Bill Text: HI HB1742 | 2010 | Regular Session | Introduced
Bill Title: General Excise And Use Tax Reform
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2009-05-11 - Carried over to 2010 Regular Session. [HB1742 Detail]
Download: Hawaii-2010-HB1742-Introduced.html
Report Title:
General Excise And Use Tax Reform
Description:
Repeals certain general excise and use tax excise exemptions and exclusions, but retains the exemption for nonprofit religious organizations. Reduces the tax rate on sales to the final consumer from 4% to 3.5%. Reduces also the public service company tax rate and repeals certain public service company tax exemptions. Subjects to the general excise tax certain sales of real property and sales of securities, commodity futures, and bonds. Makes conforming amendments to other laws.
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HOUSE OF REPRESENTATIVES |
H.B. NO. |
1742 |
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TWENTY-FIFTH LEGISLATURE, 2009 |
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STATE OF HAWAII |
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A BILL FOR AN ACT
RELATING TO TAXATION.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The purpose of this Act is to address taxation. More specifically, this Act:
(1) Repeals certain general excise and use tax exemptions and exclusions; and
(2) Reduces the tax rate imposed on sales to the final consumer from four per cent to three and one-half per cent; and
(3) Subjects to the general excise tax certain sales of real property and sales of securities, commodity futures, and bonds.
Among the exemptions repealed is that for nonprofit organizations other than religious organizations. The exemption for nonprofit religious organizations is retained.
This Act also makes conforming amendments to other statutes, including appropriately reducing the public service company tax rate and repealing certain public service company tax exemptions.
SECTION 2. Chapter 237, Hawaii Revised Statutes, is amended by adding two new sections to be appropriately designated and to read as follows:
"§237-A Tax on certain real property sales. (a) Except as provided under subsection (b), there is hereby levied, and shall be assessed and collected annually, a privilege tax against a sole proprietorship, partnership, corporation, or limited liability entity that, as a business or part of a business, sells real property owned in fee simple by the sole proprietorship, partnership, corporation, or limited liability entity to another person. The tax shall be equal to 3.5 per cent of the gross proceeds received from the sale of the real property less a deduction for any commission paid from the gross proceeds by the seller to a sales representative that is taxable under section 237-13(5).
(b) Gross proceeds from the casual sale of real property shall be exempt from the tax under subsection (a). The exemption shall apply whether the casual sale is made by a person licensed or unlicensed under this chapter.
§237-B Tax on certain securities, commodity futures, and bond sales. (a) Except as provided under subsection (b), there is hereby levied, and shall be assessed and collected annually, a privilege tax against a sole proprietorship, partnership, corporation, or limited liability entity that, as a business or part of a business, sells securities, commodity futures, or bonds owned or borrowed by the sole proprietorship, partnership, corporation, or limited liability entity to another person. The tax shall be equal to 3.5 per cent of the gross income received from the sale of the securities, commodity futures, or bonds less a deduction for any commission paid from the gross income by the seller to a sales representative that is taxable under section 237-13(5).
(b) Gross income from the casual sale of securities, commodity futures, or bonds shall be exempt from the tax under subsection (a). The exemption shall apply whether the casual sale is made by a person licensed or unlicensed under this chapter."
SECTION 3. Section 46-15.1, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:
"(a) Any law to the contrary
notwithstanding, any county shall have and may exercise the same powers, subject
to applicable limitations, as those granted the Hawaii housing finance and
development corporation pursuant to chapter 201H insofar as those powers may be
reasonably construed to be exercisable by a county for the purpose of
developing, constructing, and providing low- and moderate-income housing;
provided that no county shall be empowered to cause the State to issue general
obligation bonds to finance a project pursuant to this section; [provided
further that county projects shall be granted an exemption from general excise
or receipts taxes in the same manner as projects of the Hawaii housing finance
and development corporation pursuant to section 201H-36;] and provided
further that section 201H-16 shall not apply to this section unless federal
guidelines specifically provide local governments with that authorization and
the authorization does not conflict with any state laws. The powers shall
include the power, subject to applicable limitations, to:
(1) Develop and construct dwelling units, alone or in partnership with developers;
(2) Acquire necessary land by lease, purchase, exchange, or eminent domain;
(3) Provide assistance and aid to a public agency or other person in developing and constructing new housing and rehabilitating existing housing for elders of low- and moderate-income, other persons of low- and moderate-income, and persons displaced by any governmental action, by making long-term mortgage or interim construction loans available;
(4) Contract with any eligible bidders to provide for construction of urgently needed housing for persons of low- and moderate-income;
(5) Guarantee the top twenty-five per cent of the principal balance of real property mortgage loans, plus interest thereon, made to qualified borrowers by qualified lenders;
(6) Enter into mortgage guarantee agreements with appropriate officials of any agency or instrumentality of the United States to induce those officials to commit to insure or to insure mortgages under the National Housing Act, as amended;
(7) Make a direct loan to any qualified buyer for the downpayment required by a private lender to be made by the borrower as a condition of obtaining a loan from the private lender in the purchase of residential property;
(8) Provide funds for a share, not to exceed fifty per cent, of the principal amount of a loan made to a qualified borrower by a private lender who is unable otherwise to lend the borrower sufficient funds at reasonable rates in the purchase of residential property; and
(9) Sell or lease completed dwelling units.
For purposes of this section, a limitation is applicable to the extent that it may reasonably be construed to apply to a county."
SECTION 4. Section 46-16.8, Hawaii Revised Statutes, is amended to read as follows:
"[[]§46-16.8[]]
County surcharge on state tax. (a) Each county may establish a surcharge
on state tax at the rates enumerated in sections 237-8.6 and 238-2.6. A county
electing to establish this surcharge shall do so by ordinance; provided that:
(1) No ordinance shall be adopted until the county has conducted a public hearing on the proposed ordinance;
(2) The ordinance shall be adopted prior to December 31, 2005; and
(3) No county surcharge on state tax that may be authorized under this section shall be levied prior to January 1, 2007.
Notice of the public hearing required under paragraph (1) shall be published in a newspaper of general circulation within the county at least twice within a period of thirty days immediately preceding the date of the hearing.
(b) A county electing to exercise the authority granted under this section shall notify the director of taxation within ten days after the county has adopted a surcharge on state tax ordinance and, beginning no earlier than January 1, 2007, the director of taxation shall levy, assess, collect, and otherwise administer the county surcharge on state tax.
(c) Each county with a population greater than five hundred thousand that adopts a county surcharge on state tax ordinance pursuant to subsection (a) shall use the surcharges received from the State for:
(1) Operating or capital costs of a locally preferred alternative for a mass transit project; and
(2) Expenses in complying with the Americans with Disabilities Act of 1990 with respect to paragraph (1).
The county surcharge on state tax shall not be used to build or repair public roads or highways, bicycle paths, or support public transportation systems already in existence prior to July 12, 2005.
(d) Each county with a population equal to or less than five hundred thousand that adopts a county surcharge on state tax ordinance pursuant to subsection (a) shall use the surcharges received from the State for:
(1) Operating or capital costs of public transportation within each county for public transportation systems, including public roadways or highways, public buses, trains, ferries, pedestrian paths or sidewalks, or bicycle paths; and
(2) Expenses in complying with the Americans with Disabilities Act of 1990 with respect to paragraph (1).
(e) A county that has adopted a county surcharge on state tax ordinance in accordance with subsection (a) may amend the ordinance to reduce the rate below that in effect on June 30, 2009. If a county chooses to amend the ordinance, the ordinance shall be adopted before October 1, 2009, and the reduced surcharge rate shall be effective on January 1, 2010. A county that fails to adopt an amendatory ordinance by the October 1 deadline shall not have any further opportunity to do so.
A county that adopts an amendatory ordinance in accordance with this subsection shall notify the director of taxation of the adoption within ten days of that action. Beginning on January 1, 2010, the director of taxation shall levy, assess, collect, and otherwise administer the reduced county surcharge on state tax.
[(e)] (f) As used in this
section, "capital costs" means nonrecurring costs required to
construct a transit facility or system, including debt service, costs of land
acquisition and development, acquiring of rights-of-way, planning, design, and construction,
and including equipping and furnishing the facility or system."
SECTION 5. Section 209E-11, Hawaii Revised Statutes, is amended to read as follows:
"§209E-11 State general excise
exemptions. (a) The department shall certify annually to the
department of taxation that any qualified business operating in an
enterprise zone before July 1, 2009, is exempt from the payment of general
excise taxes on the gross proceeds from the manufacture of tangible personal
property, the wholesale sale of tangible personal property, the engaging in a
service business by a qualified business, or the engaging in research,
development, sale, or production of all types of genetically-engineered
medical, agricultural, or maritime biotechnology products; provided that
agricultural businesses other than those engaged in the production of
genetically-engineered agricultural products shall not be exempt from the
payment of general excise taxes on the gross proceeds of agricultural retail
sales. The gross proceeds received by a contractor licensed under chapter 444
shall be exempt from the general excise tax for construction within an
enterprise zone performed before July 1, 2009, for a qualified business operating
within an enterprise zone[.] before July 1, 2009. The exemption of
this subsection for a qualified business, not a contractor, shall extend
for a period not to exceed seven consecutive years; provided that if a
force majeure event occurs, then the period of time shall be tolled until the
force majeure event ceases.
(b) No general excise tax exemption shall be provided under this section for the following:
(1) A qualified business that begins operation as such in an enterprise zone after June 30, 2009;
(2) A contractor who performs work for a qualified business described under paragraph (1); or
(3) A contractor who performs work after June 30, 2009 for any qualified business."
SECTION 6. Section 235-110.7, Hawaii Revised Statutes, is amended as follows:
1. By amending subsection (a) to read:
"(a) There shall be allowed to each taxpayer subject to the tax imposed by this chapter a capital goods excise tax credit which shall be deductible from the taxpayer's net income tax liability, if any, imposed by this chapter for the taxable year in which the credit is properly claimed.
The amount of
the tax credit shall be determined by the application of the following rates
against the cost of the eligible depreciable tangible personal property used by
the taxpayer in a trade or business and placed in service within Hawaii after December 31, 1987. For calendar years beginning after: December 31, 1987,
the applicable rate shall be three per cent; December 31, 1988, [and
thereafter,] the applicable rate shall be four per cent[.], and
December 31, 2009, the applicable rate shall be three and one-half per cent.
For taxpayers with fiscal taxable years, the applicable rate shall be the rate
for the calendar year in which the eligible depreciable tangible personal
property used in the trade or business is placed in service within Hawaii.
