REPORT TITLE: 
General Excise Tax


DESCRIPTION:
Increases the general excise tax to six per cent.  Exempts food
and medical services from being taxed under the general excise
tax.  Repeals the general excise de-pyramiding scheme on July 1,
2000.


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        2972
HOUSE OF REPRESENTATIVES                H.B. NO.           
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                     A BILL FOR AN ACT

RELATING TO GENERAL EXCISE TAX REVISIONS.



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

 1      SECTION 1.  The purpose of this Act is to reduce food and
 
 2 medical costs while providing a sufficient level of tax revenue
 
 3 for the maintenance of public services.
 
 4      SECTION 2.  Section 237-4, Hawaii Revised Statutes, is
 
 5 amended by amending subsection (a) to read as follows:
 
 6      "(a)  "Wholesaler" or "jobber" applies only to a person
 
 7 making sales at wholesale.  Only the following are sales at
 
 8 wholesale:
 
 9      (1)  Sales to a licensed retail merchant, jobber, or other
 
10           licensed seller for purposes of resale;
 
11      (2)  Sales to a licensed manufacturer of materials or
 
12           commodities that are to be incorporated by the
 
13           manufacturer into a finished or saleable product
 
14           (including the container or package in which the
 
15           product is contained) during the course of its
 
16           preservation, manufacture, or processing, including
 
17           preparation for market, and that will remain in such
 
18           finished or saleable product in such form as to be
 
19           perceptible to the senses, which finished or saleable
 

 
Page 2                                                     2972
                                     H.B. NO.           
                                                        
                                                        

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

 
Page 3                                                     2972
                                     H.B. NO.           
                                                        
                                                        

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

 
Page 4                                                     2972
                                     H.B. NO.           
                                                        
                                                        

 
 1           products, or bait for catching fish (including the
 
 2           catching of bait for catching fish), which agricultural
 
 3           products or fish are to be disposed of as described in
 
 4           section 237-5 or to be incorporated in a manufactured
 
 5           product as described in paragraph (2);
 
 6      (7)  Sales to a licensed producer, or to a cooperative
 
 7           association described in section 237-23(a)(7) for sale
 
 8           to such producer; of polypropylene shade cloth; of
 
 9           polyfilm; of polyethylene film; of cartons and such
 
10           other containers, wrappers, and sacks, and binders to
 
11           be used for packaging eggs, vegetables, fruits, and
 
12           other agricultural products; of seedlings and cuttings
 
13           for producing nursery plants; or of chick containers;
 
14           which cartons and such other containers, wrappers, and
 
15           sacks, binders, seedlings, cuttings, and containers are
 
16           to be used as described in section 237-5, or to be
 
17           incorporated in a manufactured product as described in
 
18           paragraph (2);
 
19      (8)  Sales of tangible personal property:
 
20           (A)  To a licensed seller engaged in a service business
 
21                or calling; provided that:
 
22                (i)  The property is not consumed or incidental to
 
23                     the performance of the services;
 

 
Page 5                                                     2972
                                     H.B. NO.           
                                                        
                                                        

 
 1               (ii)  There is a resale of the article at the
 
 2                     retail rate of [four] six per cent; and
 
 3              (iii)  The resale of the article is separately
 
 4                     charged or billed by the person rendering the
 
 5                     services; and
 
 6           (B)  Where:
 
 7                (i)  Tangible personal property is sold upon the
 
 8                     order or request of a licensed seller for the
 
 9                     purpose of rendering a service in the course
 
10                     of the person's service business or calling
 
11                     or upon the order or request of a person,
 
12                     subject to tax under section 237D-2, for the
 
13                     purpose of furnishing transient
 
14                     accommodations;
 
15                (ii) The property becomes or is used as an
 
16                     identifiable element of the service rendered;
 
17                     and
 
18                (iii)     The cost of the property does not
 
19                          constitute overhead to the licensed
 
20                          seller;
 
21           the sale shall be subject to section 237-13.3.  Where
 
22           the taxpayer is subject to both subparagraphs (A) and
 
23           (B), then the taxpayer shall be taxed under
 

 
Page 6                                                     2972
                                     H.B. NO.           
                                                        
                                                        

 
 1           subparagraph (A).  Subparagraph (A) shall be repealed
 
 2           on January 1, 2006.
 
