GET/Use taxes; Aircraft Leases

Exempts from the general excise tax, amounts received as rent for
the rental or leasing of aircraft or aircraft engine used by
lessees or renters for interstate air transportation of
passengers and goods.  Clarifies the existing use tax exemption
with regard to the acquisition or importation of the leasing or
renting of any aircraft or aircraft engine by any lessee or
renter engaged in interstate air transportation. (HB2794 HD3)

HOUSE OF REPRESENTATIVES                H.B. NO.           H.D. 3
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            

                   A  BILL  FOR  AN  ACT


 1      SECTION 1.  The legislature finds that the geographical
 2 nature of Hawaii is unique in that it is composed of separate and
 3 distinct islands, and therefore travel among these islands is
 4 dependent solely on the availability of commercial modes of
 5 transportation, primarily air travel.
 6      The legislature further finds that interisland
 7 transportation needs of Hawaii's residents, as well as those
 8 tourists who wish to experience the beauty of each island, are
 9 currently served by the commercial air carriers that provide
10 frequent, affordable, and necessary means of intrastate
11 transportation to our residents and tourists alike, thus
12 differentiating these air carriers by the necessary service they
13 provide.
14      The legislature finds that Hawaii is currently served by two
15 major interisland air carriers that have made and will continue
16 to make capital investments in order to assure that our residents
17 continue to be best served in their interisland transportation
18 needs.  In addition, the service provided by these two
19 interisland carriers also provides a necessary service to

Page 2                                                     2794
                                     H.B. NO.           H.D. 3

 1 Hawaii's tourists and supports the tourism market on each major
 2 island.
 3      The purpose of this Act is to provide a general excise tax
 4 exemption for any amounts received as rent for the rental or
 5 leasing of aircraft or aircraft engine used for interisland air
 6 transportation of passengers and goods and to clarify the
 7 existing use tax exemption.
 8      SECTION 2.  Section 237-24.3, Hawaii Revised Statutes, is
 9 amended to read as follows:
10      "237-24.3  Additional amounts not taxable.  In addition to
11 the amounts not taxable under section 237-24, this chapter shall
12 not apply to:
13      (1)  Amounts received from the loading, transportation, and
14           unloading of agricultural commodities shipped for a
15           producer or produce dealer on one island of this State
16           to a person, firm, or organization on another island of
17           this State.  The terms "agricultural commodity",
18           "producer", and "produce dealer" shall be defined in
19           the same manner as they are defined in section 147-1;
20           provided that agricultural commodities need not have
21           been produced in the State;
22      (2)  Amounts received from sales of:

Page 3                                                     2794
                                     H.B. NO.           H.D. 3

 1           (A)  Intoxicating liquor as the term "liquor" is
 2                defined in chapter 244D;
 3           (B)  Cigarettes and tobacco products as defined in
 4                chapter 245; and
 5           (C)  Agricultural, meat, or fish products grown,
 6                raised, or caught in Hawaii, to any person or
 7                common carrier in interstate or foreign commerce,
 8                or both, whether ocean-going or air, for
 9                consumption out-of-state on the shipper's vessels
10                or airplanes;
11      (3)  Amounts received by the manager or board of directors
12           of:
13           (A)  An association of apartment owners of a
14                condominium property regime established in
15                accordance with chapter 514A; or
16           (B)  A nonprofit homeowners or community association
17                incorporated in accordance with chapter 415B or
18                any predecessor thereto and existing pursuant to
19                covenants running with the land[,];
20           in reimbursement of sums paid for common expenses;
21      (4)  Amounts received or accrued from:
22           (A)  The loading or unloading of cargo from ships,
23                barges, vessels, or aircraft, whether or not the

Page 4                                                     2794
                                     H.B. NO.           H.D. 3

 1                ships, barges, vessels, or aircraft travel between
 2                the State and other states or countries or between
 3                the islands of the State;
 4           (B)  Tugboat services including pilotage fees performed
 5                within the State, and the towage of ships, barges,
 6                or vessels in and out of state harbors, or from
 7                one pier to another; and
 8           (C)  The transportation of pilots or governmental
 9                officials to ships, barges, or vessels offshore;
10                rigging gear; checking freight and similar
11                services; standby charges; and use of moorings and
12                running mooring lines;
13      (5)  Amounts received by an employee benefit plan by way of
14           contributions, dividends, interest, and other income;
15           and amounts received by a nonprofit organization or
16           office, as payments for costs and expenses incurred for
17           the administration of an employee benefit plan;
18           provided that this exemption shall not apply to any
19           gross rental income or gross rental proceeds received
20           after June 30, 1994, as income from investments in real
21           property in this State; and provided further that gross
22           rental income or gross rental proceeds from investments
23           in real property received by an employee benefit plan