In the case of a partnership, S corporation, estate, or trust, the tax credit allowable is for eligible depreciable tangible personal property which is placed in service by the entity. The cost upon which the tax credit is computed shall be determined at the entity level. Distribution and share of credit shall be determined by rules.
In the case of
eligible depreciable tangible personal property for which a credit for sales or
use taxes paid to another state is allowable under section [238-3(i),] 238-3(g),
the amount of the tax credit allowed under this section shall not exceed the
amount of use tax actually paid under chapter 238 relating to such tangible
personal property.
If a deduction is taken under section 179 (with respect to election to expense certain depreciable business assets) of the Internal Revenue Code of 1954, as amended, no tax credit shall be allowed for that portion of the cost of property for which the deduction was taken."
2. By amending subsection (e) to read:
"(e) As used in this section, the definition of section 38 property (with respect to investment in depreciable tangible personal property) as defined by section 48(a)(1)(A), (a)(1)(B), (a)(3), (a)(4), (a)(7), (a)(8), (a)(10)(A), (b), (c), (f), (l), (m), and (s) of the Internal Revenue Code of 1954, as amended as of December 31, 1984, is operative for the purposes of this section only.
As used in this section:
"Cost" means (1) the actual invoice price of the tangible personal property, or (2) the basis from which depreciation is taken under section 167 (with respect to depreciation) or from which a deduction may be taken under section 168 (with respect to accelerated cost recovery system) of the Internal Revenue Code of 1954, as amended, whichever is less.
"Eligible depreciable tangible personal property" is section 38 property as defined by the operative provisions of section 48 and having a depreciable life under section 167 or for which a deduction may be taken under section 168 of the federal Internal Revenue Code of 1954, as amended.
"Placed in service" means the earliest of the following taxable years:
(1) The taxable year in which, under the:
(A) Taxpayer's depreciation practice, the period for depreciation; or
(B) Accelerated cost recovery system, a claim for recovery allowances; with respect to such property begins; or
(2) The taxable year in which the property is placed in a condition or state of readiness and availability for a specifically assigned function.
"Purchase" means an acquisition of property.
"Tangible
personal property" means tangible personal property which is placed in
service within Hawaii after December 31, 1987, and the purchase or
importation of which resulted in a transaction which was subject to the
imposition and payment of tax at the rate of [four] three and
one-half per cent under chapter 237 or 238. "Tangible personal
property" does not include tangible personal property which is an integral
part of a building or structure or tangible personal property used in a foreign
trade zone, as defined under chapter 212."
SECTION 7. Section 237-1, Hawaii Revised Statutes, is amended as follows:
1. By amending the definition of "casual sale" to read:
""Casual sale" means an occasional or isolated sale or transaction involving:
(1) Tangible personal property, real property, securities, commodity futures, or bonds by a person who is not required to be licensed under this chapter, or
(2) Tangible personal property, real property,
securities, commodity futures, or bonds which [is] are not
ordinarily sold in the business of a person who is regularly engaged in
business."
2. By amending the definition of "person" or "company" to read:
""Person" or "company"
includes every individual, partnership, society, unincorporated association,
joint adventure, group, hui, joint stock company, corporation, trustee,
personal representative, trust estate, decedent's estate, trust, trustee in
bankruptcy, or other entity, whether such persons are doing business for
themselves or in a fiduciary capacity, [and] whether the individuals are
residents or nonresidents of the State, [and] whether the corporation or
other association is created or organized under the laws of the State or of
another jurisdiction[.], whether the entity is organized or recognized
as a for-profit or nonprofit entity, and whether or not the individual or
entity is taxable under state or federal income tax law. Any person who
has in the person's possession, for sale in the State, the property of a
nonresident owner, other than as an employee of such owner, shall be deemed the
seller of the property, when sold."
3. By amending the definition of "representative" to read:
""Representative" means any
salesperson, commission agent, manufacturer's representative, broker or other
person who is authorized or employed by an unlicensed or licensed seller
to assist such seller in selling tangible personal or real property [for
use], securities, commodity futures, or bonds in the State, by
procuring orders for such sales or otherwise, and who carries on such
activities in the State, it being immaterial whether such activities are
regular or intermittent; but the term "representative" does not
include a manufacturer's representative whose functions are wholly promotional
and to act as liaison between an unlicensed seller and a seller or sellers, and
which do not include the procuring, soliciting or accepting of orders for
property or the making of deliveries of property, or the collecting of payment
for deliveries of property, or the keeping of books of account concerning
property orders, deliveries or collections transpiring between an unlicensed
seller and a seller or sellers. Any unlicensed seller who in person carries on
any such activity in the State shall also be classed as a representative."
4. By repealing the definition of "prepaid legal service plan".
[""Prepaid legal service
plan" ("Plan") means a group legal service plan in which the
cost of the services are prepaid by the group member or by some other person or
organization in the member's behalf. A group legal service plan is a plan by
which legal services are rendered to individual members of a group identifiable
in terms of some common interest. A plan shall provide:
(A) That individual members shall be
afforded freedom of choice in the selection of their own attorney or attorneys
to provide legal services under such plan.
(B) For the payment of equal amounts for
the cost of services rendered without regard to the identity of the attorney or
attorneys selected by the plan member or members. No plan shall otherwise
discriminate on the basis of such selection."]
SECTION 8. Section 237-3, Hawaii Revised Statutes, is amended by amending subsections (a) and (b) to read as follows:
"(a) "Gross income" means the gross receipts, cash or accrued, of the taxpayer received as compensation for personal services and the gross receipts of the taxpayer derived from trade, business, commerce, or sales and the value proceeding or accruing from the sale of tangible personal property, or service, or both, and all receipts, actual or accrued as hereinafter provided, by reason of the investment of the capital of the business engaged in, including interest, discount, rentals, royalties, fees, or other emoluments however designated and without any deductions on account of the cost of property sold, the cost of materials used, labor cost, taxes, royalties, interest, or discount paid or any other expenses whatsoever. "Gross income" also includes the gross receipts from the sale of the following: "securities" as defined in 15 United States Code section 78c or similar laws of jurisdictions outside the United States; "commodity futures" meaning contracts for the sale of a commodity for future delivery and other agreements, options, and rights as defined in 7 United States Code section 2 that are permitted to be traded on a board of trade designated by the Commodity Futures Trading Commission under the Commodity Exchange Act; and "bonds", meaning evidences of indebtedness, no matter the nomenclature, of private or public parties.
Every taxpayer shall be presumed to be dealing on a cash basis unless the taxpayer proves to the satisfaction of the department of taxation that the taxpayer is dealing on an accrual basis and the taxpayer's books are so kept, or unless the taxpayer employs or is required to employ the accrual basis for the purposes of the tax imposed by chapter 235 for any taxable year in which event the taxpayer shall report the taxpayer's gross income for the purposes of this chapter on the accrual basis for the same period.
"Gross proceeds of sale" means the value actually proceeding from the sale of tangible personal property or real property without any deduction on account of the cost of property sold or expenses of any kind.
(b) The words "gross income" and
"gross proceeds of sales" shall not be construed to include: [gross
receipts from the sale of securities as defined in 15 United States Code
section 78c or similar laws of jurisdictions outside the United States,
contracts for the sale of a commodity for future delivery and other agreements,
options, and rights as defined in 7 United States Code section 2 that are
permitted to be traded on a board of trade designated by the Commodities
Futures Trading Commission under the Commodity Exchange Act, or evidence of
indebtedness or, except as otherwise provided, from the sale of land in fee
simple, improved or unimproved,] dividends as defined by chapter 235; cash
discounts allowed and taken on sales; the proceeds of sale of goods, wares, or
merchandise returned by customers when the sale price is refunded either in
cash or by credit; [or the sale price of any article accepted as part
payment on any new article sold, if the full sale price of the new article is
included in the "gross income" or "gross proceeds of
sales";] gross receipts from the sale or transfer of materials or
supplies, interest on loans, or the provision of engineering, construction,
maintenance, or managerial services by one "member" of an
"affiliated public service company group" to another
"member" of the same group as such terms are defined in section
239-2. Accounts found to be worthless and actually charged off for income tax
purposes may be deducted, at corresponding periods, from gross proceeds of
sale, or gross income, within this chapter, so far as they reflect taxable
sales made, or gross income earned, after July 1, 1935, but shall be added to
gross proceeds of sale or gross income when and if afterwards collected."