 3      (9)  Sales to a licensed leasing company of capital goods
 
 4           that have a depreciable life, are purchased by the
 
 5           leasing company for lease to its customers, and are
 
 6           thereafter leased as a service to others;
 
 7     (10)  Sales of services to a licensed seller engaging in a
 
 8           business or calling whenever:
 
 9           (A)  Either:
 
10                (i)  In the context of a service-to-service
 
11                     transaction, a service is rendered upon the
 
12                     order or request of a licensed seller for the
 
13                     purpose of rendering another service in the
 
14                     course of the seller's service business or
 
15                     calling;
 
16               (ii)  In the context of a service-to-goods
 
17                     transaction, a service is rendered upon the
 
18                     order or request of a licensed seller for the
 
19                     purpose of manufacturing, producing,
 
20                     preparing, or acquiring tangible personal
 
21                     property to be sold;
 
22              (iii)  In the context of a services-to-contracting
 
23                     transaction, a service is rendered upon the
 

 
Page 7                                                     2972
                                     H.B. NO.           
                                                        
                                                        

 
 1                     order or request of a licensed contractor as
 
 2                     defined in section 237-6 for the purpose of
 
 3                     assisting that licensed contractor in
 
 4                     executing a contract; or
 
 5               (iv)  In the context of a services-to-transient
 
 6                     accommodations rental transaction, a service
 
 7                     is rendered upon the order or request of a
 
 8                     person subject to tax under section 237D-2
 
 9                     for the purpose of furnishing transient
 
10                     accommodations;
 
11           (B)  The benefit of the service passes to the customer
 
12                of the licensed seller, licensed contractor, or
 
13                person furnishing transient accommodations as an
 
14                identifiable element of the other service or
 
15                property to be sold, the contracting, or the
 
16                furnishing of transient accommodations; and
 
17           (C)  The cost of the service does not constitute
 
18                overhead to the licensed seller, licensed
 
19                contractor, or person furnishing transient
 
20                accommodations.
 
21           Sales subject to this paragraph shall be subject to
 
22           section 237-13.3;
 

 
 
 
Page 8                                                     2972
                                     H.B. NO.           
                                                        
                                                        

 
 1     (11)  Sales to a licensed retail merchant, jobber, or other
 
 2           licensed seller of bulk condiments or prepackaged
 
 3           single-serving packets of condiments that are provided
 
 4           to customers by the licensed retail merchant, jobber,
 
 5           or other licensed seller; and
 
 6     (12)  Sales to a licensed retail merchant, jobber, or other
 
 7           licensed seller of tangible personal property that will
 
 8           be incorporated or processed by the licensed retail
 
 9           merchant, jobber, or other licensed seller into a
 
10           finished or saleable product during the course of its
 
11           preparation for market (including disposable,
 
12           nonreturnable containers, packages, or wrappers, in
 
13           which the product is contained and that are generally
 
14           known and most commonly used to contain food or
 
15           beverage for transfer or delivery), and which finished
 
16           or saleable product is to be sold and not otherwise
 
17           used by the licensed retail merchant, jobber, or other
 
18           licensed seller."
 
19      SECTION 3. Section 237-8.5, Hawaii Revised Statutes, is
 
20 amended by amending subsection (a) to read as follows:
 
21      "(a)  The county general excise and use tax surcharge, upon
 
22 the adoption of county ordinances under section 46-16.7, shall be
 
23 levied, assessed, and collected as provided in this section on
 

 
Page 9                                                     2972
                                     H.B. NO.           
                                                        
                                                        

 
 1 all gross proceeds and gross income taxable under this chapter at
 
 2 the four per cent tax rate in such manner that the combined state
 
 3 general excise tax and the county general excise and use tax
 
 4 surcharge tax shall be [four and one-half] six and one-half per
 
 5 cent in those counties adopting the surcharge.  All provisions of
 
 6 this chapter shall apply to the county general excise and use tax
 
 7 surcharge; and with respect to the surcharge, the director shall
 
 8 have all the rights and powers provided under this chapter.  In
 
 9 addition, the director of taxation shall have the exclusive
 
10 rights and power to determine the county or counties in which a
 
11 person is engaged in business and, in the case of a person
 
12 engaged in business in more than one county, the director shall
 
13 determine through apportionment or other means, that portion of
 
14 the general excise and use tax surcharge attributable to business
 
15 conducted in each county."
 
16      SECTION 4.  Section 237-13, Hawaii Revised Statutes, is
 
17 revised to read as follows:
 
18      "237-13  Imposition of tax.  There is hereby levied and
 
19 shall be assessed and collected annually privilege taxes against
 
20 persons on account of their business and other activities in the
 
21 State measured by the application of rates against values of
 
22 products, gross proceeds of sales, or gross income, whichever is
 
23 specified, as follows:
 

 
Page 10                                                    2972
                                     H.B. NO.           
                                                        
                                                        

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

 
 
 
Page 11                                                    2972
                                     H.B. NO.           
                                                        
                                                        

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

 
Page 12                                                    2972
                                     H.B. NO.           
                                                        
                                                        

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

 
Page 13                                                    2972
                                     H.B. NO.           
                                                        
                                                        

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

 
Page 14                                                    2972
                                     H.B. NO.           
                                                        
                                                        

 
 1                collected, a tax equivalent to [four] six per cent
 
 2                of the gross proceeds of sales of the business;
 