Page 5                                                     2794
                                     H.B. NO.           H.D. 3

 1           after June 30, 1994, under written contracts executed
 2           prior to July 1, 1994, shall not be taxed until the
 3           contracts are renegotiated, renewed, or extended, or
 4           until after December 31, 1998, whichever is earlier.
 5           For the purposes of this paragraph, "employee benefit
 6           plan" means any plan as defined in section 1002(3) of
 7           title 29 of the United States Code, as amended;
 8      (6)  Amounts received for purchases made with United States
 9           Department of Agriculture food coupons under the
10           federal food stamp program, and amounts received for
11           purchases made with United States Department of
12           Agriculture food vouchers under the Special
13           Supplemental Foods Program for Women, Infants and
14           Children;
15      (7)  Amounts received by a hospital, infirmary, medical
16           clinic, health care facility, pharmacy, or a
17           practitioner licensed to administer the drug to an
18           individual for selling prescription drugs or prosthetic
19           devices to an individual; provided that this paragraph
20           shall not apply to any amounts received for services
21           provided in selling prescription drugs or prosthetic
22           devices.  As used in this paragraph:

Page 6                                                     2794
                                     H.B. NO.           H.D. 3

 1           (A)  "Prescription drugs" are those drugs defined under
 2                section [[]328-1[]] and dispensed by filling or
 3                refilling a written or oral prescription by a
 4                practitioner licensed under law to administer the
 5                drug and sold by a licensed pharmacist under
 6                section 328-16 or practitioners licensed to
 7                administer drugs; and
 8           (B)  "Prosthetic device" means any artificial device or
 9                appliance, instrument, apparatus, or contrivance,
10                including their components, parts, accessories,
11                and replacements thereof, used to replace a
12                missing or surgically removed part of the human
13                body, which is prescribed by a licensed
14                practitioner of medicine, osteopathy, or podiatry
15                and which is sold by the practitioner or which is
16                dispensed and sold by a dealer of prosthetic
17                devices; provided that "prosthetic device" shall
18                not mean any auditory, ophthalmic, dental, or
19                ocular device or appliance, instrument, apparatus,
20                or contrivance;
21      (8)  Taxes on transient accommodations imposed by chapter
22           237D and passed on and collected by operators holding
23           certificates of registration under that chapter;

Page 7                                                     2794
                                     H.B. NO.           H.D. 3

 1      (9)  Amounts received as dues by an unincorporated merchants
 2           association from its membership for advertising media,
 3           promotional, and advertising costs for the promotion of
 4           the association for the benefit of its members as a
 5           whole and not for the benefit of an individual member
 6           or group of members less than the entire membership;
 7           [and]
 8     (10)  Amounts received by a labor organization for real
 9           property leased to:
10           (A)  A labor organization; or
11           (B)  A trust fund established by a labor organization
12                for the benefit of its members, families, and
13                dependents for medical or hospital care, pensions
14                on retirement or death of employees,
15                apprenticeship and training, and other membership
16                service programs.
17           As used in this paragraph, "labor organization" means a
18           labor organization exempt from federal income tax under
19           section 501(c)(5) of the Internal Revenue Code, as
20           amended[.]; and
21     (11)  Amounts received as rent for the rental or leasing of
22           aircraft or aircraft engine used by the lessees or
23           renters for interstate air transportation of passengers

Page 8                                                     2794
                                     H.B. NO.           H.D. 3