SECTION 9. Section 237-4, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:
"(a) "Wholesaler" or "jobber" applies only to a person making sales at wholesale. Only the following are sales at wholesale:
(1) Sales to a licensed retail merchant, jobber, or other licensed seller for purposes of resale;
(2) Sales to a licensed manufacturer of materials or commodities that are to be incorporated by the manufacturer into a finished or saleable product (including the container or package in which the product is contained) during the course of its preservation, manufacture, or processing, including preparation for market, and that will remain in such finished or saleable product in such form as to be perceptible to the senses, which finished or saleable product is to be sold and not otherwise used by the manufacturer;
(3) Sales to a licensed producer or cooperative association of materials or commodities that are to be incorporated by the producer or by the cooperative association into a finished or saleable product that is to be sold and not otherwise used by the producer or cooperative association, including specifically materials or commodities expended as essential to the planting, growth, nurturing, and production of commodities that are sold by the producer or by the cooperative association;
(4) Sales to a licensed contractor, of materials or commodities that are to be incorporated by the contractor into the finished work or project required by the contract and that will remain in such finished work or project in such form as to be perceptible to the senses;
(5) Sales to a licensed producer, or to a cooperative
association described in section [237-23(a)(7)] 237-24(5)(E) for
sale to a licensed producer, or to a licensed person operating a feed lot, of
poultry or animal feed, hatching eggs, semen, replacement stock, breeding
services for the purpose of raising or producing animal or poultry products for
disposition as described in section 237-5 or for incorporation into a
manufactured product as described in paragraph (2) or for the purpose of
breeding, hatching, milking, or egg laying other than for the customer's own
consumption of the meat, poultry, eggs, or milk so produced; provided that in
the case of a feed lot operator, only the segregated cost of the feed furnished
by the feed lot operator as part of the feed lot operator's service to a
licensed producer of poultry or animals to be butchered or to a cooperative
association described in section [237-23(a)(7)] 237-24(5)(E) of
such licensed producers shall be deemed to be a sale at wholesale; and provided
further that any amount derived from the furnishing of feed lot services, other
than the segregated cost of feed, shall be deemed taxable at the service
business rate. This paragraph shall not apply to the sale of feed for poultry
or animals to be used for hauling, transportation, or sports purposes;
(6) Sales to a licensed producer, or to a cooperative
association described in section [237-23(a)(7)] 237-24(5)(E) for
sale to the producer, of seed or seedstock for producing agricultural and
aquacultural products, or bait for catching fish (including the catching of
bait for catching fish), which agricultural and aquacultural products or fish
are to be disposed of as described in section 237-5 or to be incorporated in a
manufactured product as described in paragraph (2);
(7) Sales to a licensed producer, or to a cooperative
association described in section [237-23(a)(7)] 237-24(5)(E) for
sale to such producer; of polypropylene shade cloth; of polyfilm; of polyethylene
film; of cartons and such other containers, wrappers, and sacks, and binders to
be used for packaging eggs, vegetables, fruits, and other agricultural and
aquacultural products; of seedlings and cuttings for producing nursery plants
or aquacultural products; or of chick containers; which cartons and such other
containers, wrappers, and sacks, binders, seedlings, cuttings, and containers
are to be used as described in section 237-5, or to be incorporated in a
manufactured product as described in paragraph (2);
(8) Sales of tangible personal property where:
(A) Tangible personal property is sold upon the order or request of a licensed seller for the purpose of rendering a service in the course of the person's service business or calling, or upon the order or request of a person subject to tax under section 237D-2 for the purpose of furnishing transient accommodations;
(B) The tangible personal property becomes or is used as an identifiable element of the service rendered; and
(C) The cost of the tangible personal property does not constitute overhead to the licensed seller;
the sale shall be subject to section 237-13.3;
(9) Sales to a licensed leasing company of capital goods that have a depreciable life, are purchased by the leasing company for lease to its customers, and are thereafter leased as a service to others;
(10) Sales of services to a licensed seller engaging in a business or calling whenever:
(A) Either:
(i) In the context of a service-to-service transaction, a service is rendered upon the order or request of a licensed seller for the purpose of rendering another service in the course of the seller's service business or calling, including a dealer's furnishing of goods or services to the purchaser of tangible personal property to fulfill a warranty obligation of the manufacturer of the property;
(ii) In the context of a service-to-tangible personal property transaction, a service is rendered upon the order or request of a licensed seller for the purpose of manufacturing, producing, or preparing tangible personal property to be sold;
(iii) In the context of a services-to-contracting transaction, a service is rendered upon the order or request of a licensed contractor as defined in section 237-6 for the purpose of assisting that licensed contractor; or
(iv) In the context of a services-to-transient accommodations rental transaction, a service is rendered upon the order or request of a person subject to tax under section 237D-2 for the purpose of furnishing transient accommodations;
(B) The benefit of the service passes to the customer of the licensed seller, licensed contractor, or person furnishing transient accommodations as an identifiable element of the other service or property to be sold, the contracting, or the furnishing of transient accommodations;
(C) The cost of the service does not constitute overhead to the licensed seller, licensed contractor, or person furnishing transient accommodations;
(D) The gross income of the licensed seller is not divided between the licensed seller and another licensed seller, contractor, or person furnishing transient accommodations for imposition of the tax under this chapter;
(E) The gross income of the licensed seller is not subject to a deduction under this chapter or chapter 237D; and
(F) The resale of the service, tangible personal property, contracting, or transient accommodations is subject to the tax imposed under this chapter at the highest tax rate.
Sales subject to this paragraph shall be subject to section 237-13.3;
(11) Sales to a licensed retail merchant, jobber, or other licensed seller of bulk condiments or prepackaged single-serving packets of condiments that are provided to customers by the licensed retail merchant, jobber, or other licensed seller;
(12) Sales to a licensed retail merchant, jobber, or other licensed seller of tangible personal property that will be incorporated or processed by the licensed retail merchant, jobber, or other licensed seller into a finished or saleable product during the course of its preparation for market (including disposable, nonreturnable containers, packages, or wrappers, in which the product is contained and that are generally known and most commonly used to contain food or beverage for transfer or delivery), and which finished or saleable product is to be sold and not otherwise used by the licensed retail merchant, jobber, or other licensed seller;
(13) Sales of amusements subject to taxation under section 237-13(4) to a licensed seller engaging in a business or calling whenever:
(A) Either:
(i) In the context of an amusement-to-service transaction, an amusement is rendered upon the order or request of a licensed seller for the purpose of rendering another service in the course of the seller's service business or calling;
(ii) In the context of an amusement-to-tangible personal property transaction, an amusement is rendered upon the order or request of a licensed seller for the purpose of selling tangible personal property; or
(iii) In the context of an amusement-to-amusement transaction, an amusement is rendered upon the order or request of a licensed seller for the purpose of rendering another amusement in the course of the person's amusement business;
(B) The benefit of the amusement passes to the customer of the licensed seller as an identifiable element of the other service, tangible personal property to be sold, or amusement;
(C) The cost of the amusement does not constitute overhead to the licensed seller;
(D) The gross income of the licensed seller is not divided between the licensed seller and another licensed seller, person furnishing transient accommodations, or person rendering an amusement for imposition of the tax under chapter 237;
(E) The gross income of the licensed seller is not subject to a deduction under this chapter; and
(F) The resale of the service, tangible personal property, or amusement is subject to the tax imposed under this chapter at the highest rate.
As used in this paragraph, "amusement" means entertainment provided as part of a show for which there is an admission charge. Sales subject to this paragraph shall be subject to section 237-13.3; and
(14) Sales by a printer to a publisher of magazines or similar printed materials containing advertisements, when the publisher is under contract with the advertisers to distribute a minimum number of magazines or similar printed materials to the public or defined segment of the public, whether or not there is a charge to the persons who actually receive the magazines or similar printed materials."
SECTION 10. Section 237-8.6, Hawaii Revised Statutes, is amended by amending subsection (d) to read as follows:
"(d) No county surcharge on state tax shall be established on any:
(1) Gross income or gross proceeds taxable under this
chapter at less than the [one-half] _____ per cent tax rate; or
(2) [Gross income or gross proceeds taxable under
this chapter at the 0.15 per cent tax rate; or
(3)] Transactions, amounts, persons, gross
income, or gross proceeds exempt from tax under this chapter."
SECTION 11. Section 237-13, Hawaii Revised Statutes, is amended to read as follows:
"§237-13 Imposition of tax. There is hereby levied and shall be assessed and collected annually privilege taxes against persons on account of their business and other activities in the State measured by the application of rates against values of products, gross proceeds of sales, or gross income, whichever is specified, as follows:
(1) Tax on manufacturers.
(A) Upon every person engaging or continuing within the State in the business of manufacturing, including compounding, canning, preserving, packing, printing, publishing, milling, processing, refining, or preparing for sale, profit, or commercial use, either directly or through the activity of others, in whole or in part, any article or articles, substance or substances, commodity or commodities, the amount of the tax to be equal to the value of the articles, substances, or commodities, manufactured, compounded, canned, preserved, packed, printed, milled, processed, refined, or prepared for sale, as shown by the gross proceeds derived from the sale thereof by the manufacturer or person compounding, preparing, or printing them, multiplied by one-half of one per cent.
(B) The measure of the tax on manufacturers is the value of the entire product for sale, regardless of the place of sale or the fact that deliveries may be made to points outside the State.
(C) If any person liable for the tax on manufacturers ships or transports the person's product, or any part thereof, out of the State, whether in a finished or unfinished condition, or sells the same for delivery to points outside the State (for example, consigned to a mainland purchaser via common carrier f.o.b. Honolulu), the value of the products in the condition or form in which they exist immediately before entering interstate or foreign commerce, determined as hereinafter provided, shall be the basis for the assessment of the tax imposed by this paragraph. This tax shall be due and payable as of the date of entry of the products into interstate or foreign commerce, whether the products are then sold or not. The department shall determine the basis for assessment, as provided by this paragraph, as follows:
(i) If the products at the time of their entry into interstate or foreign commerce already have been sold, the gross proceeds of sale, less the transportation expenses, if any, incurred in realizing the gross proceeds for transportation from the time of entry of the products into interstate or foreign commerce, including insurance and storage in transit, shall be the measure of the value of the products;
(ii) If the products have not been sold at the time of their entry into interstate or foreign commerce, and in cases governed by clause (i) in which the products are sold under circumstances such that the gross proceeds of sale are not indicative of the true value of the products, the value of the products constituting the basis for assessment shall correspond as nearly as possible to the gross proceeds of sales for delivery outside the State, adjusted as provided in clause (i), or if sufficient data are not available, sales in the State, of similar products of like quality and character and in similar quantities, made by the taxpayer (unless not indicative of the true value) or by others. Sales outside the State, adjusted as provided in clause (i), may be considered when they constitute the best available data. The department shall prescribe uniform and equitable rules for ascertaining the values;
(iii) At the election of the taxpayer and with the approval of the department, the taxpayer may make the taxpayer's returns under clause (i) even though the products have not been sold at the time of their entry into interstate or foreign commerce; and
(iv) In all cases in which products leave the State in an unfinished condition, the basis for assessment shall be adjusted so as to deduct the portion of the value as is attributable to the finishing of the goods outside the State.
(2) Tax on business of selling tangible personal property; producing.
(A) Upon every
person engaging or continuing in the business of selling any tangible personal
property whatsoever (not including, however, bonds or other evidence of
indebtedness, or stocks), there is likewise hereby levied, and shall be
assessed and collected, a tax equivalent to [four] three and one-half
per cent of the gross proceeds of sales of the business; provided that insofar
as the sale of tangible personal property is a wholesale sale under section [[]237-4(a)(8)[]],
the sale shall be subject to section 237-13.3. Upon every person engaging or
continuing within this State in the business of a producer, the tax shall be
equal to one-half of one per cent of the gross proceeds of sales of the business,
or the value of the products, for sale, if sold for delivery outside the State
or shipped or transported out of the State, and the value of the products shall
be determined in the same manner as the value of manufactured products covered
in the cases under paragraph (1)(C).
(B) Gross proceeds of sales of tangible property in interstate and foreign commerce shall constitute a part of the measure of the tax imposed on persons in the business of selling tangible personal property, to the extent, under the conditions, and in accordance with the provisions of the Constitution of the United States and the Acts of the Congress of the United States which may be now in force or may be hereafter adopted, and whenever there occurs in the State an activity to which, under the Constitution and Acts of Congress, there may be attributed gross proceeds of sales, the gross proceeds shall be so attributed.