 3                provided that insofar as certain retailing is
 
 4                taxed by section 237-16, the tax shall be that
 
 5                levied by section 237-16, and in the case of a
 
 6                wholesaler, the tax shall be equal to one-half of
 
 7                one per cent of the gross proceeds of sales of the
 
 8                business and provided that insofar as the sales of
 
 9                tangible personal property is a wholesale sale
 
10                under section 237-4(a)(8)(B) the sale shall be
 
11                subject to section 237-13.3.  Upon every person
 
12                engaging or continuing within this State in the
 
13                business of a producer, the tax shall be equal to
 
14                one-half of one per cent of the gross proceeds of
 
15                sales of the business, or the value of the
 
16                products, for sale, if sold for delivery outside
 
17                the State or shipped or transported out of the
 
18                State, and the value of the products shall be
 
19                determined in the same manner as the value of
 
20                manufactured products covered in the cases under
 
21                paragraph (1)(C).
 
22           (B)  Gross proceeds of sales of tangible property in
 
23                interstate and foreign commerce shall constitute a
 

 
Page 15                                                    2972
                                     H.B. NO.           
                                                        
                                                        

 
 1                part of the measure of the tax imposed on persons
 
 2                in the business of selling tangible personal
 
 3                property, to the extent, under the conditions, and
 
 4                in accordance with the provisions of the
 
 5                Constitution of the United States and the Acts of
 
 6                the Congress of the United States which may be now
 
 7                in force or may be hereafter adopted, and whenever
 
 8                there occurs in the State an activity to which,
 
 9                under the Constitution and Acts of Congress, there
 
10                may be attributed gross proceeds of sales, the
 
11                gross proceeds shall be so attributed.
 
12           (C)  No manufacturer or producer, engaged in such
 
13                business in the State and selling the
 
14                manufacturer's or producer's products for delivery
 
15                outside of the State (for example, consigned to a
 
16                mainland purchaser via common carrier f.o.b.
 
17                Honolulu), shall be required to pay the tax
 
18                imposed in this chapter for the privilege of so
 
19                selling the products, and the value or gross
 
20                proceeds of sales of the products shall be
 
21                included only in determining the measure of the
 
22                tax imposed upon the manufacturer or producer.
 

 
 
 
Page 16                                                    2972
                                     H.B. NO.           
                                                        
                                                        

 
 1           (D)  When a manufacturer or producer, engaged in such
 
 2                business in the State, also is engaged in selling
 
 3                the manufacturer's or producer's products in the
 
 4                State at wholesale, retail, or in any other
 
 5                manner, the tax for the privilege of engaging in
 
 6                the business of selling the products in the State
 
 7                shall apply to the manufacturer or producer as
 
 8                well as the tax for the privilege of manufacturing
 
 9                or producing in the State, and the manufacturer or
 
10                producer shall make the returns of the gross
 
11                proceeds of the wholesale, retail, or other sales
 
12                required for the privilege of selling in the
 
13                State, as well as making the returns of the value
 
14                or gross proceeds of sales of the products
 
15                required for the privilege of manufacturing or
 
16                producing in the State.  The manufacturer or
 
17                producer shall pay the tax imposed in this chapter
 
18                for the privilege of selling its products in the
 
19                State, and the value or gross proceeds of sales of
 
20                the products, thus subjected to tax, may be
 
21                deducted insofar as duplicated as to the same
 
22                products by the measure of the tax upon the
 
23                manufacturer or producer for the privilege of
 

 
Page 17                                                    2972
                                     H.B. NO.           
                                                        
                                                        

 
 1                manufacturing or producing in the State; except
 
 2                that no producer of agricultural products who
 
 3                sells the products to a purchaser who will process
 
 4                the products outside the State shall be required
 
 5                to pay the tax imposed in this chapter for the
 
 6                privilege of producing or selling those products.
 
 7           (E)  A taxpayer selling to a federal cost-plus
 
 8                contractor may make the election provided for by
 
 9                paragraph (3)(C), and in that case the tax shall
 
10                be computed pursuant to the election,
 
11                notwithstanding this paragraph or paragraph (1) to
 
12                the contrary.
 
13           (F)  The department, by rule, may require that a seller
 
14                take from the purchaser of tangible personal
 
15                property a certificate, in a form prescribed by
 
16                the department, certifying that the sale is a sale
 
17                at wholesale; provided that:
 
18                (i)  Any purchaser who furnishes a certificate
 
19                     shall be obligated to pay to the seller, upon
 
20                     demand, the amount of the additional tax that
 
21                     is imposed upon the seller whenever the sale
 
22                     in fact is not at wholesale; and
 

 
 
 
Page 18                                                    2972
                                     H.B. NO.           
                                                        
                                                        

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

 
Page 19                                                    2972
                                     H.B. NO.           
                                                        
                                                        

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

 
 
 
Page 20                                                    2972
                                     H.B. NO.           
                                                        
                                                        

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

 
Page 21                                                    2972
                                     H.B. NO.           
                                                        
                                                        

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

 
Page 22                                                    2972
                                     H.B. NO.           
                                                        
                                                        

 
 1                property under a lease is taxed under section
 
 2                237-16.5, the tax shall be levied by section 237-
 
 3                16.5.
 
