 
10 person violating this section shall be fined not more than $50
 
11 for each offense."
 
12      SECTION 3.  Section 36-32, Hawaii Revised Statutes, is
 
13 amended by amending subsection (a) to read as follows:
 
14      "(a)  There is created in the treasury of the State the
 
15 state educational facilities improvement special fund, into which
 
16 shall be deposited a portion of all [general excise] retail sales
 
17 tax revenues collected by the department of taxation under
 
18 section [237-31.]    -6.  The special fund shall be used solely
 
19 to plan, design, acquire lands for and to construct public school
 
20 facilities and to provide equipment and technology infrastructure
 
21 to improve public schools and other facilities under the
 
22 jurisdiction of the department of education, except public
 
23 libraries.  In addition, activities of the department of
 

 
Page 25                                                    
                                     H.B. NO.1734       
                                                        
                                                        

 
 1 education intended to eliminate the gap between the facility
 
 2 needs of schools and available resources shall be eligible for
 
 3 funding from the special fund.  Expenditures from the special
 
 4 fund shall be limited to projects authorized by the legislature
 
 5 and shall be subject to sections 37-31, and 37-33 through 37-40.
 
 6 Appropriations or authorizations from the special fund shall be
 
 7 expended by the comptroller."
 
 8      SECTION 4.  Section 39-151, Hawaii Revised Statutes, is
 
 9 amended by amending subsection (a) to read as follows:
 
10      "(a)  There is hereby established the Hawaii compound
 
11 interest bond reserve fund, as a trust fund in the state treasury
 
12 for the benefit of the State, to be held and administered by the
 
13 department of budget and finance.  The director, from time to
 
14 time, may transfer a portion of [general excise] retail sales tax
 
15 revenues collected pursuant to section [237-31]    -6 to the
 
16 credit of the compound interest bond reserve fund, up to but not
 
17 in excess of $5,000,000 during any fiscal year.  Not fewer than
 
18 thirty days before the convening of each regular session of the
 
19 legislature, the director shall submit to the legislature a
 
20 report of all funds transferred to the credit of the compound
 
21 interest bond reserve fund."
 
22      SECTION 5.  Section 46-15.1, Hawaii Revised Statutes, is
 
23 amended by amending subsection (a) to read as follows:
 

 
Page 26                                                    
                                     H.B. NO.1734       
                                                        
                                                        

 
 1      "(a)  Any law to the contrary notwithstanding, any county
 
 2 shall have and may exercise the same powers, subject to
 
 3 applicable limitations, as those granted the housing and
 
 4 community development corporation of Hawaii pursuant to chapter
 
 5 201G insofar as such powers may be reasonably construed to be
 
 6 exercisable by a county for the purpose of developing,
 
 7 constructing, and providing low and moderate income housing;
 
 8 provided that no county shall be empowered to cause the State to
 
 9 issue general obligation bonds to finance a project pursuant to
 
10 this section; [provided further that county projects shall be
 
11 granted an exemption from general excise or receipts taxes in the
 
12 same manner as projects of the housing and community development
 
13 corporation of Hawaii pursuant to section [201G-116]; and]
 
14 provided further that the provisions of section 201G-15 shall not
 
15 apply to this section unless federal guidelines specifically
 
16 provide local governments with that authorization and the
 
17 authorization does not conflict with any state laws.  The powers
 
18 shall include the power, subject to applicable limitations, to:
 
19      (1)  Develop and construct dwelling units, alone or in
 
20           partnership with developers;
 
21      (2)  Acquire necessary land by lease, purchase, exchange, or
 
22           eminent domain;
 
23      (3)  Provide assistance and aid to a public agency or person
 

 
Page 27                                                    
                                     H.B. NO.1734       
                                                        
                                                        

 
 1           in developing and constructing new housing and
 
 2           rehabilitating old housing for elders of low and
 
 3           moderate income, other persons of low and moderate
 
 4           income, and persons displaced by any governmental
 
 5           action, by making long-term mortgage or interim
 
 6           construction loans available;
 
 7      (4)  Contract with any eligible bidders to provide for
 
 8           construction of urgently needed housing for persons of
 
 9           low and moderate income;
 
10      (5)  Guarantee the top twenty-five per cent of the principal
 
11           balance of real property mortgage loans, plus interest
 
12           thereon, made to qualified borrowers by qualified
 
13           lenders;
 
14      (6)  Enter into mortgage guarantee agreements with
 
15           appropriate officials of any agency or instrumentality
 
16           of the United States in order to induce those officials
 
17           to commit to insure or insure mortgages under the
 
18           provisions of the National Housing Act, as amended;
 
19      (7)  Make a direct loan to any qualified buyer for the
 
20           downpayment required by a private lender to be made by
 
21           the borrower as a condition of obtaining a loan from
 
22           the private lender in the purchase of residential
 
23           property;
 

 
Page 28                                                    
                                     H.B. NO.1734       
                                                        
                                                        

 
 1      (8)  Provide funds for a share, not to exceed fifty per cent
 
 2           of the principal amount of a loan made to a qualified
 
 3           borrower by a private lender who is unable otherwise to
 
 4           lend the borrower sufficient funds at reasonable rates
 
 5           in the purchase of residential property; and
 
 6      (9)  Sell or lease completed dwelling units.
 
 7      For purposes of this section, a limitation is applicable to
 
 8 the extent that it may reasonably be construed to apply to a
 
 9 county."
 
10      SECTION 6.  Section 103-53, Hawaii Revised Statutes, is
 
11 amended by amending subsection (d) to read as follows:
 
12      "(d)  Any assignment of a contract shall require the
 
13 assignee, as a condition precedent to the assignment, to first
 
14 obtain a [bulk sales certificate if required under section
 
15 237-43, and present the certificate, or] tax clearance as
 
16 provided under subsection (a) [if a bulk sales certificate is not
 
17 required,] and present it to the state or county contracting
 
18 officer or agent."
 
19      SECTION 7.  Section 103-53.5, Hawaii Revised Statutes, is
 
20 amended to read as follows:
 
21      "103-53.5  Tax adjustment for out-of-state vendors and tax-
 
22 exempt bidders.  Where the bidder or vendor is an out-of-state
 
23 vendor not doing business in the State or is a person exempted
 

 
Page 29                                                    
                                     H.B. NO.1734       
                                                        
                                                        

 
 1 from paying the applicable [general excise] retail sales tax, the
 
 2 package bid or purchase price, for the purpose of determining the
 
 3 lowest price bid, shall be increased by the applicable [retail]
 
 4 rate of [general excise] retail sales tax and the applicable use
 
 5 tax.  The lowest responsible bidder, taking into consideration
 
 6 the above increases, shall be awarded the contract, but the
 
 7 contract amount of any contract awarded shall be the amount of
 
 8 the bid offered and shall not include the amount of the
 
 9 increases."
 
10      SECTION 8.  Section 103D-1002, Hawaii Revised Statutes, is
 
11 amended by amending subsection (a) to read as follows:
 
12      "(a)  A purchasing agency shall review all specifications in
 
13 a bid or proposal for purchase from the Hawaii products list
 
14 where these products are available; provided that the products:
 
15      (1)  Meet the minimum specifications and the selling price
 
16           f.o.b. jobsite;
 
17      (2)  Unloaded including applicable [general excise] retail
 
18           sales tax and use tax does not exceed the lowest
 
19           delivered price in Hawaii f.o.b. jobsite; and
 
20      (3)  Unloaded, including applicable [general excise] retail
 
21           sales tax and use tax, does not exceed the lowest
 
22           delivered price of a similar non-Hawaii product by more
 
23           than:
 

 
Page 30                                                    
                                     H.B. NO.1734       
                                                        
                                                        

 
 1           (A)  Three per cent where class I Hawaii products are
 
 2                involved;
 
 3           (B)  Five per cent where class II Hawaii products are
 
 4                involved; or
 
 5           (C)  Ten per cent where class III Hawaii products are
 
 6                involved."
 
 7      SECTION 9.  Section 201G-116, Hawaii Revised Statutes, is
 
 8 amended as follows:
 
 9      1.  By amending the title to read:
 
10      "201G-116  Exemption from [general excise] retail sales
 
11 taxes."
 
12      2.  By amending subsection (a) to read:
 
13      "(a)  [In accordance with section 237-29, the] The
 
14 corporation may approve and certify for exemption from general
 
15 excise taxes any qualified person or firm involved with a newly
 
16 constructed, or moderately or substantially rehabilitated
 
17 project:
 
18      (1)  Developed under this subpart;
 
19      (2)  Developed under a government assistance program
 
20           approved by the corporation, including but not limited
 
21           to, the United States Department of Agriculture 502
 
22           program and Federal Housing Administration 235 program;
 
23           or
 

 
Page 31                                                    
                                     H.B. NO.1734       
                                                        
                                                        

 
 1      (3)  Developed under the sponsorship of a private nonprofit
 
 2           corporation providing home rehabilitation or new homes
 
 3           for qualified families in need of decent, low-cost
 
 4           housing."
 
 5      SECTION 10.  Section 201G-459, Hawaii Revised Statutes, is
 
 6 amended to read as follows:
 
 7      "[[]201G-459[]]  Exemptions.(a)  [Any compensation
 
 8 received by a provider agency for services rendered to homeless
 
 9 families or individuals, or in operating or managing a homeless
 
10 facility authorized by this part, is exempt from taxes under
 
11 chapter 237.
 
12      (b)]  Any county mayor may exempt by executive order, donors
 
13 and homeless provider agencies from real property taxes, water
 
14 and sewer development fees, rates collected for water supplied to
 
15 consumers and for use of sewers, and any other county taxes,
 
16 charges, or fees; provided that any county may enact ordinances
 
17 to regulate the exemptions granted by this subsection.
 
18      [(c)] (b)  Any provider agency operating or managing a
 
19 homeless facility, or any other program for the homeless
 
20 authorized by this part, is exempt, for purposes of those
 
21 facilities or programs, from any requirements contained in part
 
22 VIII of chapter 346 and chapters 467 and 521."
 
23      SECTION 11.  Section 207-12, Hawaii Revised Statutes, is
 

 
Page 32                                                    
                                     H.B. NO.1734       
                                                        
                                                        

 
 1 amended to read as follows:
 
 2      "207-12  Exemptions and immunities.  A foreign lender which
 
 3 (1) does not maintain a place of business in this State, (2)
 
 4 conducts its principal activities outside this State, and (3)
 
 5 complies with this part, does not by engaging in this State in
 
 6 any or all of the activities specified in section 207-13, violate
 
 7 the laws of this State relating to doing business or doing a
 
 8 banking, trust, or insurance business, or become subject to
 
 9 chapter 412, 415, or 431, or become subject to any taxation which
 
10 would otherwise be imposed for doing business in or doing a
 
11 banking, trust, or insurance business in, or having gross income
 
12 or receipts from sources in, property in, or the conduct of any
 
13 activity in, this State, or become subject to any taxation under
 
14 chapter 235, [237,] or 241, and no income or receipts of any
 
15 foreign lender arising out of any of the activities specified in
 
16 the following section shall constitute income from sources in,
 
17 property in, or activities conducted in this State for the
 
18 purposes of any tax imposed by this State; provided that nothing
 
19 in this part shall be construed to exempt the real property of a
 
20 foreign lender from taxation to the same extent, according to its
 
21 value, as other real property is taxed, or to preclude the
 
22 inclusion of the dividends or other income from foreign lenders
 
23 in the income of individuals taxable under chapter 235 to the
 

 
Page 33                                                    
                                     H.B. NO.1734       
                                                        
                                                        

 
 1 same extent as is included dividends and other income from
 
 2 domestic lenders; and provided further that if any such foreign
 
 3 lender shall acquire any property in this State in enforcement of
 
 4 the rights of the foreign lender in the event of a default by any
 
 5 borrower, as permitted by section 207-13(4), then commencing one
 
 6 year after title to such property has vested in the foreign
 
 7 lender, the rents or other receipts received by the foreign
 
 8 lender from, and the proceeds of sale by the foreign lender of,
 
 9 such property shall be subject to taxation under [chapters]
 
10 chapter 235 [and 237] in the same manner and to the same extent
 
11 as if the rents, other receipts, or proceeds were received by a
 
12 resident of this State; and provided further that if any such
 
13 foreign lender shall otherwise acquire any property in this State
 
14 or engage in any business or activities in this State not
 
15 specified in section 207-13, then the rents and other receipts
 
16 received by the foreign lender from such property and the
 
17 proceeds of sale by the foreign lender of such property and all
 
18 income and receipts from the foreign lender's business or
 
19 activities in this State not specified in section 207-13 shall be
 
20 subject to taxation under [chapters] chapter 235 [and 237] in the
 
21 same manner and to the same extent as if such rents, other
 
22 receipts, proceeds, and income were received by a resident of
 
23 this State, but such other activities and business shall not
 

 
Page 34                                                    
                                     H.B. NO.1734       
                                                        
                                                        

 
 1 deprive the foreign lender of the immunities and exemptions from
 
 2 taxation hereinabove stated with respect to the activities
 
 3 specified in section 207-13."
 
 4      SECTION 12.  Section 209E-2, Hawaii Revised Statutes, is
 
 5 amended by amending the definition of "qualified business" to
 
 6 read as follows:
 
 7      ""Qualified business" means any corporation, partnership, or
 
 8 sole proprietorship authorized to do business in the State which
 
 9 is qualified under section 209E-9 and is:
 
10      (1)  Subject to the state corporate or individual income tax
 
11           under chapter 235;
 
12      (2)  Engaged in manufacturing, the wholesale sale of
 
13           tangible personal property [as defined in section 237-
 
14           4,] or a service business as defined in this chapter;
 
15           or
 
16      (3)  Engaged in producing agricultural products where the
 
17           business is a producer [as defined in section 237-5]."
 