(C) No manufacturer or producer, engaged in such business in the State and selling the manufacturer's or producer's products for delivery outside of the State (for example, consigned to a mainland purchaser via common carrier f.o.b. Honolulu), shall be required to pay the tax imposed in this chapter for the privilege of so selling the products, and the value or gross proceeds of sales of the products shall be included only in determining the measure of the tax imposed upon the manufacturer or producer.
(D) When a manufacturer or producer, engaged in such business in the State, also is engaged in selling the manufacturer's or producer's products in the State at wholesale, retail, or in any other manner, the tax for the privilege of engaging in the business of selling the products in the State shall apply to the manufacturer or producer as well as the tax for the privilege of manufacturing or producing in the State, and the manufacturer or producer shall make the returns of the gross proceeds of the wholesale, retail, or other sales required for the privilege of selling in the State, as well as making the returns of the value or gross proceeds of sales of the products required for the privilege of manufacturing or producing in the State. The manufacturer or producer shall pay the tax imposed in this chapter for the privilege of selling its products in the State, and the value or gross proceeds of sales of the products, thus subjected to tax, may be deducted insofar as duplicated as to the same products by the measure of the tax upon the manufacturer or producer for the privilege of manufacturing or producing in the State; provided that no producer of agricultural products who sells the products to a purchaser who will process the products outside the State shall be required to pay the tax imposed in this chapter for the privilege of producing or selling those products.
(E) A taxpayer selling to a federal cost-plus contractor may make the election provided for by paragraph (3)(C), and in that case the tax shall be computed pursuant to the election, notwithstanding this paragraph or paragraph (1) to the contrary.
(F) The department, by rule, may require that a seller take from the purchaser of tangible personal property a certificate, in a form prescribed by the department, certifying that the sale is a sale at wholesale; provided that:
(i) Any purchaser who furnishes a certificate shall be obligated to pay to the seller, upon demand, the amount of the additional tax that is imposed upon the seller whenever the sale in fact is not at wholesale; and
(ii) The absence of a certificate in itself shall give rise to the presumption that the sale is not at wholesale unless the sales of the business are exclusively at wholesale.
(3) Tax upon contractors.
(A) Upon every
person engaging or continuing within the State in the business of contracting,
the tax shall be equal to [four] three and one-half per cent of
the gross income of the business.
(B) In computing the tax levied under this paragraph, there shall be deducted from the gross income of the taxpayer so much thereof as has been included in the measure of the tax levied under subparagraph (A), on:
(i) Another taxpayer who is a contractor, as defined in section 237-6;
(ii) A specialty contractor, duly licensed by the department of commerce and consumer affairs pursuant to section 444-9, in respect of the specialty contractor's business; or
(iii) A specialty contractor who is not licensed by the department of commerce and consumer affairs pursuant to section 444-9, but who performs contracting activities on federal military installations and nowhere else in this State;
provided that any person claiming a deduction under this paragraph shall be required to show in the person's return the name and general excise number of the person paying the tax on the amount deducted by the person.
(C) In computing the tax levied under this paragraph against any federal cost-plus contractor, there shall be excluded from the gross income of the contractor so much thereof as fulfills the following requirements:
(i) The gross income exempted shall constitute reimbursement of costs incurred for materials, plant, or equipment purchased from a taxpayer licensed under this chapter, not exceeding the gross proceeds of sale of the taxpayer on account of the transaction; and
(ii) The taxpayer making the sale shall have certified to the department that the taxpayer is taxable with respect to the gross proceeds of the sale, and that the taxpayer elects to have the tax on gross income computed the same as upon a sale to the state government.
(D) A person who, as a business or as a part of a business in which the person is engaged, erects, constructs, or improves any building or structure, of any kind or description, or makes, constructs, or improves any road, street, sidewalk, sewer, or water system, or other improvements on land held by the person (whether held as a leasehold, fee simple, or otherwise), upon the sale or other disposition of the land or improvements, even if the work was not done pursuant to a contract, shall be liable to the same tax as if engaged in the business of contracting, unless the person shows that at the time the person was engaged in making the improvements the person intended, and for the period of at least one year after completion of the building, structure, or other improvements the person continued to intend to hold and not sell or otherwise dispose of the land or improvements. The tax in respect of the improvements shall be measured by the amount of the proceeds of the sale or other disposition that is attributable to the erection, construction, or improvement of such building or structure, or the making, constructing, or improving of the road, street, sidewalk, sewer, or water system, or other improvements. The measure of tax in respect of the improvements shall not exceed the amount which would have been taxable had the work been performed by another, subject as in other cases to the deductions allowed by subparagraph (B). Upon the election of the taxpayer, this paragraph may be applied notwithstanding that the improvements were not made by the taxpayer, or were not made as a business or as a part of a business, or were made with the intention of holding the same. However, this paragraph shall not apply in respect of any proceeds that constitute or are in the nature of rent; all such gross income shall be taxable under paragraph (9); provided that insofar as the business of renting or leasing real property under a lease is taxed under section 237-16.5, the tax shall be levied by section 237-16.5.
(4) Tax upon theaters, amusements, radio broadcasting stations, etc.
(A) Upon every
person engaging or continuing within the State in the business of operating a
theater, opera house, moving picture show, vaudeville, amusement park, dance
hall, skating rink, radio broadcasting station, or any other place at which
amusements are offered to the public, the tax shall be equal to [four] three
and one-half per cent of the gross income of the business, and in the case
of a sale of an amusement at wholesale under section 237-4(a)(13), the tax
shall be subject to section 237-13.3.
(B) The department may require that the person rendering an amusement at wholesale take from the licensed seller a certificate, in a form prescribed by the department, certifying that the sale is a sale at wholesale; provided that:
(i) Any licensed seller who furnishes a certificate shall be obligated to pay to the person rendering the amusement, upon demand, the amount of additional tax that is imposed upon the seller whenever the sale is not at wholesale; and
(ii) The absence of a certificate in itself shall give rise to the presumption that the sale is not at wholesale unless the person rendering the sale is exclusively rendering the amusement at wholesale.
(5) Tax upon sales
representatives, etc. Upon every person classified as a representative or
purchasing agent under section 237-1, engaging or continuing within the State
in the business of performing services for another, other than as an employee,
there is likewise hereby levied and shall be assessed and collected a tax equal
to [four] three and one-half per cent of the commissions and
other compensation attributable to the services so rendered by the person.
(6) Tax on service business.
(A) Upon every
person engaging or continuing within the State in any service business or
calling including professional services not otherwise specifically taxed under
this chapter, there is likewise hereby levied and shall be assessed and
collected a tax equal to [four] three and one-half per cent of
the gross income of the business, and in the case of a wholesaler under section
237-4(a)(10), the tax shall be equal to one-half of one per cent of the gross
income of the business. Notwithstanding the foregoing, a wholesaler under
section 237-4(a)(10) shall be subject to section 237-13.3.
(B) The department may require that the person rendering a service at wholesale take from the licensed seller a certificate, in a form prescribed by the department, certifying that the sale is a sale at wholesale; provided that:
(i) Any licensed seller who furnishes a certificate shall be obligated to pay to the person rendering the service, upon demand, the amount of additional tax that is imposed upon the seller whenever the sale is not at wholesale; and
(ii) The absence of a certificate in itself shall give rise to the presumption that the sale is not at wholesale unless the person rendering the sale is exclusively rendering services at wholesale.
(C) Where any
person is engaged in the business of selling interstate or foreign common
carrier [telecommunication] telecommunications services within
and without the State, other than as a home service provider, the tax shall be
imposed on that portion of gross income received by a person from service which
is originated or terminated in this State and is charged to a telephone number,
customer, or account in this State notwithstanding any other state law (except
for the exemption under section 237-23(a)(1)) to the contrary. If, under the
Constitution and laws of the United States, the entire gross income as
determined under this paragraph of a business selling interstate or foreign
common carrier telecommunication services cannot be included in the measure of
the tax, the gross income shall be apportioned as provided in section 237-21;
provided that the apportionment factor and formula shall be the same for all
persons providing those services in the State.
(D) Where any person is engaged in the business of a home service provider, the tax shall be imposed on the gross income received or derived from providing interstate or foreign mobile telecommunications services to a customer with a place of primary use in this State when such services originate in one state and terminate in another state, territory, or foreign country; provided that all charges for mobile telecommunications services which are billed by or for the home service provider are deemed to be provided by the home service provider at the customer's place of primary use, regardless of where the mobile telecommunications originate, terminate, or pass through; provided further that the income from charges specifically derived from interstate or foreign mobile telecommunications services, as determined by books and records that are kept in the regular course of business by the home service provider in accordance with section 239-24, shall be apportioned under any apportionment factor or formula adopted under subparagraph (C). Gross income shall not include:
(i) Gross receipts from mobile telecommunications services provided to a customer with a place of primary use outside this State;
(ii) Gross receipts from mobile telecommunications services that are subject to the tax imposed by chapter 239;
(iii) Gross receipts from mobile telecommunications services taxed under section 237-13.8; and
(iv) Gross receipts of a home service provider acting as a serving carrier providing mobile telecommunications services to another home service provider's customer.
For the purposes of this paragraph, "charges for mobile telecommunications services", "customer", "home service provider", "mobile telecommunications services", "place of primary use", and "serving carrier" have the same meaning as in section 239-22.
(7) Tax on insurance producers. Upon every person engaged as a licensed producer pursuant to chapter 431, there is hereby levied and shall be assessed and collected a tax equal to 0.15 per cent of the commissions due to that activity.
(8) Tax on receipts of sugar benefit payments. Upon the amounts received from the United States government by any producer of sugar (or the producer's legal representative or heirs), as defined under and by virtue of the Sugar Act of 1948, as amended, or other Acts of the Congress of the United States relating thereto, there is hereby levied a tax of one-half of one per cent of the gross amount received; provided that the tax levied hereunder on any amount so received and actually disbursed to another by a producer in the form of a benefit payment shall be paid by the person or persons to whom the amount is actually disbursed, and the producer actually making a benefit payment to another shall be entitled to claim on the producer's return a deduction from the gross amount taxable hereunder in the sum of the amount so disbursed. The amounts taxed under this paragraph shall not be taxable under any other paragraph, subsection, or section of this chapter.