 4      (4)  Tax upon theaters, amusements, radio broadcasting
 
 5           stations, etc.  Upon every person engaging or
 
 6           continuing within the State in the business of
 
 7           operating a theater, opera house, moving picture show,
 
 8           vaudeville, amusement park, dance hall, skating rink,
 
 9           radio broadcasting station, or any other place at which
 
10           amusements are offered to the public, the tax shall be
 
11           equal to [four] six per cent of the gross income of the
 
12           business.
 
13      (5)  Tax upon sales representatives, etc.  Upon every person
 
14           classified as a representative or purchasing agent
 
15           under section 237-1, engaging or continuing within the
 
16           State in the business of performing services for
 
17           another, other than as an employee, there is likewise
 
18           hereby levied and shall be assessed and collected a tax
 
19           equal to [four] six per cent of the commissions and
 
20           other compensation attributable to the services so
 
21           rendered by the person.
 

 
 
 
 
 
Page 23                                                    2972
                                     H.B. NO.           
                                                        
                                                        

 
 1      (6)  Tax on service business.
 
 2           (A)  Upon every person engaging or continuing within
 
 3                the State in any service business or calling
 
 4                including professional services not otherwise
 
 5                specifically taxed under this chapter, there is
 
 6                likewise hereby levied and shall be assessed and
 
 7                collected a tax equal to [four] six per cent of
 
 8                the gross income of the business, and in the case
 
 9                of a wholesaler under section 237-4(a)(10), the
 
10                tax shall be equal to one-half of one per cent of
 
11                the gross income of the business.  Sales subject
 
12                to this subparagraph shall be subject to section
 
13                237-13.3.
 
14           (B)  The department, by rule, may require that the
 
15                person rendering a service at wholesale take from
 
16                the licensed seller a certificate, in a form
 
17                prescribed by the department, certifying that the
 
18                sale is a sale at wholesale; provided that:
 
19                (i)  Any licensed seller who furnishes a
 
20                     certificate shall be obligated to pay to the
 
21                     person rendering the service, upon demand,
 
22                     the amount of additional tax that is imposed
 
23                     upon the seller whenever the sale is not at
 
24                     wholesale; and
 

 
Page 24                                                    2972
                                     H.B. NO.           
                                                        
                                                        

 
 1               (ii)  The absence of a certificate in itself shall
 
 2                     give rise to the presumption that the sale is
 
 3                     not at wholesale unless the person rendering
 
 4                     the sale is exclusively rendering services at
 
 5                     wholesale.
 
 6           (C)  Where any person engaging or continuing within the
 
 7                State in any service business or calling renders
 
 8                those services upon the order of or at the request
 
 9                of another taxpayer who is engaged in the service
 
10                business and who, in fact, acts as or acts in the
 
11                nature of an intermediary between the person
 
12                rendering those services and the ultimate
 
13                recipient of the benefits of those services, so
 
14                much of the gross income as is received by the
 
15                person rendering the services shall be subjected
 
16                to the tax at the rate of one-half of one per cent
 
17                and all of the gross income received by the
 
18                intermediary from the principal shall be subjected
 
19                to a tax at the rate of [four] six per cent.
 
20                Where the taxpayer is subject to both this
 
21                subparagraph and to the lowest tax rate under
 
22                subparagraph (A), the taxpayer shall be taxed
 
23                under this subparagraph.  This subparagraph shall
 
24                be repealed on January 1, 2006.
 

 
Page 25                                                    2972
                                     H.B. NO.           
                                                        
                                                        

 
 1           (D)  Where any person is engaged in the business of
 
 2                selling interstate or foreign common carrier
 
 3                telecommunication services within and without the
 
 4                State, the tax shall be imposed on that portion of
 
 5                gross income received by a person from service
 
 6                which is originated or terminated in this State
 
 7                and is charged to a telephone number, customer, or
 
 8                account in this State notwithstanding any other
 
 9                state law (except for the exemption under section
 
10                237-23(a)(1)) to the contrary.  If, under the
 
11                Constitution and laws of the United States, the
 
12                entire gross income as determined under this
 
13                paragraph of a business selling interstate or
 
14                foreign common carrier telecommunication services
 
15                cannot be included in the measure of the tax, the
 
16                gross income shall be apportioned as provided in
 
17                section 237-21; provided that the apportionment
 
18                factor and formula shall be the same for all
 
19                persons providing those services in the State.
 