18      SECTION 13.  Section 209E-10, Hawaii Revised Statutes, is
 
19 amended by amending subsection (a) to read as follows:
 
20      "(a)  The department shall certify annually to the
 
21 department of taxation the applicability of the tax credit
 
22 provided in this chapter for a qualified business against any
 
23 taxes due the State.  Except for the [general excise] retail
 

 
Page 35                                                    
                                     H.B. NO.1734       
                                                        
                                                        

 
 1 sales tax, the credit shall be eighty per cent of the tax due for
 
 2 the first tax year, seventy per cent of the tax due for the
 
 3 second tax year, sixty per cent of the tax due for the third
 
 4 year, fifty per cent of the tax due the fourth year, forty per
 
 5 cent of the tax due the fifth year, thirty per cent of the tax
 
 6 due the sixth year, and twenty per cent of the tax due the
 
 7 seventh year.  Any tax credit not usable shall not be applied to
 
 8 future tax years."
 
 9      SECTION 14.  Section 212-8, Hawaii Revised Statutes, is
 
10 amended to read as follows:
 
11      "212-8 Exemption from taxes.  Notwithstanding any law to
 
12 the contrary, sales of all products which are categorized as
 
13 privileged foreign merchandise, nonprivileged foreign
 
14 merchandise, domestic merchandise, or zone-restricted
 
15 merchandise, and which are admitted into a foreign-trade zone, as
 
16 more specifically set forth in the Act of Congress, and any rules
 
17 and regulations promulgated thereunder, made directly to any
 
18 common carrier in interstate or foreign commerce, or both,
 
19 whether ocean-going or air, for consumption out-of-state by the
 
20 crew or passengers on the shipper's vessels or airplanes, or for
 
21 use out-of-state by the vessels or airplanes, shall be exempt
 
22 from those taxes imposed under chapters [237,]    , 238, 243,
 
23 244D, and 245."
 

 
Page 36                                                    
                                     H.B. NO.1734       
                                                        
                                                        

 
 1      SECTION 15.  Section 231-9.4, Hawaii Revised Statutes, is
 
 2 amended to read as follows:
 
 3      "[[]231-9.4  Credit or debit card remittances[.]] In
 
 4 addition to sections [237-31,] 237D-6.5, and 251-5, as well as
 
 5 any other form of payment allowed under provisions of title 14
 
 6 administered by the department, the director, by rules adopted
 
 7 pursuant to chapter 91, may permit the use of credit or debit
 
 8 cards for remittances made to the department.  A service fee
 
 9 shall not be required by the department for the use of debit
 
10 cards for remittances, but may be required by the department for
 
11 the use of credit cards for remittances.
 
12      For purposes of this section:
 
13      "Credit card" shall have the same meaning as provided in
 
14 section 478-1.
 
15      "Debit card" means any card, plate, or other single credit
 
16 device issued with or without a fee to a cardholder to purchase
 
17 goods or services or to obtain cash that is debited from the
 
18 cardholder's checking or other bank account."
 
19      SECTION 16.  Section 231-19.5, Hawaii Revised Statutes, is
 
20 amended by amending subsection (a) to read as follows:
 
21      "(a)  Written opinions shall be open to public inspection
 
22 and copying as provided in this section, notwithstanding sections
 
23 235-116, 236D-15, [237-34,] and 237D-13 and any other law
 

 
Page 37                                                    
                                     H.B. NO.1734       
                                                        
                                                        

 
 1 restricting disclosure of tax returns or tax return information
 
 2 to the contrary.  Except as provided in subsection (f), regarding
 
 3 the disclosure of the text of written opinions, chapter 92F shall
 
 4 not apply to tax returns and tax return information.
 
 5      A written opinion may not be used or cited as precedent
 
 6 unless otherwise provided by department rules."
 
 7      SECTION 17.  Section 233-3, Hawaii Revised Statutes, is
 
 8 amended to read as follows:
 
 9      "233-3 Selling personal property, defined.  As used in
 
10 this chapter "the business of selling tangible personal property"
 
11 includes [both] business classed as such [under chapter 237] and
 
12 also the rendering of a service which involves the consumption or
 
13 use of tangible personal property furnished by the "potential
 
14 employer" referred to in section 233-1."
 
15      SECTION 18.  Section 235-6, Hawaii Revised Statutes, is
 
16 amended by amending subsection (a) to read as follows:
 
17      "(a)  For the purposes of sections 235-21 to 235-39, a
 
18 foreign corporation engaged in the business of manufacturing
 
19 without the State, having its manufactured products warehoused in
 
20 this State by another person who is engaged in the business of
 
21 warehousing in this State and whose compensation for providing
 
22 the warehousing is included in the measure of the tax imposed by
 
23 chapter [237 or] 239, shall not be deemed to be carrying on a
 

 
Page 38                                                    
                                     H.B. NO.1734       
                                                        
                                                        

 
 1 trade or business in this State if all of the following
 
 2 requirements are met:
 
 3      (1)  Every delivery of sale of such products so warehoused
 
 4           is made at the warehouse to fill an order for such
 
 5           property procured by a representative (as defined in
 
 6           subsection (b)) from a seller [licensed under chapter
 
 7           237] permitted under chapter     and purchasing such
 
 8           property for purposes of resale;
 
 9      (2)  Every order so procured was made subject to acceptance
 
10           and was accepted by the corporation at an office
 
11           located out of this State;
 
12      (3)  No collection for the payment of the products delivered
 
13           as described in paragraph (1) is made in this State by
 
14           any of its employees or agents or by any
 
15           representative; and
 
16      (4)  Except as provided in this section, it is not carrying
 
17           on a trade or business in this State within the meaning
 
18           of sections 235-21 to 235-39."
 
19      SECTION 19.  Section 235-55.6, Hawaii Revised Statutes, is
 
20 amended by amending subsection (e) to read as follows:
 
21      "(e)  Special rules.  For purposes of this section:
 
22      (1)  Maintaining household.  An individual shall be treated
 
23           as maintaining a household for any period only if over
 

 
Page 39                                                    
                                     H.B. NO.1734       
                                                        
                                                        

 
 1           half the cost of maintaining the household for the
 
 2           period is furnished by the individual (or, if the
 
 3           individual is married during the period, is furnished
 
 4           by the individual and the individual's spouse).
 
 5      (2)  Married couples must file joint return.  If the
 
 6           taxpayer is married at the close of the taxable year,
 
 7           the credit shall be allowed under subsection (a) only
 
 8           if the taxpayer and the taxpayer's spouse file a joint
 
 9           return for the taxable year.
 
10      (3)  Marital status.  An individual legally separated from
 
11           the individual's spouse under a decree of divorce or of
 
12           separate maintenance shall not be considered as
 
13           married.
 
14      (4)  Certain married individuals living apart.  If:
 
15           (A)  An individual who is married and who files a
 
16                separate return:
 
17                (i)  Maintains as the individual's home a
 
18                     household that constitutes for more than one-
 
19                     half of the taxable year the principal place
 
20                     of abode of a qualifying individual, and
 
21               (ii)  Furnishes over half of the cost of
 
22                     maintaining the household during the taxable
 
23                     year, and
 

 
Page 40                                                    
                                     H.B. NO.1734       
                                                        
                                                        

 
 1           (B)  During the last six months of the taxable year the
 
 2                individual's spouse is not a member of the
 
 3                household, the individual shall not be considered
 
 4                as married.
 
 5      (5)  Special dependency test in case of divorced parents,
 
 6           etc.  If:
 
 7           (A)  Paragraph (2) or (4) of section 152(e) of the
 
 8                Internal Revenue Code of 1986, as amended, applies
 
 9                to any child with respect to any calendar year,
 
10                and
 
11           (B)  The child is under age thirteen or is physically
 
12                or mentally incompetent of caring for the child's
 
13                self,
 
14           in the case of any taxable year beginning in the
 
15           calendar year, the child shall be treated as a
 
16           qualifying individual described in subsection (b)(1)(A)
 
17           or (B) (whichever is appropriate) with respect to the
 
18           custodial parent (within the meaning of section
 
19           152(e)(1) of the Internal Revenue Code of 1986, as
 
20           amended), and shall not be treated as a qualifying
 
21           individual with respect to the noncustodial parent.
 
22      (6)  Payments to related individuals.  No credit shall be
 
23           allowed under subsection (a) for any amount paid by the
 

 
Page 41                                                    
                                     H.B. NO.1734       
                                                        
                                                        

 
 1           taxpayer to an individual:
 
 2           (A)  With respect to whom, for the taxable year, a
 
 3                deduction under section 151(c) of the Internal
 
 4                Revenue Code of 1986, as amended (relating to
 
 5                deduction for personal exemptions for dependents)
 
 6                is allowable either to the taxpayer or the
 
 7                taxpayer's spouse, or
 
 8           (B)  Who is a child of the taxpayer (within the meaning
 
 9                of section 151(c)(3) of the Internal Revenue Code
 
10                of 1986, as amended) who has not attained the age
 
11                of nineteen at the close of the taxable year.
 
12           For purposes of this paragraph, the term "taxable year"
 
13           means the taxable year of the taxpayer in which the
 
14           service is performed.
 
15      (7)  Student.  The term "student" means an individual who,
 
16           during each of five calendar months during the taxable
 
17           year, is a full-time student at an educational
 
18           organization.
 
19      (8)  Educational organization.  The term "educational
 
20           organization" means a school operated by the department
 
21           of education under chapter 302A, an educational
 
22           organization described in section 170(b)(1)(A)(ii) of
 
23           the Internal Revenue Code of 1986, as amended, or a
 

 
Page 42                                                    
                                     H.B. NO.1734       
                                                        
                                                        

 
 1           university, college, or community college.
 
 2      (9)  Identifying information required with respect to
 
 3           service provider.  No credit shall be allowed under
 
 4           subsection (a) for any amount paid to any person
 
 5           unless:
 
 6           (A)  The name, address, and taxpayer identification
 
 7                number, [and general excise tax license number] of
 
 8                the person are included on the return claiming the
 
 9                credit,
 
10           (B)  If the person is located outside the State, the
 
11                name, address, and taxpayer identification number,
 
12                if any, of the person and a statement indicating
 
13                that the service provider is located outside the
 
14                State and that [the general excise tax license
 
15                and, if applicable,] the taxpayer identification
 
16                [numbers are] number is not required, or
 
17           (C)  If the person is an organization described in
 
18                section 501(c)(3) of the Internal Revenue Code and
 
19                exempt from tax under section 501(a) of the
 
20                Internal Revenue Code, the name and address of the
 
21                person are included on the return claiming the
 
22                credit.
 
23           In the case of a failure to provide the information
 

 
Page 43                                                    
                                     H.B. NO.1734       
                                                        
                                                        

 
 1           required under the preceding sentence, the preceding
 
 2           sentence shall not apply if it is shown that the
 
 3           taxpayer exercised due diligence in attempting to
 
 4           provide the information so required."
 
 5      SECTION 20.  Section 235-61, Hawaii Revised Statutes, is
 
 6 amended by amending subsection (e) to read as follows:
 
 7      "(e)  The department, by rule, may require the deduction and
 
 8 withholding of tax from any remuneration or compensation paid for
 
 9 or attributable to services [that are not subject to the[general
 
10 excise tax imposed by chapter 237,] whether or not such
 
11 withholding is provided for hereinabove.  Every person so
 
12 required to deduct and withhold tax, or from whom tax is required
 
13 to be deducted and withheld, shall be subject to sections 235-61
 
14 to 235-67, and every person so required to deduct and withhold
 
15 tax shall be deemed an employer for the purposes of this chapter.
 
16      The department, by rule, may exempt any employer from the
 
17 requirement of deduction and withholding of taxes, even though
 
18 the requirement is imposed by this section, if and to the extent
 
19 that the department finds the requirement unduly onerous or
 
20 impracticable of enforcement."
 
21      SECTION 21.  Section 235-110.7, Hawaii Revised Statutes, is
 
22 amended as follows:
 
23      1.  By amending the title, and subsections (a) to (c) to
 

 
Page 44                                                    
                                     H.B. NO.1734       
                                                        
                                                        

 
 1 read:
 
 2      "235-110.7  Capital goods [excise] retail sales tax credit.
 
 3 (a)  There shall be allowed to each taxpayer subject to the tax
 
 4 imposed by this chapter a capital goods [excise] retail sales tax
 
 5 credit which shall be deductible from the taxpayer's net income
 
 6 tax liability, if any, imposed by this chapter for the taxable
 
 7 year in which the credit is properly claimed.
 
 8      The amount of the tax credit shall be determined by the
 
 9 application of the following rates against the cost of the
 
10 eligible depreciable tangible personal property used by the
 
11 taxpayer in a trade or business and placed in service within
 
12 Hawaii after December 31, 1987.  For calendar years beginning
 
13 after[:  December 31, 1987, the applicable rate shall be three
 
14 per cent; December 31, 1988, and thereafter, the applicable rate
 
15 shall be four per cent, except that for the period January 1,
 
16 1993, through December 31, 2002, and for eligible depreciable
 
17 tangible personal property used in a trade or business that is
 
18 purchased in a county in which the county general excise and use
 
19 tax surcharge is in effect and placed in service in any county
 
20 the applicable rate shall be four and one-half per cent.  For
 
21 taxpayers with fiscal taxable years, the applicable rate shall be
 
22 the rate for the calendar year in which the eligible depreciable
 
23 tangible personal property used in the trade or business is
 

 
Page 45                                                    
                                     H.B. NO.1734       
                                                        
                                                        

 
 1 placed in service within Hawaii.] December 31, 1999 shall be
 
 2 eight and three-quarters per cent.
 
 3      In the case of a partnership, S corporation, estate, or
 
 4 trust, the tax credit allowable is for eligible depreciable
 
 5 tangible personal property which is placed in service by the
 
 6 entity.  The cost upon which the tax credit is computed shall be
 
 7 determined at the entity level.  Distribution and share of credit
 
 8 shall be determined by rules.
 
 9      In the case of eligible depreciable tangible personal
 
10 property for which a credit for sales or use taxes paid to
 
11 another state is allowable under section 238-3(i), the amount of
 
12 the tax credit allowed under this section shall not exceed the
 
13 amount of use tax[, and for the period January 1, 1993, through
 
14 December 31, 2002, the amount of the county general excise and
 
15 use tax surcharge,] actually paid under chapter 238 relating to
 
16 such tangible personal property.
 