(9) Tax on other
business. Upon every person engaging or continuing within the State in any
business, trade, activity, occupation, or calling not included in the preceding
paragraphs or any other provisions of this chapter, there is likewise hereby
levied and shall be assessed and collected, a tax equal to [four] three
and one-half per cent of the gross income thereof. In addition, the rate
prescribed by this paragraph shall apply to a business taxable under one or
more of the preceding paragraphs or other provisions of this chapter, as to any
gross income thereof not taxed thereunder as gross income or gross proceeds of
sales or by taxing an equivalent value of products, unless specifically
exempted."
SECTION 12. Section 237-13.5, Hawaii Revised Statutes, is amended to read as follows:
"§237-13.5 Assessment on generated
electricity. Any other provision of [the] law to the contrary
notwithstanding, the levy and assessment of the general excise tax on the gross
proceeds from the sale of electric power, including electric power produced
from geothermal resources, to a public utility company for resale to the
public, shall be made only as a tax on the business of a producer, at the rate
assessed producers, under section 237-13(2)(A).
This section shall not apply to the sale of electric power by a geothermal resource producer directly to the consumer. The gross income from such sale shall be taxed at the three and one-half per cent rate unless exempted under another provision of this chapter."
SECTION 13. Section 237-15, Hawaii Revised Statutes, is amended to read as follows:
"§237-15 Technicians. When
technicians supply dentists or physicians with dentures, orthodontic devices,
braces, and similar items which have been prepared by the technician in
accordance with specifications furnished by the dentist or physician, and such
items are to be used by the dentist or physician in the dentist's or
physician's professional practice for a particular patient who is to pay the
dentist or physician for the same as a part of the dentist's or physician's
professional services, the technician shall be taxed as though the technician
were a manufacturer selling a product to a licensed retailer[, rather than
at the rate of four per cent which is generally applied to professions and
services]."
SECTION 14. Section 237-16.5, Hawaii Revised Statutes, is amended as follows:
1. By amending subsection (a) to read:
"(a) This section relates to the leasing
of real property by a lessor to a lessee. There is hereby levied, and shall be
assessed and collected annually, a privilege tax against persons engaging or
continuing within the State in the business of leasing real property to
another, equal to [four] three and one-half per cent of the gross
proceeds or gross income received or derived from the leasing; provided that
where real property is subleased by a lessee to a sublessee, the lessee, as
provided in this section, shall be allowed a deduction from the amount of gross
proceeds or gross income received from its sublease of the real property. The
deduction shall be in the amount allowed under this section.
All deductions under this section and the name and general excise tax number of the lessee's lessor shall be reported on the general excise tax return. Any deduction allowed under this section shall only be allowed with respect to leases and subleases in writing and relating to the same real property."
2. By amending subsection (f) to read:
"(f) This section shall not cause the tax
upon a lessor, with respect to any item of the lessor's gross proceeds or gross
income, to exceed [four] three and one-half per cent."
SECTION 15. Section 237-18, Hawaii Revised Statutes, is amended by amending subsection (f) to read as follows:
"(f) Where tourism related services are furnished through arrangements made by a travel agency or tour packager and the gross income is divided between the provider of the services and the travel agency or tour packager, the tax imposed by this chapter shall apply to each such person with respect to such person's respective portion of the proceeds, and no more.
As used in this subsection,
"tourism related services" means catamaran cruises, canoe rides,
dinner cruises, lei greetings, transportation included in a tour package,
sightseeing tours not subject to chapter 239, admissions to luaus, dinner
shows, extravaganzas, cultural and educational facilities, and other services
rendered directly to the customer or tourist, but only if the providers of the
services [other than air transportation] are subject to a [four] three
and one-half per cent tax under this chapter or three and one-half per
cent tax under chapter 239."
SECTION 16. Section 237-21, Hawaii Revised Statutes, is amended to read as follows:
"§237-21
Apportionment. If any person, other than persons liable to the tax on
manufacturers as provided by section 237-13(1), is engaged in business both
within and without the State or in selling goods for delivery outside the
State, and if under the Constitution or laws of the United States [or
section 237-29.5] the entire gross income of such person cannot be included
in the measure of this tax, there shall be apportioned to the State and included
in the measure of the tax that portion of the gross income which is derived
from activities within the State, to the extent that the apportionment is
required by the Constitution or laws of the United States [or section
237-29.5]. In the case of a tax upon the production of property in the
State the apportionment shall be determined as in the case of the tax on
manufacturers. In other cases, if and to the extent that the apportionment
cannot be accurately made by separate accounting methods, there shall be
apportioned to the State and included in the measure of this tax that
proportion of the total gross income, so requiring apportionment, which the
cost of doing business within the State, applicable to the gross income, bears
to the cost of doing business both within and without the State, applicable to
the gross income."
SECTION 17. Section 237-22, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:
"(b) To the extent that any deduction,
allocation, or other method to determine tax liability is necessary to comply
with subsection (a), each taxpayer liable for the tax imposed by this chapter
shall be entitled to full offset for the amount of legally imposed sales, gross
receipts, or use taxes paid by the taxpayer with respect to the imported
property, service, or contracting to another state and any subdivision thereof;
provided that such offset shall not exceed the amount of general excise tax
imposed under this chapter upon the gross proceeds of sales or gross income from
the sale and subsequent sale of the imported property, service, or
contracting. The amount of legally imposed sales, gross receipts, or use taxes
paid by the taxpayer with respect to the import shall be first applied against
any use tax, as permitted under section [238-3(i),] 238-3(g), and
any remaining amount may be applied under this section for the same imported
property, service, or contracting.
The director of taxation shall have the authority to implement this offset by prescribing tax forms and instructions that require tax reporting and payment by deduction, allocation, or any other method to determine tax liability to the extent necessary to comply with the foregoing.
The director of taxation may require the taxpayer to produce the necessary receipts or vouchers indicating the payment of the sales, gross receipts, or use taxes to another state or subdivision as a condition for the allowance of this offset."
SECTION 18. Section 237-23, Hawaii Revised Statutes, is amended to read as follows:
"§237-23 Exemptions, persons exempt, applications for exemption. (a) This chapter shall not apply to the following persons:
(1) Public service companies as that term is defined in section 239-2, with respect to the gross income, either actual gross income or gross income estimated and adjusted, that is included in the measure of the tax imposed by chapter 239;
(2) Public utilities owned and operated by the State or any county, or other political subdivision thereof;
[(3) Fraternal benefit societies, orders, or
associations, operating under the lodge system, or for the exclusive benefit of
the members of the fraternity itself, operating under the lodge system, and
providing for the payment of death, sick, accident, prepaid legal services, or
other benefits to the members of the societies, orders, or associations, and to
their dependents;
(4)] (3) Corporations, associations,
trusts, or societies organized and operated exclusively for religious[,
charitable, scientific, or educational] purposes[, as well as that of
operating senior citizens housing facilities qualifying for a loan under the
laws of the United States as authorized by section 202 of the Housing Act of
1959, as amended, as well as that of operating a prepaid legal services plan,
as well as that of operating or managing a homeless facility, or any other
program for the homeless authorized under part VII of chapter 356D]; and
[(5) Business leagues, chambers of commerce,
boards of trade, civic leagues, agricultural and horticultural organizations,
and organizations operated exclusively for the benefit of the community and for
the promotion of social welfare that shall include the operation of a prepaid
legal service plan, and from which no profit inures to the benefit of any
private stockholder or individual;
(6) Hospitals, infirmaries, and sanitaria;
(7) Cooperative associations incorporated
under chapter 421 or Code section 521 cooperatives which fully meet the
requirements of section 421-23, except Code section 521 cooperatives need not
be organized in Hawaii; provided that:
(A) The exemption shall apply only
to the gross income derived from activities that are pursuant to purposes and
powers authorized by chapter 421, except those provisions pertaining to or
requiring corporate organization in Hawaii do not apply to Code section 521
cooperatives;
(B) The exemption shall not relieve
any person who receives any proceeds of sale from the association of the duty
of returning and paying the tax on the total gross proceeds of the sales on
account of which the payment was made, in the same amount and at the same rate
as would apply thereto had the sales been made directly by the person, and all
those persons shall be so taxable; and
(C) As used in this paragraph,
"section 521 cooperatives" mean associations that qualify as a
cooperative under section 521 (with respect to exemption of farmers'
cooperatives from tax) of the Internal Revenue Code of 1986, as amended;
(8)] (4) Persons affected with Hansen's
disease and kokuas, with respect to business within the county of Kalawao[;
(9) Corporations, companies, associations,
or trusts organized for the establishment and conduct of cemeteries no part of
the net earnings of which inures to the financial benefit of any private
stockholder or individual; provided that the exemption shall apply only to the
activities of those persons in the conduct of cemeteries and shall not apply to
any activity the primary purpose of which is to produce income, even though the
income is to be used for or in the furtherance of the exempt activities of
those persons; and
(10) Nonprofit shippers associations
operating under part 296 of the Civil Aeronautics Board Economic Regulations].
(b) The [exemptions] exemption
enumerated in subsection (a)(3) [to (6)] shall apply only:
(1) To those persons who shall have registered with the department of taxation by filing a written application for registration in such form as the department shall prescribe, shall have paid the registration fee of $20, and shall have had the exemption allowed by the department or by a court or tribunal of competent jurisdiction upon appeal from any assessment resulting from disallowance of the exemption by the department;
(2) To activities from which no profit inures to the benefit of any private stockholder or individual, except for death or other benefits to the members of fraternal societies; and
(3) To the [fraternal,] religious[,
charitable, scientific, educational, communal, or social welfare]
activities of such persons, [or to the activities of such hospitals,
infirmaries, and sanitaria as such,] and not to any activity the primary
purpose of which is to produce income even though the income is to be used for
or in furtherance of the exempt activities of such persons.
(c) To obtain allowance of an exemption:
(1) A person under subsection (a)(3) [to (6),]
who has received or applied for recognition of tax exempt status under section
501(c)(3)[, (4), (6), or (8)] of the Internal Revenue Code of 1986, as
amended, [or who is a subordinate person of a person who has received a
group exemption letter under section 501(c)(3), (4), (6), or (8) of the
Internal Revenue Code of 1986, as amended,] shall register with the
department by filing a statement attaching a copy of the exemption or
application for recognition of exempt status and any particular facts that the
department may require; and
(2) All other persons under subsection (a)(3) [to
(6)] shall file an application for exemption in the form of an affidavit or
affidavits setting forth in general all facts affecting the right to the
exemption and such particular facts as the department may require, to which
shall be attached such records, papers, and other information as the department
may prescribe.