20      (7)  Tax on insurance solicitors and agents.  Upon every
 
21           person engaged as a licensed solicitor, general agent,
 
22           or subagent pursuant to chapter 431, there is hereby
 
23           levied and shall be assessed and collected a tax equal
 

 
Page 26                                                    2972
                                     H.B. NO.           
                                                        
                                                        

 
 1           to .15 per cent of the commissions due to that
 
 2           activity.
 
 3      (8)  Tax on receipts of sugar benefit payments.  Upon the
 
 4           amounts received from the United States government by
 
 5           any producer of sugar (or the producer's legal
 
 6           representative or heirs), as defined under and by
 
 7           virtue of the Sugar Act of 1948, as amended, or other
 
 8           Acts of the Congress of the United States relating
 
 9           thereto, there is hereby levied a tax of one-half of
 
10           one per cent of the gross amount received; provided
 
11           that the tax levied hereunder on any amount so received
 
12           and actually disbursed to another by a producer in the
 
13           form of a benefit payment shall be paid by the person
 
14           or persons to whom the amount is actually disbursed,
 
15           and the producer actually making a benefit payment to
 
16           another shall be entitled to claim on the producer's
 
17           return a deduction from the gross amount taxable
 
18           hereunder in the sum of the amount so disbursed.  The
 
19           amounts taxed under this paragraph shall not be taxable
 
20           under any other paragraph, subsection, or section of
 
21           this chapter.
 
22      (9)  Tax on other business.  Upon every person engaging or
 
23           continuing within the State in any business, trade,
 

 
Page 27                                                    2972
                                     H.B. NO.           
                                                        
                                                        

 
 1           activity, occupation, or calling not included in the
 
 2           preceding paragraphs or any other provisions of this
 
 3           chapter, there is likewise hereby levied and shall be
 
 4           assessed and collected, a tax equal to [four] six per
 
 5           cent of the gross income thereof.  In addition, the
 
 6           rate prescribed by this paragraph shall apply to a
 
 7           business taxable under one or more of the preceding
 
 8           paragraphs or other provisions of this chapter, as to
 
 9           any gross income thereof not taxed thereunder as gross
 
10           income or gross proceeds of sales or by taxing an
 
11           equivalent value of products, unless specifically
 
12           exempted." 
 
13      SECTION 5.  Section 237-15, Hawaii Revised Statutes, is
 
14 amended to read as follows:
 
15      "237-15 Technicians.  When technicians supply dentists or
 
16 physicians with dentures, orthodontic devices, braces, and
 
17 similar items which have been prepared by the technician in
 
18 accordance with specifications furnished by the dentist or
 
19 physician, and such items are to be used by the dentist or
 
20 physician in the dentist's or physician's professional practice
 
21 for a particular patient who is to pay the dentist or physician
 
22 for the same as a part of the dentist's or physician's
 
23 professional services, the technician shall be taxed as though
 

 
Page 28                                                    2972
                                     H.B. NO.           
                                                        
                                                        

 
 1 the technician were a manufacturer selling a product to a
 
 2 licensed retailer, rather than at the rate of [four] six per cent
 
 3 which is generally applied to professions and services."
 
 4      SECTION 6.  Section 237-16, Hawaii Revised Statutes, is
 
 5 amended to read as follows:
 
 6      1.  By amending subsection (b) to read:
 
 7      "(b)  There is hereby levied, and shall be assessed and
 
 8 collected annually, a privilege tax against persons engaging or
 
 9 continuing within the State in the retailing to which this
 
10 section relates, on account of such retailing activities, as set
 
11 forth in subsection (a), equal to [four] six per cent of the
 
12 gross proceeds of sale or gross income received or derived from
 
13 such retailing.  Persons on whom a tax is imposed by this section
 
14 hereinafter are called "retailers".
 
15      2.  By amending subsection (d) to read:
 
16      (d)  This section shall not cause the tax upon a taxpayer,
 
17 with respect to any item of the taxpayer's gross income, to
 
18 exceed [four] six per cent."
 
19      SECTION 7.  Section 237-16.5, Hawaii Revised Statutes, is
 
20 amended to read as follows:
 
21      1.  By amending subsection (a) to read:
 
22      "(a)  This section relates to the leasing of real property
 
23 by a lessor to a lessee.  There is hereby levied, and shall be
 

 
Page 29                                                    2972
                                     H.B. NO.           
                                                        
                                                        

 
 1 assessed and collected annually, a privilege tax against persons
 
 2 engaging or continuing within the State in the business of
 
 3 leasing real property to another, equal to [four] six per cent of
 
 4 the gross proceeds or gross income received or derived from the
 
 5 leasing; provided that where real property is subleased by a
 
 6 lessee to a sublessee, the lessee, as provided in this section,
 
 7 shall be allowed a deduction from the amount of gross proceeds or
 
 8 gross income received from its sublease of the real property.
 