17      If a deduction is taken under section 179 (with respect to
 
18 election to expense certain depreciable business assets) of the
 
19 Internal Revenue Code of 1954, as amended, no tax credit shall be
 
20 allowed for that portion of the cost of property for which the
 
21 deduction was taken.
 
22      (b)  [If the tax credit is claimed by a taxpayer at the rate
 
23 of four and one-half per cent, and the tangible personal property
 

 
Page 46                                                    
                                     H.B. NO.1734       
                                                        
                                                        

 
 1 is purchased in a county in which the county general excise and
 
 2 use tax surcharge is not in effect, there shall be added to and
 
 3 become part of the tax liability of the taxpayer:
 
 4      (1)  The amount of the tax credit claimed under this section
 
 5           multiplied by three; or
 
 6      (2)  Ten per cent of the income tax liability for the
 
 7           taxable year for which the income tax return is being
 
 8           filed,
 
 9 whichever is greater.]
 
10      If the capital goods excise tax credit allowed under
 
11 subsection (a) exceeds the taxpayer's net income tax liability,
 
12 the excess of credit over liability shall be refunded to the
 
13 taxpayer; provided that no refunds or payment on account of the
 
14 tax credit allowed by this section shall be made for amounts less
 
15 than $1.
 
16      All claims for tax credits under this section, including any
 
17 amended claims, must be filed on or before the end of the twelfth
 
18 month following the close of the taxable year for which the
 
19 credits may be claimed.  Failure to comply with the foregoing
 
20 provision shall constitute a waiver of the right to claim the
 
21 credit.
 
22      (c)  Application for the capital goods [excise] retail sales
 
23 tax credit shall be upon forms provided by the department of
 

 
Page 47                                                    
                                     H.B. NO.1734       
                                                        
                                                        

 
 1 taxation."
 
 2      2.  By amending subsection (e) to read:
 
 3      "(e)  As used in this section, the definition of section 38
 
 4 property (with respect to investment in depreciable tangible
 
 5 personal property) as defined by section 48(a)(1)(A), (a)(1)(B),
 
 6 (a)(3), (a)(4), (a)(7), (a)(8), (a)(10)(A), (b), (c), (f), (l),
 
 7 (m), and (s) of the Internal Revenue Code of 1954, as amended as
 
 8 of December 31, 1984, is operative for the purposes of this
 
 9 section only.
 
10      As used in this section:
 
11      "Cost" means (1) the actual invoice price of the tangible
 
12 personal property, or (2) the basis from which depreciation is
 
13 taken under section 167 (with respect to depreciation) or from
 
14 which a deduction may be taken under section 168 (with respect to
 
15 accelerated cost recovery system) of the Internal Revenue Code of
 
16 1954, as amended, whichever is less.
 
17      "Eligible depreciable tangible personal property" is section
 
18 38 property as defined by the operative provisions of section 48
 
19 and having a depreciable life under section 167 or for which a
 
20 deduction may be taken under section 168 of the federal Internal
 
21 Revenue Code of 1954, as amended.
 
22      "Placed in service" means the earliest of the following
 
23 taxable years:
 

 
Page 48                                                    
                                     H.B. NO.1734       
                                                        
                                                        

 
 1      (1)  The taxable year in which, under the:
 
 2           (A)  Taxpayer's depreciation practice, the period for
 
 3                depreciation; or
 
 4           (B)  Accelerated cost recovery system, a claim for
 
 5                recovery allowances;
 
 6                with respect to such property begins; or
 
 7      (2)  The taxable year in which the property is placed in a
 
 8           condition or state of readiness and availability for a
 
 9           specifically assigned function.
 
10      "Purchase" means an acquisition of property.
 
11      "Tangible personal property" means tangible personal
 
12 property which is placed in service within Hawaii after
 
13 December 31, 1987, and the purchase or importation of which
 
14 resulted in a transaction which was subject to the imposition and
 
15 payment of tax at the rate of [four per cent, except that for the
 
16 period January 1, 1993, through December 31, 2002, and if the
 
17 county general excise and use tax surcharge is in effect the tax
 
18 rate shall be four and one-half per cent, under chapter 237] of
 
19 eight and three-quarters per cent under chapter     or 238.
 
20 "Tangible personal property" does not include tangible personal
 
21 property which is an integral part of a building or structure or
 
22 tangible personal property used in a foreign trade zone, as
 
23 defined under chapter 212."
 

 
Page 49                                                    
                                     H.B. NO.1734       
                                                        
                                                        

 
 1      SECTION 22.  Section 237D-1, Hawaii Revised Statutes, is
 
 2 amended by amending the definition of "gross rental" to read as
 
 3 follows:
 
 4      ""Gross rental" or "gross rental proceeds" means the gross
 
 5 receipts, cash or accrued, of the taxpayer received as
 
 6 compensation for the furnishing of transient accommodations and
 
 7 the value proceeding or accruing from the furnishing of such
 
 8 accommodations without any deductions on account of the cost of
 
 9 property or services sold, the cost of materials used, labor
 
10 cost, taxes, royalties, interest, discounts, or any other
 
11 expenses whatsoever.  Every taxpayer shall be presumed to be
 
12 dealing on a cash basis unless the taxpayer proves to the
 
13 satisfaction of the department of taxation that the taxpayer is
 
14 dealing on an accrual basis and the taxpayer's books are so kept,
 
15 [or unless the taxpayer employs or is required to employ the
 
16 accrual basis for the purposes of the tax imposed by chapter 237]
 
17 for any taxable year in which event the taxpayer shall report the
 
18 taxpayer's gross income for the purposes of this chapter on the
 
19 accrual basis for the same period.
 
20      [The words "gross rental" or "gross rental proceeds" shall
 
21 not be construed to include the amounts of taxes imposed by
 
22 chapter 237 or this chapter on operators of transient
 
23 accommodations and passed on, collected, and received from the
 

 
Page 50                                                    
                                     H.B. NO.1734       
                                                        
                                                        

 
 1 consumer as part of the receipts received as compensation for the
 
 2 furnishing of transient accommodations.]  Where transient
 
 3 accommodations are furnished through arrangements made by a
 
 4 travel agency or tour packager at noncommissionable negotiated
 
 5 contract rates and the gross income is divided between the
 
 6 operator of transient accommodations on the one hand and the
 
 7 travel agency or tour packager on the other hand, gross rental or
 
 8 gross rental proceeds to the operator means only the respective
 
 9 portion allocated or distributed to the operator, and no more.
 
10 For purposes of this definition, where the operator maintains a
 
11 schedule of rates for identifiable groups of individuals, such as
 
12 kamaainas, upon which the accommodations are leased, let, or
 
13 rented, gross rental or gross rental proceeds means the receipts
 
14 collected and received based upon the scheduled rates and
 
15 recorded as receipts in its books and records."
 
16      SECTION 23.  Section 237D-6, Hawaii Revised Statutes, is
 
17 amended by amending subsection (a) to read as follows:
 
18      "(a)  On or before the last day of each calendar month,
 
19 every operator taxable, or plan manager liable under this chapter
 
20 during the preceding calendar month shall file a sworn return
 
21 with the director in such form as the director shall prescribe
 
22 together with a remittance for the amount of the tax in the form
 
23 required by section 237D-6.5.  Sections [237-30 and 237-32]    -5
 

 
Page 51                                                    
                                     H.B. NO.1734       
                                                        
                                                        

 
 1 and    -7  shall apply to returns and penalties made under this
 
 2 chapter to the same extent as if the sections were set forth
 
 3 specifically in this section."
 
 4      SECTION 24.  Section 237D-8.5, Hawaii Revised Statutes, is
 
 5 amended to read as follows:
 
 6      "[[]237D-8.5[]]  Collection of rental by third party;
 
 7 filing with department; statement required.(a)  Every person
 
 8 authorized under an agreement by the owner of transient
 
 9 accommodations located within this State to collect rent on
 
10 behalf of such owner shall be subject to this section.
 
11      (b)  Every written rental collection agreement shall have on
 
12 the first page of the agreement the name, address, social
 
13 security or federal identification number, and, if available, the
 
14 general excise tax license and transient accommodations tax
 
15 registration numbers of the owner of the transient accommodations
 
16 being rented, the address of the property being rented, and the
 
17 following statement which shall be set forth in bold print and in
 
18 ten-point type size:
 
19 "HAWAII TRANSIENT ACCOMMODATIONS TAXES MUST BE PAID ON THE GROSS
 
20 RENTS COLLECTED BY ANY PERSON RENTING TRANSIENT ACCOMMODATIONS IN
 
21 THE STATE OF HAWAII.  A COPY OF THE FIRST PAGE OF THIS AGREEMENT,
 
22 OR OF FEDERAL INTERNAL REVENUE FORM 1099 STATING THE AMOUNT OF
 
23 RENTS COLLECTED, SHALL BE FILED WITH THE HAWAII DEPARTMENT OF
 

 


 

Page 52                                                    
                                     H.B. NO.1734       
                                                        
                                                        

 
 1 TAXATION."
 
 2      Every person entering an oral rental collection agreement
 
 3 shall furnish the department of taxation the information required
 
 4 under this subsection and shall give the owner of the property a
 
 5 copy of the notice required by this subsection.  [The statement
 
 6 required by this subsection may be combined with the statement
 
 7 required under section 237-30.5 by adding in bold print and in
 
 8 ten-point type size to the front of the statement in section
 
 9 237-30.5 the following:
 
10           "HAWAII TRANSIENT ACCOMMODATIONS TAXES AND".]
 
11      (c)  Every person authorized to collect rent for another
 
12 person shall file a copy of the first page of the rental
 
13 collection agreement with the department of taxation within
 
14 ninety days after June 9, 1988, or within thirty days after
 
15 entering into the agreement, or shall file a copy of federal
 
16 Internal Revenue form 1099, the property owner's social security
 
17 or federal identification number, and, if available, the general
 
18 excise tax license and transient accommodations tax registration
 
19 numbers of the owner of such property being rented with the
 
20 department of taxation at the same time as such forms must be
 
21 filed with the Internal Revenue Service for the applicable tax
 
22 year.  The person also shall notify the owner that such
 
23 information is being furnished and give the owner a copy of the
 

 
Page 53                                                    
                                     H.B. NO.1734       
                                                        
                                                        

 
 1 notice required by subsection (b).
 
 2      [(d)  If a person complies with the provisions of this
 
 3 section, the person shall be deemed to have complied with section
 
 4 237-30.5.]"
 
 5      SECTION 25.  Section 237D-8.6, Hawaii Revised Statutes, is
 
 6 amended to read as follows:
 
 7      "[[]237D-8.6[]]  Reconciliation; form requirement.(a)  On
 
 8 or before the twentieth day of the fourth month following the
 
 9 close of the taxable year, every person who has become liable for
 
10 the payment of taxes under this chapter during the preceding
 
11 taxable year and who has furnished transient accommodations which
 
12 were exempt, for any portion of the taxable year, from the tax
 
13 imposed under this chapter, shall file a reconciliation for
 
14 transient accommodations as prescribed by the director indicating
 
15 the amount of gross income that was subject to [such] the tax
 
16 [and the amount that was subject to the general excise tax
 
17 imposed under chapter 237].
 
18      (b)  On or before the twentieth day of the fourth month
 
19 following the close of the taxable year, every plan manager who
 
20 has become liable for the payment of taxes under this chapter
 
21 during the preceding taxable year shall file a reconciliation
 
22 indicating the period of time that the owner of a resort time
 
23 share vacation unit was subject to the [general excise tax or
 

 
Page 54                                                    
                                     H.B. NO.1734       
                                                        
                                                        

 
 1 the] tax under section 237D-2(a)."
 
 2      SECTION 26.  Section 237D-16 Hawaii Revised Statutes, is
 
 3 amended by amending subsection (a to read as follows:
 
 4      "(a)  The director of taxation shall administer and enforce
 
 5 this chapter.  In respect of:
 
 6      (1)  The examinations of books and records and of taxpayers
 
 7           and other persons,
 
 8      (2)  Procedure and powers upon failure or refusal by a
 
 9           taxpayer to make a return or proper return, and
 
10      (3)  The general administration of this chapter,
 
11 the director of taxation shall have all rights and powers
 
12 conferred by chapter [237]      with respect to taxes thereby or
 
13 thereunder imposed; and, without restriction upon these rights
 
14 and powers, sections [237-8 and 237-36 to 237-41]    -11 to    -
 
15 16 are made applicable to and with respect to the taxes,
 
16 taxpayers, tax officers, and other persons, and the matters and
 
17 things affected or covered by this chapter, insofar as not
 
18 inconsistent with this chapter, in the same manner, as nearly as
 
19 may be, as in similar cases covered by chapter [237.]    ."
 
20      SECTION 27.  Section 238-1, Hawaii Revised Statutes, is
 
21 amended as follows:
 
22      1.  By repealing the definition of "general excise tax".
 
23      "["General excise tax law" means chapter 237, as amended
 

 
Page 55                                                    
                                     H.B. NO.1734       
                                                        
                                                        

 
 1 from time to time.]" 
 
 2      2.  By amending the definition of "person" to read:
 
 3      ""Person"[, "business", "engaging in business", "retailer",
 
 4 "wholesaler",  "jobber", and "contractor" have] has the
 
 5 [meanings] same meaning as defined by chapter [237.]    ." 
 
 6      3.  By amending the definition of "unlicensed seller" to
 
 7 read:     
 
 8      ""Unlicensed seller"  means any seller who, with respect to
 
 9 the particular sale, is not subject to the tax imposed by chapter
 
10 [237,]    , whether or not the seller holds a [license] permit
 
11 under that chapter, but does not include any seller with respect
 
12 to any sale which is expressly exempted from the tax imposed by
 
13 chapter [237.]    ."
 