(d) [For all persons, the] The
statement registering the person with the department or application for
exemption shall be filed on or before March 31 of the first year of
registration or within three months after the commencement of business. In the
event of allowance of the exemption, no further statement or application
therefor need be filed unless there is a material change in the facts. In the
event of disallowance of the exemption, a license may be obtained upon payment
of the required fee as provided by section 237-9, less the $20 already paid
under this section, which shall be credited thereon. In the event the
registrant has a license under this chapter, no further fee shall be required
for registration under this section.
(e) The department for good cause may extend the time for registration or the time for filing an application for exemption."
SECTION 19. Section 237-24, Hawaii Revised Statutes, is amended to read as follows:
"§237-24 Amounts not taxable. This chapter shall not apply to the following amounts:
(1) Amounts received under life insurance policies and contracts paid by reason of the death of the insured;
(2) Amounts received (other than amounts paid by reason of death of the insured) under life insurance, endowment, or annuity contracts, either during the term or at maturity or upon surrender of the contract;
(3) Amounts received under any accident insurance or health insurance policy or contract or under workers' compensation acts or employers' liability acts, as compensation for personal injuries, death, or sickness, including also the amount of any damages or other compensation received, whether as a result of action or by private agreement between the parties on account of the personal injuries, death, or sickness;
(4) The value of all property of every kind and sort acquired by gift, bequest, or devise, and the value of all property acquired by descent or inheritance;
(5) Amounts received as a gift or donation by a:
(A) Fraternal benefit society, order, or association;
(B) Corporation, association, trust, or society organized and operated exclusively for charitable, scientific, or educational purposes;
(C) Business league, chamber of commerce, board of trade, civic league, agricultural or horticultural organization, and organization operated exclusively for the benefit of the community and for the promotion of social welfare;
(D) Hospital, infirmary, or sanitarium;
(E) Cooperative association incorporated under section 521 of the Internal Revenue Code, as amended, or chapter 421; or
(F) Corporation, company, association, or trust organized for the establishment and conduct of a cemetery;
[(5)] (6) Amounts received by any person
as compensatory damages for any tort injury to the person, or to the person's
character reputation, or received as compensatory damages for any tort injury
to or destruction of property, whether as the result of action or by private
agreement between the parties (provided that amounts received as punitive
damages for tort injury or breach of contract injury shall be included in gross
income);
[(6)] (7) Amounts received as salaries
or wages for services rendered by an employee to an employer;
[(7)] (8) Amounts received as alimony
and other similar payments and settlements;
[(8)] (9) Amounts collected by
distributors as fuel taxes on "liquid fuel" imposed by chapter 243,
and the amounts collected by such distributors as a fuel tax imposed by any Act
of the Congress of the United States;
[(9)] (10) Taxes on liquor imposed by
chapter 244D on dealers holding permits under that chapter;
[(10)] (11) The amounts of taxes on
cigarettes and tobacco products imposed by chapter 245 on wholesalers or
dealers holding licenses under that chapter and selling the products at
wholesale;
[(11)] (12) Federal excise taxes imposed
on articles sold at retail and collected from the purchasers thereof and paid
to the federal government by the retailer;
[(12)] (13) The amounts of federal taxes
under chapter 37 of the Internal Revenue Code, or similar federal taxes,
imposed on sugar manufactured in the State, paid by the manufacturer to the
federal government;
[(13) An amount up to, but not in excess of,
$2,000 a year of gross income received by any blind, deaf, or totally disabled
person engaging, or continuing, in any business, trade, activity, occupation,
or calling within the State; a corporation all of whose outstanding shares are
owned by an individual or individuals who are blind, deaf, or totally disabled;
a general, limited, or limited liability partnership, all of whose partners are
blind, deaf, or totally disabled; or a limited liability company, all of whose
members are blind, deaf, or totally disabled;
(14) Amounts received by a producer of
sugarcane from the manufacturer to whom the producer sells the sugarcane,
where:
(A) The producer is an independent
cane farmer, so classed by the Secretary of Agriculture under the Sugar Act of
1948 (61 Stat. 922, Chapter 519) as the Act may be amended or supplemented;
(B) The value or gross proceeds of
sale of the sugar, and other products manufactured from the sugarcane, is
included in the measure of the tax levied on the manufacturer under section
237-13(1) or (2);
(C) The producer's gross proceeds of
sales are dependent upon the actual value of the products manufactured
therefrom or the average value of all similar products manufactured by the
manufacturer; and
(D) The producer's gross proceeds of
sales are reduced by reason of the tax on the value or sale of the manufactured
products;
(15)] (14) Money paid by the State or
eleemosynary child-placing organizations to foster parents for their care of
children in foster homes; and
[(16)] (15) Amounts received by a
cooperative housing corporation from its shareholders in reimbursement of funds
paid by such corporation for lease rental, real property taxes, and other
expenses of operating and maintaining the cooperative land and improvements;
provided that such a cooperative corporation is a corporation:
(A) Having one and only one class of stock outstanding;
(B) Each of the stockholders of which is entitled solely by reason of the stockholder's ownership of stock in the corporation, to occupy for dwelling purposes a house, or an apartment in a building owned or leased by the corporation; and
(C) No stockholder of which is entitled (either conditionally or unconditionally) to receive any distribution not out of earnings and profits of the corporation except in a complete or partial liquidation of the corporation."
SECTION 20. Section 237-24.3, Hawaii Revised Statutes, is amended to read as follows:
"§237-24.3 Additional amounts not taxable. In addition to the amounts not taxable under section 237-24, this chapter shall not apply to:
[(1) Amounts
received from the loading, transportation, and unloading of agricultural
commodities shipped for a producer or produce dealer on one island of this
State to a person, firm, or organization on another island of this State. The
terms "agricultural commodity", "producer", and
"produce dealer" shall be defined in the same manner as they are
defined in section 147-1; provided that agricultural commodities need not have
been produced in the State;
(2) Amounts
received from sales of:
(A) Intoxicating
liquor as the term "liquor" is defined in chapter 244D;
(B) Cigarettes
and tobacco products as defined in chapter 245; and
(C) Agricultural,
meat, or fish products;
to any person or common carrier in interstate
or foreign commerce, or both, whether ocean-going or air, for consumption
out-of-state on the shipper's vessels or airplanes;
(3)] (1)
Amounts received by the manager, submanager, or board of directors of:
(A) An association of owners of a condominium property regime established in accordance with chapter 514A or 514B; or
(B) A nonprofit homeowners or community association incorporated in accordance with chapter 414D or any predecessor thereto and existing pursuant to covenants running with the land,
in reimbursement of sums paid for common expenses;
[(4) Amounts
received or accrued from:
(A) The
loading or unloading of cargo from ships, barges, vessels, or aircraft, whether
or not the ships, barges, vessels, or aircraft travel between the State and
other states or countries or between the islands of the State;
(B) Tugboat
services including pilotage fees performed within the State, and the towage of
ships, barges, or vessels in and out of state harbors, or from one pier to
another; and
(C) The
transportation of pilots or governmental officials to ships, barges, or vessels
offshore; rigging gear; checking freight and similar services; standby charges;
and use of moorings and running mooring lines;
(5)] (2)
Amounts received by an employee benefit plan by way of contributions,
dividends, interest, and other income; and amounts received by a nonprofit
organization or office, as payments for costs and expenses incurred for the
administration of an employee benefit plan; provided that this exemption shall
not apply to any gross rental income or gross rental proceeds received after
June 30, 1994, as income from investments in real property in this State; and
provided further that gross rental income or gross rental proceeds from
investments in real property received by an employee benefit plan after June
30, 1994, under written contracts executed prior to July 1, 1994, shall not be
taxed until the contracts are renegotiated, renewed, or extended, or until
after December 31, 1998, whichever is earlier. For the purposes of this
paragraph, "employee benefit plan" means any plan as defined in
section 1002(3) of title 29 of the United States Code, as amended;
[(6)] (3)
Amounts received for purchases made with United States Department of
Agriculture food coupons under the federal food stamp program, and amounts
received for purchases made with United States Department of Agriculture food
vouchers under the Special Supplemental Foods Program for Women, Infants and
Children;
[(7) Amounts
received by a hospital, infirmary, medical clinic, health care facility,
pharmacy, or a practitioner licensed to administer the drug to an individual
for selling prescription drugs or prosthetic devices to an individual; provided
that this paragraph shall not apply to any amounts received for services
provided in selling prescription drugs or prosthetic devices. As used in this
paragraph:
"Prescription
drugs" are those drugs defined under section 328-1 and dispensed by
filling or refilling a written or oral prescription by a practitioner licensed
under law to administer the drug and sold by a licensed pharmacist under
section 328-16 or practitioners licensed to administer drugs; and
"Prosthetic
device" means any artificial device or appliance, instrument, apparatus,
or contrivance, including their components, parts, accessories, and
replacements thereof, used to replace a missing or surgically removed part of
the human body, which is prescribed by a licensed practitioner of medicine,
osteopathy, or podiatry and which is sold by the practitioner or which is
dispensed and sold by a dealer of prosthetic devices; provided that
"prosthetic device" shall not mean any auditory, ophthalmic, dental,
or ocular device or appliance, instrument, apparatus, or contrivance;
(8)] (4)
Taxes on transient accommodations imposed by chapter 237D and passed on and
collected by operators holding certificates of registration under that chapter;
and
[(9) Amounts
received as dues by an unincorporated merchants association from its membership
for advertising media, promotional, and advertising costs for the promotion of
the association for the benefit of its members as a whole and not for the
benefit of an individual member or group of members less than the entire
membership;
(10) Amounts
received by a labor organization for real property leased to:
(A) A
labor organization; or
(B) A
trust fund established by a labor organization for the benefit of its members,
families, and dependents for medical or hospital care, pensions on retirement
or death of employees, apprenticeship and training, and other membership
service programs.
As used in this
paragraph, "labor organization" means a labor organization exempt
from federal income tax under section 501(c)(5) of the Internal Revenue Code,
as amended;
(11)] (5)
Amounts received from foreign diplomats and consular officials who are holding
cards issued or authorized by the United States Department of State granting
them an exemption from state taxes[; and
(12) Amounts received as rent for the rental
or leasing of aircraft or aircraft engines used by the lessees or renters for
interstate air transportation of passengers and goods. For purposes of this
paragraph, payments made pursuant to a lease shall be considered rent
regardless of whether the lease is an operating lease or a financing lease.