 1           and goods.  For purposes of this paragraph, payments
 2           made pursuant to a lease shall be considered rent
 3           regardless of whether the lease is an operating lease
 4           or a financing lease.  The definition of "interstate
 5           air transportation" is the same as in 49 U.S.C. section
 6           40102."
 7      SECTION 3.  Section 238-1, Hawaii Revised Statutes, is
 8 amended by amending the definition of "use" to read as follows:
 9      ""Use" (and any nounal, verbal, adjectival, adverbial, and
10 other equivalent form of the term) herein used interchangeably
11 means any use, whether the use is of [such] the nature as to
12 cause the property or services to be appreciably consumed or not,
13 or the keeping of the property or services for [such] the use or
14 for sale, and shall include the exercise of any right or power
15 over tangible or intangible personal property incident to the
16 ownership of that property, but the term "use" shall not include:
17      (1)  Temporary use of property, not of a perishable or
18           quickly consumable nature, where the property is
19           imported into the State for temporary use (not sale)
20           therein by the person importing the same and is not
21           intended to be, and is not, kept permanently in the
22           State (as for example without limiting the generality
23           of the foregoing language:

Page 9                                                     2794
                                     H.B. NO.           H.D. 3

 1           (A)  In the case of a contractor importing permanent
 2                equipment for the performance of a construction
 3                contract, with intent to remove, and who does
 4                remove, the equipment out of the State upon
 5                completing the contract;
 6           (B)  In the case of moving picture films imported for
 7                use in theaters in the State with intent or under
 8                contract to transport the same out of the State
 9                after completion of [such] the use; and
10           (C)  In the case of a transient visitor importing an
11                automobile or other belongings into the State to
12                be used by the transient visitor while therein but
13                which are to be used and are removed upon the
14                transient visitor's departure from the State);
15      (2)  Use by the taxpayer of property acquired by the
16           taxpayer solely by way of gift;
17      (3)  Use [which] that is limited to the receipt of articles
18           and the return thereof, to the person from whom
19           acquired, immediately or within a reasonable time
20           either after temporary trial or without trial;
21      (4)  Use of goods imported into the State by the owner of a
22           vessel or vessels engaged in interstate or foreign
23           commerce and held for and used only as ship stores for
24           the vessels;

Page 10                                                    2794
                                     H.B. NO.           H.D. 3

 1      (5)  The use or keeping for use of household goods, personal
 2           effects, and private automobiles imported into the
 3           State for nonbusiness use by a person who:
 4           (A)  Acquired them in another state, territory,
 5                district, or country;
 6           (B)  At the time of the acquisition was a bona fide
 7                resident of another state, territory, district, or
 8                country;
 9           (C)  Acquired the property for use outside the State;
10                and
11           (D)  Made actual and substantial use thereof outside
12                this State;
13           provided that as to an article acquired less than three
14           months prior to the time of its importation into the
15           State it shall be presumed, until and unless clearly
16           proved to the contrary, that it was acquired for use in
17           the State and that its use outside the State was not
18           actual and substantial;
19      (6)  The leasing or renting of any aircraft or the keeping
20           of any aircraft solely for leasing or renting to
21           lessees or renters using the aircraft for commercial
22           transportation of passengers and goods[;] or the
23           acquisition or importation of any aircraft or aircraft

Page 11                                                    2794
                                     H.B. NO.           H.D. 3

 1           engine by any lessee or renter engaged in interstate
 2           air transportation.  For purposes of this paragraph,
 3           "leasing" shall include all forms of leases, regardless
 4           of whether the lease is an operating lease or a
 5           financing lease.  The definition of "interstate air
 6           transportation" is the same as in 49 U.S.C. section
 7           40102;
 8      (7)  The use of oceangoing vehicles for passenger or
 9           passenger and goods transportation from one point to
10           another within the State as a public utility as defined
11           in chapter 269;
12      (8)  The use of material, parts, or tools imported or
13           purchased by a person licensed under chapter 237
14           [which] that are used for aircraft service and
15           maintenance, or the construction of an aircraft service
16           and maintenance facility as those terms are defined in
17           section 237-24.9; and
18      (9)  The use of services imported for resale to a foreign
19           customer located outside the State to the extent the
20           services are resold, consumed, or used by that foreign
21           customer outside the State pursuant to section
22           237-29.53(a).
23      With regard to purchases made and distributed under the
24 authority of chapter 421, a cooperative association shall be
25 deemed the user thereof."

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                                     H.B. NO.           H.D. 3

 1      SECTION 4.  Statutory material to be repealed is bracketed.
 2 New statutory material is underscored.
 3      SECTION 5.  This Act shall take effect on July 1, 2020.