14      4.  By amending the definition of "use" to read:
 
15      ""Use" (and any nounal, verbal, adjective, adverbial, and
 
16 other equivalent form of the term) herein used interchangeably
 
17 means any use, whether the use is of such nature as to cause the
 
18 property to be appreciably consumed or not, or the keeping of the
 
19 property for such use or for sale, and shall include the exercise
 
20 of any right or power over tangible personal property incident to
 
21 the ownership of that property, but the term "use" shall not
 
22 include:
 
23      (1)  Temporary use of property, not of a perishable or
 

 
Page 56                                                    
                                     H.B. NO.1734       
                                                        
                                                        

 
 1           quickly consumable nature, where the property is
 
 2           imported into the State for temporary use (not sale)
 
 3           therein by the person importing the same and is not
 
 4           intended to be, and is not, kept permanently in the
 
 5           State (as for example without limiting the generality
 
 6           of the foregoing language:  (A) in the case of a
 
 7           contractor importing permanent equipment for the
 
 8           performance of a construction contract, with intent to
 
 9           remove, and who does remove, the equipment out of the
 
10           State upon completing the contract; (B) in the case of
 
11           moving picture films imported for use in theaters in
 
12           the State with intent or under contract to transport
 
13           the same out of the State after completion of such use;
 
14           (C) in the case of a transient visitor importing an
 
15           automobile or other belongings into the State to be
 
16           used by the transient visitor while therein but which
 
17           are to be used and are removed upon the transient
 
18           visitor's departure from the State); 
 
19      (2)  Use by the taxpayer of property acquired by the
 
20           taxpayer solely by way of gift;
 
21      (3)  Use which is limited to the receipt of articles and the
 
22           return thereof, to the person from whom acquired,
 
23           immediately or within a reasonable time either after
 

 
Page 57                                                    
                                     H.B. NO.1734       
                                                        
                                                        

 
 1           temporary trial or without trial; 
 
 2      (4)  Use of goods imported into the State by the owner of a
 
 3           vessel or vessels engaged in interstate or foreign
 
 4           commerce and held for and used only as ship stores for
 
 5           the vessels; 
 
 6      (5)  The use or keeping for use of household goods, personal
 
 7           effects, and private automobiles imported into the
 
 8           State for nonbusiness use by a person who (A) acquired
 
 9           them in another state, territory, district, or country,
 
10           (B) at the time of the acquisition was a bona fide
 
11           resident of another state, territory, district, or
 
12           country, (C) acquired the property for use outside the
 
13           State, and (D) made actual and substantial use thereof
 
14           outside this State; provided that as to an article
 
15           acquired less than three months prior to the time of
 
16           its importation into the State it shall be presumed,
 
17           until and unless clearly proved to the contrary, that
 
18           it was acquired for use in the State and that its use
 
19           outside the State was not actual and substantial; 
 
20      (6)  The leasing or renting of any aircraft or the keeping
 
21           of any aircraft solely for leasing or renting to
 
22           lessees or renters using the aircraft for commercial
 
23           transportation of passengers and goods;
 

 
Page 58                                                    
                                     H.B. NO.1734       
                                                        
                                                        

 
 1      (7)  The use of oceangoing vehicles for passenger or
 
 2           passenger and goods transportation from one point to
 
 3           another within the State as a public utility as defined
 
 4           in chapter 269; and
 
 5      (8)  The use of material, parts, or tools imported or
 
 6           purchased by a person [licensed under chapter 237 which
 
 7           are used for aircraft service and maintenance, or the
 
 8           construction of an aircraft service and maintenance
 
 9           facility as those terms are defined in section
 
10           237-24.9].
 
11      With regard to purchases made and distributed under the
 
12 authority of chapter 421, a cooperative association shall be
 
13 deemed the user thereof."
 
14      SECTION 28.  Section 238-2, Hawaii Revised Statutes, is
 
15 amended to read as follows:
 
16      "238-2 Imposition of tax; exemptions.  There is hereby
 
17 levied [an excise] a tax on the use in this State of tangible
 
18 personal property which is imported, or purchased from an
 
19 unlicensed seller, for use in this State.  The tax imposed by
 
20 this chapter shall accrue when the property is acquired by the
 
21 importer or purchaser and becomes subject to the taxing
 
22 jurisdiction of the State.  The rates of the tax hereby imposed
 
23 and the exemptions thereof are as follows:
 

 
Page 59                                                    
                                     H.B. NO.1734       
                                                        
                                                        

 
 1      (1)  If the importer or purchaser is licensed under chapter
 
 2           [237]     and is (A) [a wholesaler or jobber] importing
 
 3           or purchasing for purposes of resale, or (B) a
 
 4           manufacturer importing or purchasing material or
 
 5           commodities which are to be incorporated by the
 
 6           manufacturer into a finished or saleable product
 
 7           (including the container or package in which the
 
 8           product is contained) wherein it will remain in such
 
 9           form as to be perceptible to the senses, and which
 
10           finished or saleable product is to be sold in such
 
11           manner as to result in a further tax on the activity of
 
12           the manufacturer as the manufacturer or as a
 
13           wholesaler, and not as a retailer, there shall be no
 
14           tax[, provided that if the wholesaler, jobber, or
 
15           manufacturer is also engaged in business as a retailer
 
16           (so classed under chapter 237), paragraph (2) shall
 
17           apply to the wholesaler, jobber, or manufacturer, but
 
18           the director of taxation shall refund to the
 
19           wholesaler, jobber, or manufacturer, in the manner
 
20           provided under section 231-23(c) such amount of tax as
 
21           the wholesaler, jobber, or manufacturer shall, to the
 
22           satisfaction of the director, establish to have been
 
23           paid by the wholesaler, jobber, or manufacturer to the
 

 
Page 60                                                    
                                     H.B. NO.1734       
                                                        
                                                        

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

 
Page 61                                                    
                                     H.B. NO.1734       
                                                        
                                                        

 
 1           consummated in Hawaii; or, if there is no purchase
 
 2           price applicable thereto, or if the purchase or sale is
 
 3           consummated outside of Hawaii, then one-half of one per
 
 4           cent of the value of such property.
 
 5      (3)] In all other cases, [four] eight and three-quarters
 
 6           per cent of the value of the property." 
 
 7      SECTION 29.  Section 238-3, Hawaii Revised Statutes, is
 
 8 amended as follows:
 
 9      1.  By amending subsection (b) to read:
 
10      "(b)  The tax imposed by this chapter shall not apply to any
 
11 use of property the transfer of which property to, or the
 
12 acquisition of which by, the person so using the same, has
 
13 actually been or actually is taxed under chapter [237.]    ."
 
14      2.  By amending subsection (f) to read:
 
15      "(f)  The tax imposed by this chapter shall not apply to any
 
16 use or consumption of aircraft and vessels, the transfer of which
 
17 aircraft or vessel to, or the acquisition of which by, the person
 
18 so using or consuming the same, or the rental for the use of the
 
19 aircraft or vessel, has actually been or actually is taxed under
 
20 chapter [237.]    ."
 
21      3. By amending subsection (j) and (k) to read:
 
22      "(j)  The tax imposed by this chapter shall not apply to
 
23 [any use of property exempted by section 237-26 or section
 

 
Page 62                                                    
                                     H.B. NO.1734       
                                                        
                                                        

 
 1 237-29.
 
 2      (k)  The tax imposed by this chapter shall not apply to] any
 
 3 use of air pollution control facility [exempted by section
 
 4 237-27.5]."
 
 5      SECTION 30.  Section 238-5, Hawaii Revised Statutes, is
 
 6 amended by amending subsections (b) and (c) to read as follows:
 
 7      "(b)  Notwithstanding subsection (a), a taxpayer may be
 
 8 eligible to file the taxpayer's return required under this
 
 9 section and make payments thereon on a quarterly or semiannual
 
10 basis during the calendar or fiscal year, the return and payment
 
11 to be made on or before the last day of the calendar month after
 
12 the close of each quarter or semiannual period, to wit:
 
13      (1)  For calendar year taxpayers filing on a quarterly
 
14           basis, on or before April 30, July 31, October 31, and
 
15           January 31;
 
16      (2)  For calendar year taxpayers filing on a semiannual
 
17           basis, on or before July 31, and January 31;
 
18      (3)  For fiscal year taxpayers filing on a quarterly basis,
 
19           on or before the last day of the fourth month, seventh
 
20           month, and tenth month following the beginning of the
 
21           fiscal year and on or before the last day of the month
 
22           following the close of the fiscal year; or
 
23      (4)  For fiscal year taxpayers filing on a semiannual basis,
 

 
Page 63                                                    
                                     H.B. NO.1734       
                                                        
                                                        

 
 1           on or before the last day of the seventh month
 
 2           following the beginning of the fiscal year and on or
 
 3           before the last day of the month following the close of
 
 4           the fiscal year;
 
 5 if the taxpayer possesses a valid and current permit to file the
 
 6 taxpayer's [general excise] retail sales tax return and to make
 
 7 payments thereon on a quarterly or semiannual basis issued by the
 
 8 director pursuant to section [237-30.]    -5.  A taxpayer may
 
 9 also be eligible to make monthly payments based on the taxpayer's
 
10 estimated quarterly or semiannual liability with a reconciliation
 
11 return at the end of each quarter or semiannual period during the
 
12 calendar or fiscal year, as heretofore provided, if the taxpayer
 
13 possesses a valid and current permit to file quarterly or
 
14 semiannual reconciliation [general excise] retail sales tax
 
15 returns and to make monthly payments, issued by the director
 
16 pursuant to section [237-30.]    -5.
 
17      (c)  On or before the twentieth day of the fourth month
 
18 following the close of the taxable year, every person who has
 
19 become liable for the payment of taxes both under this chapter
 
20 and also under chapter [237]     during the preceding calendar or
 
21 fiscal year shall file a return summarizing the person's
 
22 liability under this chapter for the taxable year, in such form
 
23 as the director shall prescribe and shall file it with the
 

 
Page 64                                                    
                                     H.B. NO.1734       
                                                        
                                                        

 
 1 person's annual return of [general excise] retail sales taxes."
 
 2      SECTION 31.  Section 238-7, Hawaii Revised Statutes, is
 
 3 amended to read as follows:
 
 4      "238-7 Audits; additional assessments; refunds.  Sections
 
 5 [237-36 to 237-40]    -11 to    -15 of the [general excise]
 
 6 retail sales tax law are hereby made applicable to the taxes
 
 7 imposed by this chapter, to the refunding of overpayments
 
 8 thereof, and to assessments, investigations, and audits in
 
 9 connection therewith, [for which purpose any references therein
 
10 to "gross income" or "gross proceeds of sale" shall be deemed to
 
11 refer to the purchase price or value, as the case may be, subject
 
12 to tax under this chapter,] and any references to the "annual
 
13 return" shall, if the taxpayer is not required to file an annual
 
14 return under this chapter, be deemed to refer to the monthly
 
15 return mentioned in the first paragraph of section 238-5."
 
16      SECTION 32.  Section 238-13, Hawaii Revised Statutes, is
 
17 amended to read as follows:
 
18      "238-13  Other provisions of [general excise] retail sales
 
19 tax law applicable.  In respect of (1) the examination of books
 
20 and records and of taxpayers and other persons, (2) procedure and
 
21 powers upon failure or refusal by a taxpayer to make a return or
 
22 a proper return, and (3) the general administration of this
 
23 chapter, the director of taxation shall have all the rights and
 

 
Page 65                                                    
                                     H.B. NO.1734       
                                                        
                                                        

 
 1 powers conferred upon the director by the [general excise] retail
 
 2 sales tax law with respect to taxes thereby or thereunder
 
 3 imposed; and, without restriction upon these rights and powers,
 
 4 sections [237-8, 237-30, and 237-36 to 237-41]    -5,     -11 to
 
 5    -15 are hereby made applicable to and with respect to the
 
 6 taxes and the taxpayers, tax officers, and other persons, and the
 
 7 matters and things affected or covered by this chapter, insofar
 
 8 as not inconsistent with this chapter, in the same manner, as
 
 9 nearly as may be, as in similar cases covered by the [general
 
10 excise] retail sales tax law."
 
11      SECTION 33.  Section 244D-13, Hawaii Revised Statutes, is
 
12 amended to read as follows:
 
13      "244D-13  Other provisions applicable.  All of the
 
14 provisions of chapters 235 and [237]     not inconsistent with
 
15 this chapter and which may appropriately be applied to the taxes,
 
16 persons, circumstances, and situations involved in this chapter,
 
17 including (without prejudice to the generality of the foregoing)
 
18 provisions as to penalties and interest, and provisions granting
 
19 administrative powers to the director of taxation, and provisions
 
20 for the assessment, levy, and collection of taxes, shall be
 
21 applicable to the taxes imposed by this chapter, and to the
 
22 assessment, levy, and collection thereof, except that returns,
 
23 return information, or reports under this chapter and relating
 

 
Page 66                                                    
                                     H.B. NO.1734       
                                                        
                                                        

 
 1 only to this chapter may be made known to the liquor commission
 
 2 by the department of taxation, if not in conflict with section
 
 3 231-18."
 
 4      SECTION 34.  Section 245-11, Hawaii Revised Statutes, is
 
 5 amended to read as follows:
 
 6      "245-11  Chapter 235 and chapter [237]     applicable.  All
 
 7 of the provisions of chapter 235 and chapter [237]     not
 
 8 inconsistent with this chapter and which may appropriately be
 
 9 applied to the taxes, persons, circumstances, and situations
 
10 involved in this chapter, including (without prejudice to the
 
11 generality of the foregoing) provisions as to penalties and
 
12 interest, and provisions granting administrative powers to the
 
13 department of taxation, and provisions for the assessment, levy,
 
14 and collection of taxes, shall be applicable to the taxes imposed
 
15 by this chapter, and to the assessment, levy, and collection
 
16 thereof."
 
17      SECTION 35.  Section 246-34.5, Hawaii Revised Statutes, is
 
18 amended to read as follows:
 
19      "246-34.5  Exemptions for air pollution control facility.
 