The definition of "interstate air transportation" is the same as in
49 U.S.C. 40102]."
SECTION 21. Section 237-24.7, Hawaii Revised Statutes, is amended to read as follows:
"§237-24.7 Additional amounts not taxable. In addition to the amounts not taxable under section 237-24, this chapter shall not apply to:
(1) Amounts received by the operator of a hotel from the owner of the hotel or from a time share association, and amounts received by the suboperator of a hotel from the owner of the hotel, from a time share association, or from the operator of the hotel, in amounts equal to and which are disbursed by the operator or suboperator for employee wages, salaries, payroll taxes, insurance premiums, and benefits, including retirement, vacation, sick pay, and health benefits. As used in this paragraph:
"Employee" means employees directly engaged in the day-to-day operation of the hotel and employed by the operator or suboperator.
"Hotel" means an operation as defined in section 445-90 or a time share plan as defined in section 514E-1.
"Operator" means any person who, pursuant to a written contract with the owner of a hotel or time share association, operates or manages the hotel for the owner or time share association.
"Owner" means the fee owner or lessee under a recorded lease of a hotel.
"Suboperator" means any person who, pursuant to a written contract with the operator, operates or manages the hotel as a subcontractor of the operator.
"Time share association" means an "association" as that term is defined in section 514E-1;
(2) Amounts received by the operator of a county transportation system operated under an operating contract with a political subdivision, where the political subdivision is the owner of the county transportation system. As used in this paragraph:
"County transportation system" means a mass transit system of motorized buses providing regularly scheduled transportation within a county.
"Operating contract" or "contract" means a contract to operate and manage a political subdivision's county transportation system, which provides that:
(A) The political subdivision shall exercise substantial control over all aspects of the operator's operation;
(B) The political subdivision controls the development of transit policy, service planning, routes, and fares; and
(C) The operator develops in advance a draft budget in the same format as prescribed for agencies of the political subdivision. The budget must be subject to the same constraints and controls regarding the lawful expenditure of public funds as any public sector agency, and deviations from the budget must be subject to approval by the appropriate political subdivision officials involved in the budgetary process.
"Operator" means any person who, pursuant to an operating contract with a political subdivision, operates or manages a county transportation system.
"Owner" means a political subdivision that owns or is the lessee of all the properties and facilities of the county transportation system (including buses, real estate, parking garages, fuel pumps, maintenance equipment, office supplies, etc.), and that owns all revenues derived therefrom;
(3) Surcharge taxes on rental motor vehicles imposed by chapter 251 and passed on and collected by persons holding certificates of registration under that chapter;
(4) Amounts received by the operator of orchard properties from the owner of the orchard property in amounts equal to and which are disbursed by the operator for employee wages, salaries, payroll taxes, insurance premiums, and benefits, including retirement, vacation, sick pay, and health benefits. As used in this paragraph:
"Employee" means an employee directly engaged in the day-to-day operations of the orchard properties and employed by the operator.
"Operator" means a producer who, pursuant to a written contract with the owner of the orchard property, operates or manages the orchard property for the owner where the property contains an area sufficient to make the undertaking economically feasible.
"Orchard property" means any real property that is used to raise trees with a production life cycle of fifteen years or more producing fruits or nuts having a normal period of development from the initial planting to the first commercially saleable harvest of not less than three years.
"Owner" means a fee owner or lessee under a recorded lease of orchard property;
(5) Taxes on nursing facility income imposed by chapter 346E and passed on and collected by operators of nursing facilities;
(6) Amounts received under property and casualty insurance policies for damage or loss of inventory used in the conduct of a trade or business located within the State or a portion thereof that is declared a natural disaster area by the governor pursuant to section 209-2;
[(7) Amounts
received as compensation by community organizations, school booster clubs, and
nonprofit organizations under a contract with the chief election officer for
the provision and compensation of precinct officials and other election-related
personnel, services, and activities, pursuant to section 11-5;
(8)] (7)
Interest received by a person domiciled outside the State from a trust company
(as defined in section 412:8-101) acting as payment agent or trustee on behalf
of the issuer or payees of an interest bearing instrument or obligation, if the
interest would not have been subject to tax under this chapter if paid directly
to the person domiciled outside the State without the use of a paying agent or
trustee; provided that if the interest would otherwise be taxable under this
chapter if paid directly to the person domiciled outside the State, it shall
not be exempt solely because of the use of a Hawaii trust company as a paying
agent or trustee; and
[(9)] (8)
Amounts received by a management company from related entities engaged in the
business of selling interstate or foreign common carrier telecommunications
services in amounts equal to and which are disbursed by the management company
for employee wages, salaries, payroll taxes, insurance premiums, and benefits,
including retirement, vacation, sick pay, and health benefits. As used in this
paragraph:
"Employee" means employees directly engaged in the day-to-day operation of related entities engaged in the business of selling interstate or foreign common carrier telecommunications services and employed by the management company.
"Management company" means any person who, pursuant to a written contract with a related entity engaged in the business of selling interstate or foreign common carrier telecommunications services, provides managerial or operational services to that entity.
"Related entities" means:
(A) An affiliated group of corporations within the meaning of section 1504 (with respect to affiliated group defined) of the federal Internal Revenue Code of 1986, as amended;
(B) A controlled group of corporations within the meaning of section 1563 (with respect to definitions and special rules) of the federal Internal Revenue Code of 1986, as amended;
(C) Those entities connected through ownership of at least eighty per cent of the total value and at least eighty per cent of the total voting power of each such entity (or combination thereof), including partnerships, associations, trusts, S corporations, nonprofit corporations, limited liability partnerships, or limited liability companies; and
(D) Any group or combination of the entities described in paragraph (C) constituting a unitary business for income tax purposes;
whether or
not the entity is located within or without the State or licensed under this
chapter[; and
(10) Amounts
received as grants under section 206M-15]."
SECTION 22. Section 237-27, Hawaii Revised Statutes, is amended as follows:
1. By amending its title to read:
"[Exemption of certain] Certain
petroleum refiners."
2. By amending subsection (b) to read:
"(b) [There shall be excluded from the
measure of the tax on] When a refiner [such] sells
part of the petroleum products resultant from the refiner's business [as is]
to [be further refined by] another refiner[, to the extent that the
petroleum products resultant from such further refining will be (or but for
this subsection would be) included in the measure of the tax on such other
refiner, and where] for further refinement, the tax shall be imposed at
the rate of one-half of one per cent on the gross income derived from the sale
of the petroleum products. Where the petroleum products are to be used
partly for such refining and partly for other purposes, the proportion used for
each purpose shall be determined upon the basis of weight or BTU content."
SECTION 23. Section 237-29.55, Hawaii Revised Statutes, is amended as follows:
1. By amending its title to read:
"[Exemption
for sale] Sale of tangible personal property for resale at
wholesale."
2. By amending subsection (a) to read:
"(a) [There shall be exempted from,
and excluded from the measure of, the taxes imposed by this chapter all of the
gross proceeds or gross income arising from the sale of] When
tangible personal property imported to Hawaii from a foreign or domestic source
is sold to a licensed taxpayer for subsequent resale for the purpose of
wholesale as defined under section 237-4[.], the gross proceeds or
gross income arising from the sale shall be taxed at the rate of one-half of
one per cent."
SECTION 24. Section 237-44, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:
"(b) Every person receiving admissions
for any circus, carnival, or any other place whatsoever at which a transient
taxpayer is engaged in business (whether or not further admissions are charged
inside the place, such further admissions, if any, being also subject to this
section), shall set aside from the admissions and hold in trust for the State [five]
_____ per cent of the admissions, or such lesser amount as the department of
taxation shall approve as sufficient, to guarantee payment of the tax levied by
this chapter on the transient taxpayer. The amount so required to be set aside
from the admissions shall be deposited with the department promptly upon
collection thereof, from time to time, for deposit by it in a special trust
fund in the treasury of the State, there to remain until refunded upon voucher
of the department, or until applied to the payment of the taxes guaranteed
thereby with the consent of the person making the deposit, or until deposited
in court pursuant to chapter 655 or the rules of court. The department may
bring an action to obtain an adjudication of its right to apply the guarantee
fund in payment of taxes and may deposit the fund in court to await the results
of the adjudication, or may be sued by an interested person seeking to obtain
the adjudication and may be ordered to make such deposit in court,
notwithstanding that the department asserts a claim against the fund."
SECTION 25. Section 238-1, Hawaii Revised Statutes, is amended by amending the definition of "use" to read as follows:
""Use" (and any nounal, verbal, adjectival, adverbial, and other equivalent form of the term) herein used interchangeably means any use, whether the use is of such nature as to cause the property, services, or contracting to be appreciably consumed or not, or the keeping of the property or services for such use or for sale, the exercise of any right or power over tangible or intangible personal property incident to the ownership of that property, and shall include control over tangible or intangible property by a seller who is licensed or who should be licensed under chapter 237, who directs the importation of the property into the State for sale and delivery to a purchaser in the State, liability and free on board (FOB) to the contrary notwithstanding, regardless of where title passes, but the term "use" shall not include:
(1) Temporary use of property, not of a perishable or quickly consumable nature, where the property is imported into the State for temporary use (not sale) therein by the person importing the same and is not intended to be, and is not, kept permanently in the State. For example, without limiting the generality of the foregoing language:
(A) In the case of a contractor importing permanent equipment for the performance of a construction contract, with intent to remove, and who does remove, the equipment out of the State upon completing the contract;
(B) In the case of moving picture films imported for use in theaters in the State with intent or under contract to transport the same out of the State after completion of such use; and
(C) In the case of a transient visitor importing an automobile or other belongings into the State to be used by the transient visitor while therein but which are to be used and are removed upon the transient visitor's departure from the State;
(2) Use by the taxpayer of property acquired by the taxpayer solely by way of gift;
(3) Use which is limited to the receipt of articles and the return thereof, to the person from whom acquired, immediately or within a reasonable time either after temporary trial or without trial;
(4) Use of goods imported into the State by the owner of a vessel or vessels engaged in interstate or foreign commerce and held for and used only as ship stores for the vessels;
(5) The use or keeping for use of household goods, personal effects, and private automobiles imported into the State for nonbusiness use by a person who:
(A) Acquired them in another state, territory, district, or country;
(B) At the time of the acquisition was a bona fide resident of another state, territory, district, or country;
(C) Acquired the property for use outside the State; and
(D) Made actual and substantial use thereof outside this State;
provided that as to an article acquired less than three months prior to the time of its importation into the State it shall be presumed, until and unless clearly proved to the contrary, that it was acquired for use in the State and that its use outside the State was not actual and substantial;
[(6) The leasing or renting of any aircraft
or the keeping of any aircraft solely for leasing or renting to lessees or
renters using the aircraft for commercial transportation of passengers and
goods or the acquisition or importation of any such aircraft or aircraft
engines by any lessee or renter engaged in interstate air transportation. For
purposes of this paragraph, "leasing" includes all forms of lease,
regardless of whether the lease is an operating lease or financing lease. The
definition of "interstate air transportation" is the same as in 49
U.S.C. 40102;
(7) The use of oceangoing vehicles for
passenger or passenger and goods transportation from one point to another
within the State as a public utility as defined in chapter 269;
(8) The use of material, parts, or tools
imported or purchased by a person licensed under chapter 237 which are used for
aircraft service and maintenance, or the construction of an aircraft service
and maintenance facility as those terms are defined in section 237-24.9;
(9) The use of services or contracting
imported for resale where the contracting or services are for resale,
consumption, or use outside the State pursuant to section 237-29.53(a);
(10)] (6) The use of contracting
imported or purchased by a contractor as defined in section 237-6 who is:
(A) Licensed under chapter 237;
(B) Engaged in business as a contractor; and
(C) Subject to the tax imposed under section 238-2.3; and
[(11)] (7) The use of property, services,
or contracting imported by foreign diplomats and consular officials who are
holding cards issued or authorized by the United States Department of State
granting them an exemption from state taxes.