 9 The deduction shall be in the amount allowed under this section.
 
10      All deductions under this section and the name and general
 
11 excise tax number of the lessee's lessor shall be reported on the
 
12 general excise tax return.  Any deduction allowed under this
 
13 section shall only be allowed with respect to leases and
 
14 subleases in writing and relating to the same real property.
 
15      2.  By amending subsection (f) to:
 
16      (f)  This section shall not cause the tax upon a lessor,
 
17 with respect to any item of the lessor's gross proceeds or gross
 
18 income, to exceed [four] six per cent."
 
19      SECTION 8.  Section 237-18, Hawaii Revised Statutes, is
 
20 amended by amending subsection (f) to read as follows:
 
21      "(f)  Where tourism related services are furnished through
 
22 arrangements made by a travel agency or tour packager and the
 
23 gross income is divided between the provider of the services and
 

 
Page 30                                                    2972
                                     H.B. NO.           
                                                        
                                                        

 
 1 the travel agency or tour packager, the tax imposed by this
 
 2 chapter shall apply to each such person with respect to such
 
 3 person's respective portion of the proceeds, and no more.
 
 4      As used in this subsection "tourism related services" means
 
 5 catamaran cruises, canoe rides, dinner cruises, lei greetings,
 
 6 transportation included in a tour package, sightseeing tours not
 
 7 subject to chapter 239, admissions to luaus, dinner shows,
 
 8 extravaganzas, cultural and educational facilities, and other
 
 9 services rendered directly to the customer or tourist, but only
 
10 if the providers of the services other than air transportation
 
11 are subject to a [four] six per cent tax under this chapter or
 
12 chapter 239."
 
13      SECTION 9.  Section 237-24.3, Hawaii Revised Statutes, is
 
14 amended to read as follows:
 
15      "237-24.3  Additional amounts not taxable.  In addition to
 
16 the amounts not taxable under section 237-24, this chapter shall
 
17 not apply to:
 
18      (1)  Amounts received from the loading, transportation, and
 
19           unloading of agricultural commodities shipped for a
 
20           producer or produce dealer on one island of this State
 
21           to a person, firm, or organization on another island of
 
22           this State.  The terms "agricultural commodity",
 
23           "producer", and "produce dealer" shall be defined in
 

 
Page 31                                                    2972
                                     H.B. NO.           
                                                        
                                                        

 
 1           the same manner as they are defined in section 147-1;
 
 2           provided that agricultural commodities need not have
 
 3           been produced in the State;
 
 4      (2)  Amounts received from sales of:
 
 5           (A)  Intoxicating liquor as the term "liquor" is
 
 6                defined in chapter 244D;
 
 7           (B)  Cigarettes and tobacco products as defined in
 
 8                chapter 245; and
 
 9           (C)  Agricultural, meat, or fish products grown,
 
10                raised, or caught in Hawaii, to any person or
 
11                common carrier in interstate or foreign commerce,
 
12                or both, whether ocean-going or air, for
 
13                consumption out-of-state on the shipper's vessels
 
14                or airplanes;
 
15      (3)  Amounts received by the manager or board of directors
 
16           of:
 
17           (A)  An association of apartment owners of a
 
18                condominium property regime established in
 
19                accordance with chapter 514A; or
 
20           (B)  A nonprofit homeowners or community association
 
21                incorporated in accordance with chapter 415B or
 
22                any predecessor thereto and existing pursuant to
 
23                covenants running with the land,
 
24           in reimbursement of sums paid for common expenses;
 

 
Page 32                                                    2972
                                     H.B. NO.           
                                                        
                                                        

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

 
Page 33                                                    2972
                                     H.B. NO.           
                                                        
                                                        

 
 1           property in this State; and provided further that gross
 
 2           rental income or gross rental proceeds from investments
 
 3           in real property received by an employee benefit plan
 
 4           after June 30, 1994, under written contracts executed
 
 5           prior to July 1, 1994, shall not be taxed until the
 
 6           contracts are renegotiated, renewed, or extended, or
 
 7           until after December 31, 1998, whichever is earlier.
 
 8           For the purposes of this paragraph, "employee benefit
 
 9           plan" means any plan as defined in section 1002(3) of
 
10           title 29 of the United States Code, as amended;
 
11      (6)  Amounts received for purchases [made with United States
 
12           Department of Agriculture food coupons under the
 
13           federal food stamp program, and amounts received for
 
14           purchases made with United States Department of
 
15           Agriculture food vouchers under the Special
 
16           Supplemental Foods Program for Women, Infants and
 
17           Children;] of food.
 
18           "Food" means the same as defined in 7 United States
 
19           Code Section 2012(g), as amended, and includes:
 
20           (A)  Any food or food product for home consumption
 
21                except alcoholic beverages, tobacco, and hot foods
 
22                or hot food products ready for immediate
 
23                consumption other than those authorized;
 

