STAND. COM. REP. NO. 847-00

                                 Honolulu, Hawaii
                                                   , 2000

                                 RE: H.B. No. 1970
                                     H.D. 2




Honorable Calvin K.Y. Say
Speaker, House of Representatives
Twentieth State Legislature
Regular Session of 2000
State of Hawaii

Sir:

     Your Committee on Finance, to which was referred H.B. No.
1970, H.D. 1, entitled: 

     "A BILL FOR AN ACT RELATING TO PREPAID TELEPHONE CALLING
     SERVICE,"

begs leave to report as follows:

     The purpose of this bill is to simplify the taxation of
prepaid telephone cards by clarifying that the general excise tax
(GET) is imposed on the sale of prepaid telephone calling
services at the point of sale.

     The Department of Taxation and GTE Hawaiian Tel testified in
support of this measure, but recommended revisions.  The Tax
Foundation of Hawaii and AT&T submitted comments.

     Your Committee has amended this measure by:

     (1)  Clarifying that the taxation of wholesale sales of
          prepaid telephone calling services and the retailer of
          prepaid telephone calling services are taxed as a
          retailer of tangible personal property;

     (2)  Adding a new section that amends the definition of
          "property" to clarify that the use tax is applicable to
          the importer or purchaser of prepaid telephone calling
          services;


 
 
 
                                 STAND. COM. REP. NO. 847-00
                                 Page 2

 
     (3)  Providing that the sale of prepaid telephone calling
          services subject to the GET applies to gross income and
          gross receipts received after August 31, 2000;

     (4)  Providing that the use tax which is applicable to the
          importer or purchaser of prepaid telephone calling
          services applies to all taxes accruing after August 31,
          2000; and

     (5)  Making technical, nonsubstantive amendments for
          purposes of clarity and style.

     As affirmed by the record of votes of the members of your
Committee on Finance that is attached to this report, your
Committee is in accord with the intent and purpose of H.B. No.
1970, H.D. 1, as amended herein, and recommends that it pass
Third Reading in the form attached hereto as H.B. No. 1970, H.D.
2.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Finance,



                                   ______________________________
                                   DWIGHT Y. TAKAMINE, Chair