20 The value of all property in the State (not including a building
 
21 and its structural components, other than a building which is
 
22 exclusively a treatment facility) actually and solely used or to
 
23 be used as an air pollution control facility [as the term is
 

 
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                                     H.B. NO.1734       
                                                        
                                                        

 
 1 defined in chapter 237] shall be exempted from the measure of the
 
 2 taxes imposed by this chapter; provided, however, the property
 
 3 exemption shall be applicable only with respect to a certified
 
 4 facility which is property (1) the construction, reconstruction
 
 5 or erection of which is completed by the taxpayer after June 30,
 
 6 1969, or, (2) acquired by the taxpayer after June 30, 1969, if
 
 7 the original use of the property commences with the taxpayer
 
 8 after June 30, 1969; provided further the facility is placed in
 
 9 service by the taxpayer before July 1, 1975.
 
10      Application for the exemption provided herein shall first be
 
11 made with the director of health who shall, if satisfied that the
 
12 facility meets the pollution emission criteria established by the
 
13 department of health, certify to that fact.  Upon receipt of the
 
14 certification from the department of health, the director of
 
15 taxation shall exempt the facility from the tax imposed by this
 
16 chapter.  A new certificate shall be obtained from the director
 
17 of health and filed with the director of taxation every two years
 
18 certifying that the pollution control facility complies with the
 
19 pollutant emission criteria established by the department of
 
20 health.  The director of taxation shall furnish all forms
 
21 required by this section. 
 
22      The director of taxation shall, pursuant to chapter 91,
 
23 promulgate rules and regulations necessary to administer this
 

 
Page 68                                                    
                                     H.B. NO.1734       
                                                        
                                                        

 
 1 section."
 
 2      SECTION 36.  Section 251-1, Hawaii Revised Statutes, is
 
 3 amended by amending the definition of "person" to read as
 
 4 follows:
 
 5      ""Person" has the same meaning as defined in section
 
 6 [237-1.]    -1."
 
 7      SECTION 37.  Section 251-4, Hawaii Revised Statutes, is
 
 8 amended by amending subsection (a) to read as follows:
 
 9      "(a)  On or before the last day of each calendar month,
 
10 every person taxable under this chapter during the preceding
 
11 calendar month shall file a sworn return with the director in
 
12 such form as the director shall prescribe together with a
 
13 remittance for the amount of the surcharge tax in the form
 
14 required by section 251-5.  Sections [237-30 and 237-32]    -5
 
15 and    -7 shall apply to returns and penalties made under this
 
16 chapter to the same extent as if the sections were set forth
 
17 specifically in this section."
 
18      SECTION 38.  Section 251-15, Hawaii Revised Statutes, is
 
19 amended by amending subsection (a) to read as follows:
 
20      "(a)  The director shall administer and enforce this chapter
 
21 in respect of:
 
22      (1)  The examination of books and records and of lessors,
 
23           tour vehicle operators, and other persons;
 

 
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                                     H.B. NO.1734       
                                                        
                                                        

 
 1      (2)  Procedure and powers upon failure or refusal by a
 
 2           person to make a return or proper return; and
 
 3      (3)  The general administration of this chapter.
 
 4 All of the provisions of chapter [237]     not inconsistent with
 
 5 this chapter and which may appropriately be applied to the taxes,
 
 6 persons, circumstances, and situations involved in this chapter,
 
 7 including (without prejudice to the generality of the foregoing)
 
 8 provisions as to penalties and interest, and provisions granting
 
 9 administrative powers to the department, and provisions for the
 
10 assessment, levy, and collection of taxes, shall be applicable to
 
11 the surcharge taxes imposed by this chapter, and to the
 
12 assessment, levy, and collection thereof."
 
13      SECTION 39.  Section 329-62, Hawaii Revised Statutes, is
 
14 amended by amending subsection (b) to read as follows:
 
15      "(b)  For the purposes of this section, "proper
 
16 identification" means a motor vehicle operator's license or other
 
17 official state-issued identification of the purchaser which
 
18 contains a photograph of the purchaser; the residential or
 
19 mailing address of the purchaser other than a post office box
 
20 number, or the tax map key number if no other address is
 
21 available; the motor vehicle license number of any motor vehicle
 
22 owned or operated by the purchaser; a letter of authorization
 
23 from the business for which any substance specified in section
 

 
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                                     H.B. NO.1734       
                                                        
                                                        

 
 1 329-61 is being furnished, which includes the [general excise
 
 2 license number and] address of the business; a full description
 
 3 of how the substance is to be used; and the signature of the
 
 4 purchaser.  The person selling, transferring, or otherwise
 
 5 furnishing any substance specified in section 329-61 shall sign
 
 6 as a witness to the signature and identification of the
 
 7 purchaser."
 
 8      SECTION 40.  Section 346E-1, Hawaii Revised Statutes, is
 
 9 amended by amending the definition of "nursing facility income"
 
10 to read as follows:
 
11      ""Nursing facility income" means the total compensation
 
12 received for furnishing nursing facility services, including all
 
13 receipts from "ancillary services" (as defined in 42 Code of
 
14 Federal Regulations 413.53(b)) to the provision of nursing
 
15 facility services, and receipts from items supplied in connection
 
16 with these services.  "Nursing facility income" shall not include
 
17 the following:  compensation received from services covered by
 
18 Title XVIII of the federal Social Security Act (including
 
19 copayments and deductibles received from beneficiaries of the
 
20 Medicare program); income from an affiliated entity that operates
 
21 as a prepaid health maintenance organization; settlements from
 
22 third party payors for services delivered or items supplied prior
 
23 to the effective date of this Act (such as settlements of cost
 

 
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                                     H.B. NO.1734       
                                                        
                                                        

 
 1 reports or decisions on rate reconsideration requests); income
 
 2 from services provided by separately licensed units (such as
 
 3 distinct part intermediate care facilities for the mentally
 
 4 retarded); income from the provision of adult day health and
 
 5 adult day care programs; income from the provision of home health
 
 6 agency services; income from the provision of "nursing homes
 
 7 without walls" programs; income from the provision of inpatient
 
 8 hospital services; income from grants, bequests, donations,
 
 9 endowments, or investments; or amounts of taxes imposed by
 
10 chapter [237]     or this chapter and passed on, collected, and
 
11 received from the consumer as part of nursing facility income."
 
12      SECTION 41.  Section 346E-3, Hawaii Revised Statutes, is
 
13 amended by amending subsection (a) to read as follows:
 
14      "(a)  On or before the fifteenth day of February, May,
 
15 August, and November, or for fiscal year taxpayers on or before
 
16 the forty-fifth day after the close of the fiscal quarter, every
 
17 operator taxable under this chapter during the preceding calendar
 
18 or fiscal quarter shall file a sworn return with the director in
 
19 such form as the director shall prescribe, together with a
 
20 remittance for the amount of the tax in the form of cash, bank
 
21 draft, cashier's check, money order, or certificate of deposit.
 
22 In lieu of the remittance, the operator may request withholding
 
23 from payments made to the operator by the department under
 

 
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                                     H.B. NO.1734       
                                                        
                                                        

 
 1 section 346E-4.  Sections [237-30 and 237-32]    -5 and    -7
 
 2 shall apply to returns and penalties made under this chapter to
 
 3 the same extent as if the sections were set forth specifically in
 
 4 this section."
 
 5      SECTION 42.  Section 346E-13, Hawaii Revised Statutes, is
 
 6 amended by amending subsection (a) to read as follows:
 
 7      "(a)  The director shall administer and enforce this
 
 8 chapter.  With respect to:
 
 9      (1)  The examinations of books and records, and operators
 
10           and other persons;
 
11      (2)  Procedures and powers upon failure or refusal by an
 
12           operator to make a return or proper return; and
 
13      (3)  The general administration of this chapter;
 
14 the director shall have all rights, powers, and duties conferred
 
15 by chapters 231 and [237]     with respect to powers and duties
 
16 or with respect to taxes imposed under chapter [237.]    .
 
17 Without restriction upon these rights and powers, [section 237-8
 
18 and] sections [237-36 to 237-41]    -5 and     -11 to    -16  are
 
19 made applicable to and with respect to taxes, operators,
 
20 department officers, and other persons, and the matters and
 
21 things affected or covered by this chapter, insofar as these
 
22 sections are not inconsistent with this chapter, in the same
 
23 manner, as nearly as may be, as in similar cases covered by
 

 
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                                     H.B. NO.1734       
                                                        
                                                        

 
 1 chapter [237.]   ."
 
 2      SECTION 43.  Section 349-10, Hawaii Revised Statutes, is
 
 3 amended to read as follows:
 
 4      "349-10  Annual senior citizen's fair.  Each county may
 
 5 hold an annual senior citizen's fair in its respective county.
 
 6 The county shall be responsible for the planning, organizing, and
 
 7 coordinating of the fair in every respect.  The state policy
 
 8 advisory board for elder affairs may assist the county in any
 
 9 aspect upon request.  Proceeds earned from this fair are deemed
 
10 to be proceeds earned from casual sales [as defined in chapter
 
11 237] and not subject to the tax in chapter    .  The county shall
 
12 distribute such proceeds to the various senior citizen
 
13 organizations and individuals who participate in the fair in
 
14 accordance with appropriate methods of distribution as determined
 
15 by the county."
 
16      SECTION 44  Section 358D-12 Hawaii Revised Statutes, is
 
17 amended by amending subsection (a) to read as follows:
 
18      "(a)  Any compensation received by a provider agency for
 
19 services or tangible personal property rendered to homeless
 
20 families or individuals, or in operating or managing a homeless
 
21 facility authorized by this chapter, is exempt from taxes under
 
22 chapter [237.]    ."
 
23      SECTION 45.  Section 421-23, Hawaii Revised Statutes, is
 

 
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                                     H.B. NO.1734       
                                                        
                                                        

 
 1 amended to read as follows:
 
 2      "421-23  Taxation.  Domestic associations organized under
 
 3 this chapter shall pay an annual license fee of $10 to the
 
 4 director of commerce and consumer affairs (and which shall be a
 
 5 general realization of the State) which shall be in lieu of all
 
 6 other corporation, franchise, and income taxes, and taxes and
 
 7 charges upon reserves held by the association for distribution to
 
 8 members, including without limitation upon the generality of the
 
 9 foregoing any taxes imposed under chapter 235. 
 
10      To obtain the exemptions from taxation granted by this
 
11 section or any other law, the association annually shall file
 
12 with the director of taxation a copy of its report made under
 
13 section 421-22, and in addition thereto, within ninety days after
 
14 the close of its fiscal year, shall file with the tax assessor of
 
15 each district in which there are persons doing business to whom
 
16 it has paid, during the preceding fiscal year, any proceeds of
 
17 goods marketed, a report showing the name of each person to whom
 
18 the proceeds were paid, the total proceeds of sales for which
 
19 such person is taxable under chapter [237]     for the fiscal
 
20 year, and the rate or rates of such tax applicable thereto or to
 
21 the several amounts thereof, as the case may be."
 
22      SECTION 46.  Section 421H-4, Hawaii Revised Statutes, is
 
23 amended by amending subsection (c) to read as follows:
 

 
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                                     H.B. NO.1734       
                                                        
                                                        

 
 1      "(c)  The membership shares and cooperative fees are
 
 2 interests in real property for purposes of[:
 
 3      (1)  Cooperative] cooperative housing corporations under
 
 4           section 216 of the federal Internal Revenue Code of
 
 5           1954, as amended[; and
 
 6      (2)  Exemption from state general excise tax under section
 
 7           237-24(16)]."
 
 8      SECTION 47.  Section 431:7-204, Hawaii Revised Statutes, is
 
 9 amended to read as follows:
 
10      "431:7-204  In lieu provision.  As to insurers, the taxes
 
11 and fees imposed by section 431:7-201 to section 431:7-204, and
 
12 the fees imposed by this code, when paid shall be in settlement
 
13 of and in lieu of all demands for taxes, licenses, or fees of
 
14 every character imposed by the laws of this State, the ordinances
 
15 or other laws, rules, or regulations of any county of this State,
 
16 except:
 
17      (1)  As expressly otherwise provided;
 
18      (2)  Taxes on real property;
 
19      (3)  Taxes on the purchase, use, or ownership of tangible
 
20           personal property; and
 
21      (4)  Taxes on gross income, gross proceeds, gross rental, or
 
22           gross rental proceeds under chapter [237 or] 237D.
 
23 Nothing in this section shall be deemed to exempt insurers from
 

 
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                                     H.B. NO.1734       
                                                        
                                                        

 
 1 liability for withholding taxes payable by their employees and
 
 2 paying the same to the proper collection officers, or from
 
 3 keeping such records, and making such returns and reports, as may
 
 4 be required in the case of other persons enjoying tax exemption."
 
 5      SECTION 48.  Section 431:10C-312, Hawaii Revised Statutes,
 
 6 is amended as follows:
 
 7      1.  By amending the title to read:
 
 8      "431:10C-312  Payment of [excise] retail sales tax and
 
 9 certificate of ownership fee."
 
10      2.  By amending subsection (a) to read:
 
11      "(a)  When a replacement vehicle is provided under section
 
12 431:10C-310 or section 431:10C-311, the insurer shall pay the
 
13 applicable [general excise] retail sales tax and ownership fee as
 
14 follows:
 
15      (1)  If a cash settlement is provided, and if within thirty
 
16           days of the receipt of the settlement by the insured,
 
17           the insured has purchased a vehicle, the insurer shall
 
18           reimburse the insured for the applicable [general
 
19           excise] retail sales tax and certificate of ownership
 
20           fee incurred on account of the purchase of the vehicle,
 
21           but not exceeding the amount payable on account of the
 
22           value of the total loss vehicle.
 
23      (2)  If the insured purchases a vehicle with a market value
 

 
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                                     H.B. NO.1734       
                                                        
                                                        

 
 1           less than the amount of the settlement, then the
 
 2           insurer shall reimburse only the amount of the
 
 3           applicable [general excise] retail sales  tax and
 
 4           certificate of ownership fee incurred by the insured."
 
 5      3.  By amending subsection (c) to read:
 
 6      "(c)  In lieu of the reimbursement procedure set out in
 
 7 subsection (a), the insurer may directly pay the required amounts
 
 8 of [general excise] retail sales taxes and certificate of
 
 9 ownership fee to the insured at the time of settlement."
 