 
Page 34                                                    2972
                                     H.B. NO.           
                                                        
                                                        

 
 1           (B)  Seeds and plants for use in gardens to produce
 
 2                food for the personal household consumption;
 
 3           (C)  In the case of those persons who are sixty years
 
 4                of age or over or who receive supplemental
 
 5                security income benefits or disability or
 
 6                blindness payments under title I, II, X, XIV, or
 
 7                XVI, of the Social Security Act (42 U.S.C.A. 301
 
 8                et seq., 401 et seq., 1201 et seq., 1351 et seq.,
 
 9                or 1381 et seq.), and their spouses, meals
 
10                prepared by and served in senior citizens'
 
11                centers, apartment buildings occupied primarily by
 
12                such persons, public or private nonprofit
 
13                establishments (eating or otherwise) that feed
 
14                such persons, private establishments that contract
 
15                with the appropriate agency of the State to offer
 
16                meals for such persons at concessional prices, and
 
17                meals prepared for and served to residents of
 
18                federally subsidized housing for the elderly;
 
19           (D)  In the case of persons sixty years of age or over
 
20                and persons who are physically or mentally
 
21                handicapped or otherwise so disabled that they are
 
22                unable adequately to prepare all of their meals,
 
23                meals prepared for and delivered to them (and
 

 
Page 35                                                    2972
                                     H.B. NO.           
                                                        
                                                        

 
 1                their spouses) at their home by a public or
 
 2                private nonprofit organization or by a private
 
 3                establishment that contracts with the appropriate
 
 4                state agency to perform such services at
 
 5                concessional prices;
 
 6           (E)  In the case of narcotics addicts or alcoholics,
 
 7                and their children, served by drug addiction or
 
 8                alcoholic treatment and rehabilitation programs,
 
 9                meals prepared and served under such programs;
 
10           (F)  In the case of disabled or blind recipients of
 
11                benefits under title I, II, X, XIV, or XVI of the
 
12                Social Security Act (42 U.S.C.A. 301 et seq., 401
 
13                et seq., 1201 et seq., 1351 et seq., or 1381 et
 
14                seq.), or residents in a public or private
 
15                nonprofit group living arrangement that serves no
 
16                more than sixteen residents and is certified by
 
17                the appropriate state agency meals prepared and
 
18                served under such arrangement;
 
19           (G)  In the case of women and children temporarily
 
20                residing in public or private nonprofit shelters
 
21                for battered women and children, meals prepared
 
22                and served, by such shelters; and
 

 
 
 
Page 36                                                    2972
                                     H.B. NO.           
                                                        
                                                        

 
 1           (H)  In the case of households that do not reside in
 
 2                permanent dwellings and households that have no
 
 3                fixed mailing addresses, meals prepared for and
 
 4                served by a public or private nonprofit
 
 5                establishment (approved by an appropriate state
 
 6                agency) that feeds such individuals and by private
 
 7                establishments that contract with the appropriate
 
 8                agency of the State to offer meals for such
 
 9                individuals at concessional prices.
 
10      (7)  Amounts received by a hospital, infirmary, medical
 
11           clinic, health care facility, pharmacy, or a licensed
 
12           practitioner [licensed to administer the drug to an
 
13           individual for selling prescription drugs or prosthetic
 
14           devices to an individual; provided that this paragraph
 
15           shall not apply to any] for health care services
 
16           rendered including amounts received for services
 
17           provided in selling prescription drugs or prosthetic
 
18           devices.  As used in this paragraph:
 
19           (A)  "Prescription drugs" are those drugs defined under
 
20                section [[]328-1[]] and dispensed by filling or
 
21                refilling a written or oral prescription by a
 
22                practitioner licensed under law to administer the
 
23                drug and sold by a licensed pharmacist under
 

 
Page 37                                                    2972
                                     H.B. NO.           
                                                        
                                                        

 
 1                section 328-16 or practitioners licensed to
 
 2                administer drugs; and
 
 3           (B)  "Prosthetic device" means any artificial device or
 
 4                appliance, instrument, apparatus, or contrivance,
 
 5                including their components, parts, accessories,
 
 6                and replacements thereof, used to replace a
 
 7                missing or surgically removed part of the human
 
 8                body, which is prescribed by a licensed
 
 9                practitioner of medicine, osteopathy, or podiatry
 
10                and which is sold by the practitioner or which is
 
11                dispensed and sold by a dealer of prosthetic
 
12                devices; provided that "prosthetic device" shall
 
13                not mean any auditory, ophthalmic, dental, or
 
14                ocular device or appliance, instrument, apparatus,
 
15                or contrivance;
 
16      (8)  Taxes on transient accommodations imposed by chapter
 
17           237D and passed on and collected by operators holding
 
18           certificates of registration under that chapter;
 
19      (9)  Amounts received as dues by an unincorporated merchants
 
20           association from its membership for advertising media,
 
21           promotional, and advertising costs for the promotion of
 
22           the association for the benefit of its members as a
 
23           whole and not for the benefit of an individual member
 

 
Page 38                                                    2972
                                     H.B. NO.           
                                                        
                                                        

 
 1           or group of members less than the entire membership;
 
 2           and
 
 3     (10)  Amounts received by a labor organization for real
 
 4           property leased to:
 
 5           (A)  A labor organization; or
 
 6           (B)  A trust fund established by a labor organization
 
 7                for the benefit of its members, families, and
 
 8                dependents for medical or hospital care, pensions
 
 9                on retirement or death of employees,
 
10                apprenticeship and training, and other membership
 
11                service programs.
 
12           As used in this paragraph, "labor organization" means a
 
13           labor organization exempt from federal income tax under
 
14           section 501(c)(5) of the Internal Revenue Code, as
 
15           amended."
 
16      SECTION 10.  Section 237-44, Hawaii Revised Statutes, is
 
17 amended by amending subsection (b) to read as follows:
 
18      "(b)  Every person receiving admissions for any
 
19 circus,carnival, or any other place whatsoever at which a
 
20 transient taxpayer is engaged in business (whether or not further
 
21 admissions are charged inside the place, such further admissions,
 
22 if any, being also subject to this section), shall set aside from
 
23 the admissions and hold in trust for the State [five] six per
 

 
Page 39                                                    2972
                                     H.B. NO.           
                                                        
                                                        

 
 1 cent of the admissions, or such lesser amount as the department
 
 2 of taxation shall approve as sufficient, to guarantee payment of
 
 3 the tax levied by this chapter on the transient taxpayer.  The
 
 4 amount so required to be set aside from the admissions shall be
 
 5 deposited with the department promptly upon collection thereof,
 
 6 from time to time, for deposit by it in a special trust fund in
 
 7 the treasury of the State, there to remain until refunded upon
 
 8 voucher of the department, or until applied to the payment of the
 
 9 taxes guaranteed thereby with the consent of the person making
 
10 the deposit, or until deposited in court pursuant to chapter 655
 
11 or the rules of court.  The department may bring an action to
 
12 obtain an adjudication of its right to apply the guarantee fund
 
13 in payment of taxes and may deposit the fund in court to await
 
14 the results of the adjudication, or may be sued by an interested
 
15 person seeking to obtain the adjudication and may be ordered to
 
16 make such deposit in court, notwithstanding that the department
 
17 asserts a claim against the fund." 
 
18      SECTION 11.  Section 238-2, Hawaii Revised Statutes, is
 
19 amended to read as follows:
 
20      "238-2  Imposition of tax; exemptions.  There is hereby
 
21 levied an excise tax on the use in this State of tangible
 
22 personal property which is imported, or purchased from an
 
23 unlicensed seller, for use in this State.  The tax imposed by
 

 
Page 40                                                    2972
                                     H.B. NO.           
                                                        
                                                        

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

 
Page 41                                                    2972
                                     H.B. NO.           
                                                        
                                                        

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

 
Page 42                                                    2972
                                     H.B. NO.           
                                                        
                                                        

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

 
Page 43                                                    2972
                                     H.B. NO.           
                                                        
                                                        

 
 1      SECTION 12.  Section 239-6, Hawaii Revised Statutes, is
 
 2 amended to read as follows:
 
 3      "239-6 Airlines, certain carriers.  There shall be levied
 
 4 and assessed upon each airline a tax of [four] six per cent of
 
 5 its gross income each year from the airline business; provided
 
 6 that if an airline adopts a rate schedule for students in grade
 
 7 twelve or below travelling in school groups providing such
 
 8 students at reasonable hours a rate less than one-half of the
 
 9 regular adult fare, the tax shall be three per cent of its gross
 
10 income each year from the airline business.  There shall be
 
11 levied and assessed upon each motor carrier, each common carrier
 
12 by water, and upon each contract carrier other than a motor
 
13 carrier, a tax of [four] six per cent of its gross income each
 
14 year from the motor carrier or contract carrier business.  The
 
15 tax imposed by this section is a means of taxing the personal
 
16 property of the airline or other carrier, tangible and
 
17 intangible, including going concern value, and is in lieu of the
 
18 tax imposed by chapter 237 but is not in lieu of any other tax." 
 
19      SECTION 13. Act 71, Session Laws of Hawaii 1999, is
 
20 repealed.
 
21      SECTION 14. Statutory material to be repealed is bracketed.
 
22 new statutory material is underscored.
 

 
 
 
Page 44                                                    2972
                                     H.B. NO.           
                                                        
                                                        

 
 1      SECTION 15. This Act shall take effect upon its approval,
 
 2 except that section 13 of this Act shall take effect on July 1,
 
 3 2000.
 
 4 
 
 5                       INTRODUCED BY:  ___________________________