10      SECTION 49.  Section 432:2-503, Hawaii Revised Statutes, is
 
11 amended to read as follows:
 
12      "432:2-503  Taxation.  Every society organized and
 
13 operating or licensed under this article shall be, from the time
 
14 of such organization, exempt from every state, county, and
 
15 municipal tax, except real property taxes and unemployment
 
16 compensation taxes; provided that nothing in this section shall
 
17 be deemed to exempt the association or society from liability to
 
18 withhold such taxes payable by its employees and pay the same to
 
19 the proper collection officers, and to keep such records and make
 
20 such returns and reports, as may be required in the case of other
 
21 corporations, associations, or societies similarly exempt from
 
22 the taxes hereinabove first mentioned[; provided further, that
 
23 the exemption hereby granted as to general excise taxes under
 

 
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                                     H.B. NO.1734       
                                                        
                                                        

 
 1 chapter 237 shall not apply to any activity the primary purpose
 
 2 of which is to produce income]."
 
 3      SECTION 50.  Section 437B-13, Hawaii Revised Statutes, is
 
 4 amended to read as follows:
 
 5      "437B-13  Invoices; supplying crash parts or used parts;
 
 6 customer's copy.  All work done by a motor vehicle repair dealer,
 
 7 mechanic, or apprentice, including all warranty work, shall be
 
 8 recorded on an invoice and shall describe all service work done
 
 9 and parts supplied.  Service work and parts shall be listed
 
10 separately on the invoice, which shall also state separately the
 
11 subtotal prices for service work and for parts, not including the
 
12 [general excise] retail sales tax, and shall state separately the
 
13 tax, if any, applicable to parts and service work.  If any crash,
 
14 used, rebuilt, or reconditioned parts are supplied, the invoice
 
15 shall clearly state that fact.  If a part of a component system
 
16 is composed of new and used, crash, rebuilt, or reconditioned
 
17 parts, the invoice shall clearly state that fact.  One copy shall
 
18 be given to the customer and one copy shall be retained by the
 
19 motor vehicle repair dealer."
 
20      SECTION 51.  Section 437D-8.44, Hawaii Revised Statutes, is
 
21 amended to read as follows:
 
22      "[[]437D-8.4[]]  License and registration fees.
 
23 Notwithstanding any law to the contrary, a lessor may visibly
 

 
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                                     H.B. NO.1734       
                                                        
                                                        

 
 1 pass on to a lessee:
 
 2      (1)  [The general excise tax attributable to the
 
 3           transaction;
 
 4      (2)] The vehicle license and registration fee and weight
 
 5           taxes, prorated at 1/365th of the annual vehicle
 
 6           license and registration fee and weight taxes actually
 
 7           paid on the particular vehicle being rented for each
 
 8           full or partial twenty-four hour rental day that the
 
 9           vehicle is rented; provided the total of all vehicle
 
10           license and registration fees charged to all lessees
 
11           shall not exceed the annual vehicle license and
 
12           registration fee actually paid for the particular
 
13           vehicle rented; and 
 
14     [(3)] (2)  The rental motor vehicle surcharge tax as provided
 
15           in section 251-2 attributable to the transaction.
 
16 A representation by the lessor to the lessee that the visible
 
17 pass on of the charges in paragraphs (1) [to (3)] and (2) is
 
18 mandatory or that it is a government assessment upon the consumer
 
19 shall be a per se violation of section 480-2."
 
20      SECTION 52.  Section 444-17, Hawaii Revised Statutes, is
 
21 amended to read as follows:
 
22      "444-17 Revocation, suspension, and renewal of licenses.
 
23 In addition to any other actions authorized by law, the board may
 

 
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                                     H.B. NO.1734       
                                                        
                                                        

 
 1 revoke any license issued pursuant to this section, or suspend
 
 2 the right of a licensee to use a license, or refuse to renew a
 
 3 license for any cause authorized by law, including but not
 
 4 limited to the following:
 
 5      (1)  Any dishonest, fraudulent, or deceitful act as a
 
 6           contractor that causes substantial damage to another;
 
 7      (2)  Engaging in any unfair or deceptive act or practice as
 
 8           prohibited by section 480-2;
 
 9      (3)  Abandonment of any construction project or operation
 
10           without reasonable or legal excuse;
 
11      (4)  Wilful diversion of funds or property received for
 
12           prosecution or completion of a specific construction
 
13           project or operation, or for a specified purpose in the
 
14           prosecution or completion of any construction project
 
15           or operation, and the use thereof for any other
 
16           purpose;
 
17      (5)  Wilful departure from, or wilful disregard of plans or
 
18           specifications in any material respect without consent
 
19           of the owner or the owner's duly authorized
 
20           representative, that is prejudicial to a person
 
21           entitled to have the construction project or operation
 
22           completed in accordance with those plans and
 
23           specifications;
 

 
Page 81                                                    
                                     H.B. NO.1734       
                                                        
                                                        

 
 1      (6)  Wilful violation of any law of the State, or any
 
 2           county, relating to building, including any violation
 
 3           of any applicable rule of the department of health, or
 
 4           of any applicable safety or labor law;
 
 5      (7)  Failure to make and keep records showing all contracts,
 
 6           documents, records, receipts, and disbursements by a
 
 7           licensee of all the licensee's transactions as a
 
 8           contractor for a period of not less than three years
 
 9           after completion of any construction project or
 
10           operation to which the records refer or to permit
 
11           inspection of those records by the board;
 
12      (8)  When the licensee being a partnership or a joint
 
13           venture permits any partner, member, or employee of the
 
14           partnership or joint venture who does not hold a
 
15           license to have the direct management of the
 
16           contracting business thereof;
 
17      (9)  When the licensee being a corporation permits any
 
18           officer or employee of the corporation who does not
 
19           hold a license to have the direct management of the
 
20           contracting business thereof;
 
21     (10)  Misrepresentation of a material fact by an applicant in
 
22           obtaining a license;
 
23     (11)  Failure of a licensee to complete in a material respect
 

 
Page 82                                                    
                                     H.B. NO.1734       
                                                        
                                                        

 
 1           any construction project or operation for the agreed
 
 2           price if the failure is without legal excuse;
 
 3     (12)  Wilful failure in any material respect to comply with
 
 4           this chapter or the rules adopted pursuant thereto;
 
 5     (13)  Wilful failure or refusal to prosecute a project or
 
 6           operation to completion with reasonable diligence;
 
 7     (14)  Wilful failure to pay when due a debt incurred for
 
 8           services or materials rendered or purchased in
 
 9           connection with the licensee's operations as a
 
10           contractor when the licensee has the ability to pay or
 
11           when the licensee has received sufficient funds
 
12           therefor as payment for the particular operation for
 
13           which the services or materials were rendered or
 
14           purchased;
 
15     (15)  The false denial of any debt due or the validity of the
 
16           claim therefor with intent to secure for a licensee,
 
17           the licensee's employer, or other person, any discount
 
18           of the debt or with intent to hinder, delay, or defraud
 
19           the person to whom the debt is due;
 
20     (16)  Failure to secure or maintain workers' compensation
 
21           insurance, unless the licensee is authorized to act as
 
22           a self-insurer under chapter 386 or is excluded from
 
23           the requirements of chapter 386;
 

 
Page 83                                                    
                                     H.B. NO.1734       
                                                        
                                                        

 
 1     (17)  Entering into a contract with an unlicensed contractor
 
 2           involving work or activity for the performance of which
 
 3           licensing is required under this chapter;
 
 4     (18)  Performing service on a residential or commercial air
 
 5           conditioner, utilizing CFCs, without using refrigerant
 
 6           recovery and recycling equipment;
 
 7     (19)  Performing service on any air conditioner after
 
 8           January 1, 1994, without successful completion of an
 
 9           appropriate training course in the recovery and
 
10           recycling of CFC and HCFC refrigerants, which included
 
11           instruction in the proper use of refrigerant recovery
 
12           and recycling equipment that is certified by
 
13           Underwriters Laboratories, Incorporated;
 
14     (20)  Violating chapter 342C; and
 
15     (21)  Failure to pay delinquent taxes, interest, and
 
16           penalties assessed [under chapter 237] that relate to
 
17           the business of contracting, or to comply with the
 
18           terms of a conditional payment plan with the department
 
19           of taxation for the payment of such delinquent taxes,
 
20           interest, and penalties."
 
21      SECTION 53.  Section 445-232, Hawaii Revised Statutes, is
 
22 amended to read as follows:
 
23      "445-232  License.  Any person who engages in the business
 

 
Page 84                                                    
                                     H.B. NO.1734       
                                                        
                                                        

 
 1 as a scrap dealer shall be licensed with the treasurer.  The
 
 2 treasurer shall have the power to grant license and to revoke
 
 3 such license upon reasonable cause.  The annual license fee shall
 
 4 be $10. 
 
 5      Every license granted under this section shall designate the
 
 6 place where business is carried on and sufficient identifying
 
 7 information including the licensee's name, address, [general
 
 8 excise tax license number,] and other information which may be
 
 9 prescribed by the treasurer."
 
10      SECTION 54.  Section 476-1, Hawaii Revised Statutes, is
 
11 amended by amending the definition of "cash price" to read as
 
12 follows:
 
13      ""Cash price" means the price at which the seller, in the
 
14 ordinary course of business, offers to sell for cash the goods or
 
15 services that are the subject of the credit sale.  At the
 
16 seller's option, the term may include the price of accessories,
 
17 services related to the sale, service contracts, [general excise]
 
18 retail sales and other taxes, and taxes and fees for license,
 
19 title, and registration.  The term does not include any finance
 
20 charge."
 
21      SECTION 55.  Section 481I-2, Hawaii Revised Statutes, is
 
22 amended by amending the definition of "collateral charges" to
 
23 read as follows:
 

 
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                                     H.B. NO.1734       
                                                        
                                                        

 
 1      ""Collateral charges" means those additional charges to a
 
 2 consumer wholly incurred as a result of the acquisition of the
 
 3 motor vehicle.  For the purposes of this chapter, collateral
 
 4 charges include, but are not limited to, manufacturer-installed
 
 5 or agent-installed items, [general excise] retail sales tax,
 
 6 license and registration fees, title charges, and similar
 
 7 government charges."
 
 8      SECTION 56.  Section 481I-3, Hawaii Revised Statutes, is
 
 9 amended by amending subsection (b) to read as follows:
 
10      "(b)  If the manufacturer, its agents, distributors, or
 
11 authorized dealers are unable to conform the motor vehicle to any
 
12 applicable express warranty by repairing or correcting any defect
 
13 or condition which substantially impairs the use, market value,
 
14 or safety of the motor vehicle after a reasonable number of
 
15 documented attempts, then the manufacturer shall provide the
 
16 consumer with a replacement motor vehicle or accept return of the
 
17 vehicle from the consumer and refund to the consumer the
 
18 following:  the full purchase price including but not limited to
 
19 charges for undercoating, dealer preparation, transportation and
 
20 installed options, and all collateral and incidental charges,
 
21 excluding finance and interest charges, and less a reasonable
 
22 offset for the consumer's use of the motor vehicle.
 
23      If either a replacement motor vehicle or a refund is
 

 
Page 86                                                    
                                     H.B. NO.1734       
                                                        
                                                        

 
 1 awarded, an "offset" may be made for damage to the vehicle not
 
 2 attributable to normal wear and tear, if unrelated to the
 
 3 nonconformity.  If a replacement motor vehicle is awarded, a
 
 4 reasonable offset shall be made for the use of the motor vehicle
 
 5 and an additional offset may be made for loss to the fair market
 
 6 value of the vehicle resulting from damage beyond normal wear and
 
 7 tear, unless the damage resulted from the nonconformity.  When
 
 8 the manufacturer supplies a replacement motor vehicle, the
 
 9 manufacturer shall be responsible for the [general excise] retail
 
10 sales tax, and license and registration fees.  Refunds made
 
11 pursuant to this subsection shall be deemed to be refunds of the
 
12 sales price and treated as such for purposes of [section 237-3.]
 
13 chapter    .  Refunds shall be made to the consumer and
 
14 lienholder, if any, as their interests may appear on the records
 
15 of ownership.  If applicable, refunds shall be made to the lessor
 
16 and lessee pursuant to rules adopted by the department of
 
17 commerce and consumer affairs."
 
18      SECTION 57.  Section 481K-1, Hawaii Revised Statutes, is
 
19 amended by amending the definition of "collateral charges" to
 
20 read as follows:
 
21      ""Collateral charges" means those additional charges to a
 
22 consumer [wholly] incurred as a result of the acquisition of the
 
23 assistive device.  For the purposes of this chapter, collateral
 

 
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                                     H.B. NO.1734       
                                                        
                                                        

 
 1 charges include but are not limited to items installed by the
 
 2 manufacturer, its agent, assistive device dealer or assistive
 
 3 device lessor, finance charges and financing costs, [general
 
 4 excise] retail sales tax, and other governmental charges, taxes,
 
 5 or fees."
 
 6      SECTION 58.  Section 501-151, Hawaii Revised Statutes, is
 
 7 amended to read as follows:
 
 8      "501-151  Pending actions, judgments; recording of, notice.
 
 9 No writ of entry, action for partition, or any action affecting
 
10 the title to real property or the use and occupation thereof or
 
11 the buildings thereon, and no judgment, nor any appeal or other
 
12 proceeding to vacate or reverse any judgment, shall have any
 
13 effect upon registered land as against persons other than the
 
14 parties thereto, unless a full memorandum thereof, containing
 
15 also a reference to the number of certificate of title of the
 
16 land affected is filed or recorded and registered.  Except as
 
17 otherwise provided, every judgment shall contain or have endorsed
 
18 on it the social security number, [State of Hawaii general excise
 
19 taxpayer identification number, or] federal employer
 
20 identification number for persons, corporations, partnerships or
 
21 other entities against whom the judgment is rendered.  If the
 
22 judgment debtor has no social security number, [State of Hawaii
 
23 general excise taxpayer identification number, or federal
 

 
Page 88                                                    
                                     H.B. NO.1734       
                                                        
                                                        

 
 1 employer identification number,] or if that information is not in
 
 2 the possession of the party seeking registration of the judgment,
 
 3 the judgment shall be accompanied by a certificate that provides
 
 4 that the information does not exist or is not in the possession
 
 5 of the party seeking registration of the judgment.  Failure to
 
 6 disclose or disclosure of an incorrect social security number,
 
 7 [State of Hawaii general excise taxpayer identification number,]
 
 8 or federal employer identification number shall not in any way
 
 9 adversely affect or impair the lien created upon recording of the
 
10 judgment.  This section does not apply to attachments, levies of
 
11 execution, or to proceedings for the probate of wills, or for
 
12 administration in a probate court; provided that in case notice
 
13 of the pendency of the action has been duly registered it is
 
14 sufficient to register the judgment in the action within sixty
 
15 days after the rendition thereof.
 
16      As used in this chapter "judgment" includes an order or
 
17 decree having the effect of a judgment.
 
18      Notice of the pendency of an action in a United States
 
19 District Court, as well as a court of the State of Hawaii, may be
 
20 recorded."
 
21      SECTION 59.  Section 502-33, Hawaii Revised Statutes, is
 
22 amended to read as follows:
 
23      "502-33  Identification of reference to registration of
 

 
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                                     H.B. NO.1734       
                                                        
                                                        

 
 1 original.  The registrar shall not record any instrument
 
 2 requiring a reference to a prior recorded instrument, unless the
 
 3 same contains a reference to the book and page or document number
 
 4 of the registration of the original recorded instrument or a
 
 5 statement that the original instrument is unrecorded, as the case
 
 6 may be.  Except as otherwise provided, every judgment shall
 
 7 contain or have endorsed on it the social security number, [State
 
 8 of Hawaii general excise taxpayer identification number,] or
 
 9 federal employer identification number for persons, corporations,
 
10 partnerships, or other entities against whom the judgment is
 
11 rendered.  If the judgment debtor has no social security number,
 
12 [State of Hawaii general excise taxpayer identification number,]
 
13 or federal employer identification number, or if that information
 
14 is not in the possession of the party seeking registration of the
 
15 judgment, the judgment shall be accompanied by a certificate that
 
16 provides that the information does not exist or is not in the
 
17 possession of the party seeking registration of the judgment.
 
18 Failure to disclose or disclosure of an incorrect social security
 
19 number, [State of Hawaii general excise taxpayer identification
 
20 number,] or federal employer identification number shall not in
 
21 any way adversely affect or impair the lien created upon
 
22 registration of the judgment.  No amendment, continuation
 
23 statement, termination statement, statement of assignment, or
 

 
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                                     H.B. NO.1734       
                                                        
                                                        

 
 1 statement of release relating to security interests in goods
 
 2 which are or are to become fixtures shall be filed unless it
 
 3 complies with the requirements of the Uniform Commercial Code,
 
 4 section 490:9-408.  This section does not apply to any document
 
 5 mentioned herein executed prior to April 13, 1915."
 
 6      SECTION 60.  Section 504-1, Hawaii Revised Statutes, is
 
 7 amended to read as follows:
 
 8      "504-1 Registration of federal judgments.  Judgments of
 
 9 United States courts may be registered, recorded, docketed, and
 
10 indexed in the bureau of conveyances or with the assistant
 
11 registrar of the land court in the same manner as judgments of
 
12 the courts of the State.  Except as otherwise provided, every
 
13 judgment shall contain or have endorsed on it the social security
 
14 number, [State of Hawaii general excise taxpayer identification
 
15 number,] or federal employer identification number for persons,
 
16 corporations, partnerships, or other entities against whom the
 
17 judgment is rendered.  If the judgment debtor has no social
 
18 security number, [State of Hawaii general excise taxpayer
 
19 identification number,] or federal employer identification
 
20 number, or if that information is not in the possession of the
 
21 party seeking the registration, recordation, docketing, or
 
22 indexing of the judgment, the judgment shall be accompanied by a
 
23 certificate that provides that the information does not exist or
 

 
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                                     H.B. NO.1734       
                                                        
                                                        

 
 1 is not in the possession of the party seeking registration,
 
 2 recordation, docketing, or indexing of the judgment.  Failure to
 
 3 disclose or disclosure of an incorrect social security number,
 
 4 [State of Hawaii general excise taxpayer identification number,]
 
 5 or federal employer identification number shall not in any way
 
 6 adversely affect or impair the lien created upon the
 
 7 registration, recordation, docketing, or indexing of the
 
 8 judgment."
 
 9      SECTION 61.  Section 514E-3, Hawaii Revised Statutes, is
 
10 amended by amending subsection (b) to read as follows:
 
11      "(b)  The acquisition agent and sales agent shall maintain
 
12 records pertaining to the [general excise] retail sales tax of
 
13 any independent contractors employed by them, their addresses and
 
14 commissions paid during each calendar year.  The plan manager
 
15 shall maintain records of the [general excise and] transient
 
16 accommodations taxes due and owing with respect to any occupants
 
17 or time share units under the plan manager's management.  The
 
18 records for any year shall be retained for at least two years and
 
19 be available for inspection by the director or the director of
 
20 taxation."
 
21      SECTION 62.  Section 521-43, Hawaii Revised Statutes, is
 
22 amended by amending subsection (h) to read as follows:
 
23      "(h)  Landlords shall provide [their general excise tax
 

 
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                                     H.B. NO.1734       
                                                        
                                                        

 
 1 number] necessary information to all tenants for the purpose of
 
 2 filing for a low-income tax credit."
 
 3      SECTION 63.  Section 636-3, Hawaii Revised Statutes, is
 
 4 amended to read as follows:
 
 5      "636-3  Judgment, lien when.  Any money judgment or decree
 
 6 of a state court or the United States District Court for the
 
 7 District of Hawaii shall be a lien upon real property when a copy
 
 8 thereof, certified as correct by a clerk of the court where it is
 
 9 entered, is recorded in the bureau of conveyances. No such lien
 
10 shall continue beyond ten years after the date of the judgment.
 
11 Except as otherwise provided, every judgment shall contain or
 
12 have endorsed on it the social security number, [State of Hawaii
 
13 general excise taxpayer identification number,] or federal
 
14 employer identification number for persons, corporations,
 
15 partnerships, or other entities against whom the judgment is
 
16 rendered. If the judgment debtor has no social security number,
 
17 [State of Hawaii general excise taxpayer identification number,]
 
18 or federal employer identification number, or if that information
 
19 is not in the possession of the party seeking registration of the
 
20 judgment, the judgment shall be accompanied by a certificate that
 
21 provides that the information does not exist or is not in the
 
22 possession of the party seeking recordation of the judgment.
 
23 Failure to disclose or disclosure of an incorrect social security
 

 
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                                     H.B. NO.1734       
                                                        
                                                        

 
 1 number, [State of Hawaii general excise taxpayer identification
 
 2 number,] or federal employer identification number shall not in
 
 3 any way adversely affect or impair the lien created upon
 
 4 recordation of the judgment. When any such judgment is fully
 
 5 paid, the creditor or the creditor's attorney of record in the
 
 6 action shall, at the expense of the debtor, execute, acknowledge,
 
 7 and deliver to the debtor a satisfaction thereof, which may be
 
 8 recorded in the bureau. Every satisfaction or assignment of
 
 9 judgment shall contain a reference to the book and page or
 
10 document number of the registration of the original judgment. The
 
11 recording fees for a judgment and for each assignment or
 
12 satisfaction of judgment shall be as provided by section 502-25.
 
13      In the case of registered land, section 501-102 and sections
 
14 501-241 to 501-248 shall govern."
 
15      SECTION 64.  Section 842-11, Hawaii Revised Statutes, is
 
16 amended to read as follows:
 
17      "842-11  Failure to report income; penalty.  Any law to the
 
18 contrary notwithstanding, no person shall willfully fail to
 
19 report income or to pay the taxes due thereon as provided by
 
20 chapters 235 or [237.]    .  Whoever violates this section shall
 
21 be fined not more than $10,000 or imprisoned not more than ten
 
22 years, or both, in addition to any assessment and collection of
 
23 taxes, penalties and interest to which the State may be entitled
 

 
Page 94                                                    
                                     H.B. NO.1734       
                                                        
                                                        

 
 1 under chapters 235 and [237.]    ."
 
 2      SECTION 65.  Section 46-16.7, Hawaii Revised Statutes, is
 
 3 repealed.
 
 4      ["46-16.7  County general excise and use tax surcharge.
 
 5 (a)  Each county, except the county of Kalawao, may establish a
 
 6 general excise and use tax surcharge of one-half per cent.  Each
 
 7 county shall establish the general excise and use tax surcharge
 
 8 by ordinance adopted before October 1, 1992, which shall take
 
 9 effect on January 1, 1993, and remain in effect for ten years
 
10 through December 31, 2002, unless earlier repealed, pursuant to
 
11 subsection (c).  No ordinance shall be adopted until the county
 
12 has conducted a public hearing on the proposed ordinance.  Notice
 
13 of the public hearing shall be published in a newspaper of
 
14 general circulation within the county at least twice within a
 
15 period of thirty days immediately preceding the date of the
 
16 hearing.  If a county fails to adopt a county general excise and
 
17 use tax surcharge ordinance by October 1, 1992, the county shall
 
18 not be covered by this section.
 
19      (b)  Each county shall notify the director of taxation
 
20 within ten days after the county has adopted a general excise and
 
21 use tax surcharge ordinance, and the director of taxation shall
 
22 levy, assess, collect, and otherwise administer the general
 
23 excise and use tax surcharge for the taxable year beginning
 

 
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                                     H.B. NO.1734       
                                                        
                                                        

 
 1 January 1, 1993, and for taxable years thereafter through
 
 2 December 31, 2002, as provided by chapters 237 and 238.
 
 3      (c)  The general excise and use tax surcharges received from
 
 4 the State by each county shall be used as follows:
 
 5      (1)  The city and county of Honolulu shall use the
 
 6           surcharges to develop a fixed rail rapid transit
 
 7           system.  All private source revenues generated or
 
 8           pledged to develop a fixed rail rapid transit system
 
 9           that are received prior to the operation of the system
 
10           shall be used as county matching funds for moneys
 
11           requested from the transit capital development fund,
 
12           pursuant to chapter 51D, before surcharges may be used.
 
13           The director of finance shall determine whether or not
 
14           private sources are adequate to meet county matching
 
15           requirements.  The director of finance shall submit a
 
16           report of the findings to the legislature.  Upon
 
17           legislative acceptance of the findings, within sixty
 
18           days of the first regular legislative session convened
 
19           following the submittal of the findings, no additional
 
20           moneys may be expended from the transit fund; provided
 
21           that:
 
22           (A)  Such limitation on the expenditure of moneys from
 
23                the transit fund shall not occur prior to
 

 
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                                     H.B. NO.1734       
                                                        
                                                        

 
 1                December 31, 1992; and
 
 2           (B)  Private source revenues received prior to the
 
 3                operation of the system or received in each year
 
 4                that the surcharge is in effect shall be committed
 
 5                to the funding of the capital costs of the fixed
 
 6                rail rapid transit system prior to any
 
 7                determination regarding the duration of the
 
 8                surcharge.
 
 9      (2)  All surcharges collected by the State for the city and
 
10           county of Honolulu but not used for the purpose of
 
11           developing a fixed rail rapid transit system shall be
 
12           deposited into the state treasury to be returned to the
 
13           taxpayers who resided in the city and county of
 
14           Honolulu for more than two hundred days of the taxable
 
15           year in the aggregate during the time that the
 
16           surcharges were collected, in the form of an income tax
 
17           credit, the amount of the credit to be determined by
 
18           law.
 
19      (3)  The general excise and use tax surcharge shall be
 
20           repealed upon the determination by the director of
 
21           finance that all authorized capital costs of the fixed
 
22           rail rapid transit system or county projects under
 
23           paragraph (4) have been collected and distributed
 

 
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                                     H.B. NO.1734       
                                                        
                                                        

 
 1           pursuant to chapter 248.
 
 2      (4)  The counties of Hawaii, Kauai, and Maui shall use the
 
 3           surcharges for public transportation systems, including
 
 4           mass transportation, sewage, or water development, and
 
 5           parks, including park operation, maintenance,
 
 6           infrastructure, or purchase.
 
 7      (d)  As used in this section:
 
 8      "Capital costs" means nonrecurring costs required to
 
 9 construct a transit facility or system, including debt service,
 
10 costs of land acquisition and development, acquiring of rights-
 
11 of-way, planning, design, and construction, including equipping
 
12 and furnishing the facility or system.
 
13      "Private source revenue" means all funds, concessions,
 
14 development rights, or those assets of value contractually agreed
 
15 upon with the county from sources other than state, county, or
 
16 federal governments as a result of, or for the purposes of,
 
17 developing mass transportation."]
 
18      SECTION 66.  Section 182-16, Hawaii Revised Statutes, is
 
19 repealed.
 
20      ["[182-16]  Levy and assessment of general excise tax.
 
21 Notwithstanding any provision to the contrary, the levy and
 
22 assessment of the general excise tax on the gross proceeds from
 
23 any manner of sale of (1) geothermal resources or (2) electrical
 

 
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                                     H.B. NO.1734       
                                                        
                                                        

 
 1 energy produced by the geothermal resources producer from such
 
 2 geothermal resources, shall be made only as a tax on the business
 
 3 of a producer, at the rate assessed producers, under section
 
 4 237-13(2)(A)."]
 
 5      SECTION 67.  Section 209-11, Hawaii Revised Statutes, is
 
 6 repealed.
 
 7      ["209E-11  State general excise and use tax exemptions.
 
 8 The department shall certify annually to the department of
 
 9 taxation that any qualified business is exempt from the payment
 
10 of general excise taxes on the gross proceeds from the
 
11 manufacture of tangible personal property, the wholesale sale of
 
12 tangible personal property, or the engaging in a service business
 
13 by a qualified business in the enterprise zone and exempt from
 
14 the use tax for purchases by a qualified business.  The gross
 
15 proceeds received by a contractor shall be exempt from the
 
16 general excise tax for construction within an enterprise zone
 
17 performed for a qualified business within an enterprise zone.
 
18 The exemption shall extend for a period not to exceed seven
 
19 years."]
 
20      SECTION 68.  Section 235-16, Hawaii Revised Statutes, is
 
21 repealed.
 
22      ["235-16  County surcharge excise tax credit.  (a)  If the
 
23 collection of the county general excise and use tax surcharge
 

 
Page 99                                                    
                                     H.B. NO.1734       
                                                        
                                                        

 
 1 starts on January 1, 1993, as provided in sections 46-16.7,
 
 2 237-8.5, and 238-2.5, then for taxable years, in each year that
 
 3 the surcharge is in effect, beginning after December 31, 1992,
 
 4 and ending before January 1, 2003, each resident individual
 
 5 taxpayer, who files an individual income tax return for a taxable
 
 6 year, and who is not claimed or is not otherwise eligible to be
 
 7 claimed as a dependent by another taxpayer for federal or Hawaii
 
 8 state individual income tax purposes, may claim a county
 
 9 surcharge excise tax credit in the amount computed under this
 
10 section against the resident taxpayer's individual income tax
 
11 liability for the taxable year for which the individual income
 
12 tax return is being filed; provided that a resident individual
 
13 who has no income or no income taxable under this chapter and who
 
14 is not claimed or is not otherwise eligible to be claimed as a
 
15 dependent by a taxpayer for federal or Hawaii state individual
 
16 income tax purposes may claim this credit.
 
17      (1)  Each resident individual taxpayer who resides for more
 
18           than two hundred days of the taxable year in the
 
19           aggregate in a county in which the county general
 
20           excise and use tax surcharge is in effect may claim the
 
21           tax credit according to the adjusted gross income
 
22           bracket shown in the following schedule:
 
23                        TAX CREDIT SCHEDULE
 

 
Page 100                                                   
                                     H.B. NO.1734       
                                                        
                                                        

 
 1           Adjusted Gross Income             Tax Credit
 
 2                    Under $5,000                $ 25
 
 3            $5,000 under $10,000                  45
 
 4           $10,000 under $15,000                  65
 
 5           $15,000 under $20,000                  90
 
 6           $20,000 under $30,000                 110
 
 7           $30,000 under $40,000                 125
 
 8           $40,000 under $50,000                 145
 
 9           $50,000 under $75,000                 185
 
10          $75,000 under $100,000                 205
 
11               $100,000 and over                 210
 
12      (2)  Each resident individual taxpayer who resides for more
 
13           than two hundred days of the taxable year in the
 
14           aggregate in a county which has not adopted the county
 
15           general excise and use tax surcharge may claim a tax
 
16           credit according to the adjusted gross income bracket
 
17           shown in the schedule below:
 
18                        TAX CREDIT SCHEDULE
 
19           Adjusted Gross Income             Tax Credit
 
20                    Under $5,000                 $ 5
 
21            $5,000 under $10,000                  10
 
22           $10,000 under $20,000                  15
 
23           $20,000 under $30,000                  20
 

 
Page 101                                                   
                                     H.B. NO.1734       
                                                        
                                                        

 
 1           $30,000 under $40,000                  25
 
 2           $40,000 under $50,000                  30
 
 3           $50,000 under $75,000                  35
 
 4                $75,000 and over                  40
 
 5      A husband and wife filing separate returns for a taxable
 
 6 year for which a joint return could have been filed by them shall
 
 7 claim only the tax credit to which they would have been entitled
 
 8 had a joint return been filed.
 
 9      (b)  The tax credit under this section shall not be
 
10 available to (1) any person who has been convicted of a felony
 
11 and who has been committed to prison and has been physically
 
12 confined for the full taxable year; (2) any person who would
 
13 otherwise be eligible to be claimed as a dependent but who has
 
14 been committed to a youth correctional facility and has resided
 
15 at the facility for the full taxable year; or (3) any
 
16 misdemeanant who has been committed to jail and has been
 
17 physically confined for the full taxable year.
 
18      (c)  The tax credits claimed by a resident taxpayer pursuant
 
19 to this section shall be deductible from the resident taxpayer's
 
20 individual income tax liability, if any, for the tax year in
 
21 which they are properly claimed.  If the tax credits claimed by a
 
22 resident taxpayer exceed the amount of income tax payment due
 
23 from the resident taxpayer, the excess of credits over payments
 

 
Page 102                                                   
                                     H.B. NO.1734       
                                                        
                                                        

 
 1 due shall be refunded to the resident taxpayer; provided that tax
 
 2 credits properly claimed by a resident individual who has no
 
 3 income tax liability shall be paid to the resident individual.
 
 4      (d)  If the tax credit is claimed by an individual who does
 
 5 not reside in the appropriate county as set forth in subsection
 
 6 (a)(1) or (a)(2), there shall be added to and become a part of
 
 7 the tax liability of the individual:
 
 8      (1)  The amount of the tax credit claimed under this section
 
 9           multiplied by three; or
 
10      (2)  Ten per cent of the income tax liability for the
 
11           taxable year for which the individual income tax return
 
12           is being filed,
 
13 whichever is greater.
 
14      All claims for tax credits under this section, including any
 
15 amended claims, must be filed on or before the end of the twelfth
 
16 month following the close of the taxable year for which the
 
17 credits may be claimed.  Failure to comply with the foregoing
 
18 provision shall constitute a waiver of the right to claim the
 
19 credit."]
 
20      SECTION 69.  Section 238-2.5, Hawaii Revised Statutes, is
 
21 repealed.
 
22      ["238-2.5  County general excise and use tax surcharge;
 
23 administration.(a)  The county general excise and use tax
 

 
Page 103                                                   
                                     H.B. NO.1734       
                                                        
                                                        

 
 1 surcharge, upon the adoption of a county ordinance under section
 
 2 46-16.7, shall be levied, assessed, and collected as provided in
 
 3 this section on the value of property taxable under this chapter
 
 4 at the four per cent tax rate under section 238-2(3) in a manner
 
 5 that the combined state use tax and the county general excise and
 
 6 use tax surcharge shall be four and one-half per cent in those
 
 7 counties adopting the surcharge.  All provisions of this chapter
 
 8 shall apply to the county general excise and use tax surcharge.
 
 9 With respect to the surcharge, the director shall have all the
 
10 rights and powers provided under this chapter.  In addition, the
 
11 director of taxation shall have the exclusive rights and power to
 
12 determine the county or counties in which a person imports or
 
13 purchases tangible personal property and, in the case of a person
 
14 importing or purchasing tangible property in more than one
 
15 county, the director shall determine through apportionment or
 
16 other means, that portion of the general excise and use tax
 
17 surcharge attributable to the importation or purchase in each
 
18 county.
 
19      (b)  Each county general excise and use tax surcharge shall
 
20 be levied as of January 1, 1993, and shall continue for a period
 
21 of ten years through December 31, 2002, or until earlier
 
22 repealed.
 
23      (c)  No county general excise and use tax surcharge shall be
 

 
Page 104                                                   
                                     H.B. NO.1734       
                                                        
                                                        

 
 1 established upon any use taxable under this chapter at the one-
 
 2 half per cent tax rate or upon any use that is not subject to
 
 3 taxation or that is exempt from taxation under this chapter.
 
 4      (d)  The director of taxation shall revise the use tax forms
 
 5 to provide for the clear and separate designation of the
 
 6 imposition and payment of the county general excise and use tax
 
 7 surcharge.
 
 8      The taxpayer shall designate the taxation district to which
 
 9 the county general excise and use tax surcharge is assigned in
 
10 accordance with rules adopted by the director of taxation under
 
11 chapter 91.  The taxpayer shall file a schedule with the
 
12 taxpayer's periodic and annual general excise and use tax returns
 
13 summarizing the amount of taxes assigned to each taxation
 
14 district.
 
15      The penalties provided by section 231-39 for failure to file
 
16 a tax return shall be imposed on the amount of surcharge due on
 
17 the return being filed for the failure to file the schedule
 
18 required to accompany the return.  In addition, there shall be
 
19 added to the tax an amount equal to ten per cent of the amount of
 
20 the surcharge and tax due on the return being filed for the
 
21 failure to file the schedule or the failure to correctly report
 
22 the assignment of the use tax by taxation district on the
 
23 schedule required under this subsection.
 

 
Page 105                                                   
                                     H.B. NO.1734       
                                                        
                                                        

 
 1      (e)  All taxpayers who file on a fiscal year basis whose
 
 2 fiscal year ends after December 31, 1992, or after December 31,
 
 3 2002, shall file a short period annual return for the period
 
 4 preceding January 1, 1993, or preceding January 1, 2003.  Each
 
 5 fiscal year taxpayer shall also file a short period annual return
 
 6 for the period starting after December 31, 1992, and ending
 
 7 before January 1, 1994, and for the period starting after
 
 8 December 31, 2002, and ending before January 1, 2004.
 
 9      All monthly, annual, and amended returns due under this
 
10 chapter for any period preceding January 1, 2003, which are
 
11 submitted to the department after December 31, 2002, shall
 
12 include in payments submitted with the return any county general
 
13 excise and use tax surcharge that may be due for the period
 
14 preceding January 1, 2003."]
 
15      SECTION 70.  Section 238-4, Hawaii Revised Statutes, is
 
16 repealed.
 
17      ["238-4 Certain property used by producers.  If a licensed
 
18 producer, or a cooperative association acting under the authority
 
19 of chapter 421 or 422, in order to sell to such producer, or a
 
20 licensed person, imports into the State or acquires in the State
 
21 commodities, materials, items, services, or living things
 
22 enumerated in section 237-4(3) and (5) to (7), then section 237-4
 
23 shall apply.  If section 237-4 applies and the producer is
 

 
Page 106                                                   
                                     H.B. NO.1734       
                                                        
                                                        

 
 1 engaged in the sale of the producer's products at retail or in
 
 2 any manner other than at wholesale, then the tax upon use of
 
 3 property in the State imposed by section 238-2(2) shall apply the
 
 4 same as in the case of a purchaser who is a licensed retailer.
 
 5 In other such cases no tax shall be imposed under this chapter."]
 
 6      SECTION 71.  Section 239-4, Hawaii Revised Statutes, is
 
 7 repealed.
 
 8      ["239-6 Airlines, certain carriers.  There shall be levied
 
 9 and assessed upon each airline a tax of four per cent of its
 
10 gross income each year from the airline business; provided that
 
11 if an airline adopts a rate schedule for students in grade twelve
 
12 or below travelling in school groups providing such students at
 
13 reasonable hours a rate less than one-half of the regular adult
 
14 fare, the tax shall be three per cent of its gross income each
 
15 year from the airline business.  There shall be levied and
 
16 assessed upon each motor carrier, each common carrier by water,
 
17 and upon each contract carrier other than a motor carrier, a tax
 
18 of four per cent of its gross income each year from the motor
 
19 carrier or contract carrier business.  The tax imposed by this
 
20 section is a means of taxing the personal property of the airline
 
21 or other carrier, tangible and intangible, including going
 
22 concern value, and is in lieu of the tax imposed by chapter 237
 
23 but is not in lieu of any other tax."]
 

 
Page 107                                                   
                                     H.B. NO.1734       
                                                        
                                                        

 
 1      SECTION 72.  Section 248-2.5, Hawaii Revised Statutes, is
 
 2 repealed.
 
 3      ["[248-2.5]  County general excise and use tax surcharge;
 
 4 disposition of proceeds.(a)  All county general excise and use
 
 5 tax surcharges collected by the director of taxation shall be
 
 6 paid into the state treasury each month within ten working days
 
 7 after collection, and shall be kept by the state director of
 
 8 finance in special accounts.  Out of the county general excise
 
 9 and use tax surcharges paid into the state treasury special
 
10 accounts, the state director of finance shall retain, from time
 
11 to time, sufficient amounts to reimburse the State for the costs
 
12 of assessment, collection, and disposition of the county general
 
13 excise and use tax surcharge incurred by the State.  Amounts
 
14 retained shall be general fund realizations of the State.
 
15      (b)  The costs of assessment, collection, and disposition of
 
16 county general excise and use tax surcharges shall be withheld
 
17 from payment to the several counties by the State out of the
 
18 county general excise and use tax surcharges collected for the
 
19 current calendar year.
 
20      The costs of assessment, collection, and disposition of the
 
21 county general excise and use tax surcharges shall be borne by
 
22 each of the several counties in an amount proportional to the
 
23 total amount of surcharges allocated to that county divided by
 

 
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                                     H.B. NO.1734       
                                                        
                                                        

 
 1 the total amount of surcharges collected for the entire State for
 
 2 the preceding calendar year.
 
 3      For the purpose of this section, the costs of assessment,
 
 4 collection, and disposition of the county general excise and use
 
 5 tax surcharges shall include any and all costs, direct or
 
 6 indirect, which are deemed necessary and proper to effectively
 
 7 administer this section and sections 237-8.5 and 238-2.5.  Costs
 
 8 include refunds or reductions of income taxes under section
 
 9 235-110.7 attributable to the county general excise and use tax
 
10 surcharge.
 
11      (c)  After the deduction of the costs under subsection (b),
 
12 the state director of finance shall pay the remaining balance on
 
13 a monthly or quarterly basis to the director of finance for each
 
14 county which has adopted a county general excise and use tax
 
15 surcharge under section 46-16.7.  The payments shall be made as
 
16 soon as possible after the county general excise and use tax
 
17 surcharges have been paid into the state treasury special
 
18 accounts, or after the disposition of any tax appeal, as the case
 
19 may be.  All county general excise and use tax surcharges
 
20 collected shall be distributed by the state director of finance
 
21 to the county in which the county general excise tax surcharge is
 
22 generated and shall be a general fund realization of the county
 
23 to be used for the purposes specified in section 46-16.7 by each
 

 
Page 109                                                   
                                     H.B. NO.1734       
                                                        
                                                        

 
 1 of the several counties."]
 
 2      SECTION 73. Chapter 237, Hawaii Revised Statutes, is
 
 3 repealed.
 
 4      SECTION 74.  Statutory material to be repealed is bracketed.
 
 5 New statutory material is underscored.
 
 6      SECTION 75.  This Act shall take effect on July 1, 2000.
 
 7 
 
 8                           INTRODUCED BY:  _______________________