With regard to purchases made and distributed under the authority of chapter 421, a cooperative association shall be deemed the user thereof."
SECTION 26. Section 238-2, Hawaii Revised Statutes, is amended to read as follows:
"§238-2 Imposition of tax on tangible personal property; exemptions. There is hereby levied an excise tax on the use in this State of tangible personal property which is imported by a taxpayer in this State whether owned, purchased from an unlicensed seller, or however acquired for use in this State. The tax imposed by this chapter shall accrue when the property is acquired by the importer or purchaser and becomes subject to the taxing jurisdiction of the State. The rates of the tax hereby imposed and the exemptions thereof are as follows:
(1) If the importer or purchaser is licensed under chapter 237 and is:
(A) A wholesaler or jobber importing or purchasing for purposes of sale or resale; or
(B) A manufacturer importing or purchasing material or commodities which are to be incorporated by the manufacturer into a finished or saleable product (including the container or package in which the product is contained) wherein it will remain in such form as to be perceptible to the senses, and which finished or saleable product is to be sold in such manner as to result in a further tax on the activity of the manufacturer as the manufacturer or as a wholesaler, and not as a retailer,
there shall be no tax; provided that if the wholesaler, jobber, or manufacturer is also engaged in business as a retailer (so classed under chapter 237), paragraph (2) shall apply to the wholesaler, jobber, or manufacturer, but the director of taxation shall refund to the wholesaler, jobber, or manufacturer, in the manner provided under section 231-23(c) such amount of tax as the wholesaler, jobber, or manufacturer shall, to the satisfaction of the director, establish to have been paid by the wholesaler, jobber, or manufacturer to the director with respect to property which has been used by the wholesaler, jobber, or manufacturer for the purposes stated in this paragraph;
(2) If the importer or purchaser is licensed under chapter 237 and is:
(A) A retailer or other person importing or purchasing for purposes of sale or resale, not exempted by paragraph (1);
(B) A manufacturer importing or purchasing material or commodities which are to be incorporated by the manufacturer into a finished or saleable product (including the container or package in which the product is contained) wherein it will remain in such form as to be perceptible to the senses, and which finished or saleable product is to be sold at retail in this State, in such manner as to result in a further tax on the activity of the manufacturer in selling such products at retail;
(C) A contractor importing or purchasing material or commodities which are to be incorporated by the contractor into the finished work or project required by the contract and which will remain in such finished work or project in such form as to be perceptible to the senses;
(D) A person engaged in a service business or calling as defined in section 237-7, or a person furnishing transient accommodations subject to the tax imposed by section 237D-2, in which the import or purchase of tangible personal property would have qualified as a sale at wholesale as defined in section 237-4(a)(8) had the seller of the property been subject to the tax in chapter 237; or
(E) A publisher of magazines or similar printed materials containing advertisements, when the publisher is under contract with the advertisers to distribute a minimum number of magazines or similar printed materials to the public or defined segment of the public, whether or not there is a charge to the persons who actually receive the magazines or similar printed materials,
the tax shall be one-half of one per cent of the purchase price of the property, if the purchase and sale are consummated in Hawaii; or, if there is no purchase price applicable thereto, or if the purchase or sale is consummated outside of Hawaii, then one-half of one per cent of the value of such property; and
(3) In all other cases, [four] three and
one-half per cent of the value of the property.
For purposes of this section, tangible personal property is property that is imported by the taxpayer for use in this State, notwithstanding the fact that title to the property, or the risk of loss to the property, passes to the purchaser of the property at a location outside this State."
SECTION 27. Section 238-2.3, Hawaii Revised Statutes, is amended to read as follows:
"§238-2.3 Imposition of tax on imported services or contracting; exemptions. There is hereby levied an excise tax on the value of services or contracting as defined in section 237-6 that are performed by an unlicensed seller at a point outside the State and imported or purchased for use in this State. The tax imposed by this chapter shall accrue when the service or contracting as defined in section 237-6 is received by the importer or purchaser and becomes subject to the taxing jurisdiction of the State. The rates of the tax hereby imposed and the exemptions from the tax are as follows:
(1) If the importer or purchaser is licensed under chapter 237 and is:
(A) Engaged in a service business or calling in which the imported or purchased services or contracting become identifiable elements, excluding overhead, of the services rendered by the importer or purchaser, and the gross income of the importer or purchaser is subject to the tax imposed under chapter 237 on services at the rate of one-half of one per cent or the rate of tax imposed under section 237-13.3; or
(B) A manufacturer importing or purchasing services or contracting that become identifiable elements, excluding overhead, of a finished or saleable product (including the container or package in which the product is contained) and the finished or saleable product is to be sold in a manner that results in a further tax on the manufacturer as a wholesaler, and not a retailer;
there shall be no tax imposed on the value of the
imported or purchased services or contracting; provided that if the
manufacturer is also engaged in business as a retailer as classified under
chapter 237, paragraph (2) shall apply to the manufacturer, but the director of
taxation shall refund to the manufacturer, in the manner provided under section
231-23(c), that amount of tax that the manufacturer, to the satisfaction of the
director, shall establish to have been paid by the manufacturer to the director
with respect to services that have been used by the manufacturer for the
purposes stated in this paragraph[.];
(2) If the importer or purchaser is a person licensed under chapter 237 and is:
(A) Engaged in a service business or calling in which the imported or purchased services or contracting become identifiable elements, excluding overhead, of the services rendered by the importer or purchaser, and the gross income from those services when sold by the importer or purchaser is subject to the tax imposed under chapter 237 at the highest rate;
(B) A manufacturer importing or purchasing services or contracting that become identifiable elements, excluding overhead, of the finished or saleable manufactured product (including the container or package in which the product is contained) and the finished or saleable product is to be sold in a manner that results in a further tax under chapter 237 on the activity of the manufacturer as a retailer; or
(C) A contractor importing or purchasing services or contracting that become identifiable elements, excluding overhead, of the finished work or project required, under the contract, and where the gross proceeds derived by the contractor are subject to the tax under section 237-13(3) as a contractor,
the tax shall be one-half of one per cent of the value of the imported or purchased services or contracting; and
(3) In all other cases, the importer or purchaser is
subject to the tax at the rate of [four] three and one-half per
cent on the value of the imported or purchased services or contracting."
SECTION 28. Section 238-3, Hawaii Revised Statutes, is amended to read as follows:
"§238-3 Application of tax, etc.
(a) The tax imposed by this chapter shall not apply to any property, services,
or contracting or to any use of the property, services, or contracting that
cannot legally be so taxed under the Constitution or laws of the United States,
but only so long as[,] and only to the extent to which the State is
without power to impose the tax.
To the extent that any exemption, exclusion, or apportionment is necessary to comply with the preceding sentence, the director of taxation shall:
(1) Exempt or exclude from the tax under this chapter, property, services, or contracting or the use of property, services, or contracting exempted under chapter 237; or
(2) Apportion the gross value of services or contracting sold to customers within the State by persons engaged in business both within and without the State to determine the value of that portion of the services or contracting that is subject to taxation under chapter 237 for the purposes of section 237-21.
Any provision of law to the contrary
notwithstanding, exemptions or exclusions from tax under this chapter allowed
on or before April 1, 1978, under the provisions of the Constitution of the
United States or an [act] Act of the Congress of the United
States to persons or common carriers engaged in interstate or foreign commerce,
or both, whether ocean-going or air, shall continue undiminished and be
available thereafter.
(b) The tax imposed by this chapter shall not apply to any use of property, services, or contracting the transfer of which property, services, or contracting to, or the acquisition of which by, the person so using the same, has actually been or actually is taxed under chapter 237.
(c) The tax imposed by this chapter shall be paid only once upon or in respect of the same property, services, or contracting; provided that nothing in this chapter contained shall be construed to exempt any property, services, or contracting, or the use thereof from taxation under any other law of the State.
(d) The tax imposed by this chapter shall be
in addition to any other taxes imposed by any other laws of the State, except
as otherwise specifically provided herein; provided that if it be finally held
by any court of competent jurisdiction, that the tax imposed by this chapter
may not legally be imposed in addition to any other tax or taxes imposed by any
other law or laws with respect to the same property, services, or contracting,
or the use thereof, then this chapter shall be deemed not to apply to the
property, services, or contracting, or the use thereof under such specific
circumstances, but such other laws shall be given full effect with respect to
the property, services, [or] contracting, or use.
(e) The tax imposed by this chapter shall not apply to any use of property exempted by section 238-4.
(f) The tax imposed by this chapter shall not apply to any use or consumption of aircraft and vessels, the transfer of which aircraft or vessel to, or the acquisition of which by, the person so using or consuming the same, or the rental for the use of the aircraft or vessel, has actually been or actually is taxed under chapter 237.
[(g) The tax imposed by this chapter shall
not apply to any intoxicating liquor as defined in chapter 244D and cigarettes
and tobacco products as defined in chapter 245, imported into the State and
sold to any person or common carrier in interstate commerce, whether
ocean-going or air, for consumption out-of- state by the person, crew, or
passengers on the shipper's vessels or airplanes.
(h) The tax imposed by this chapter shall
not apply to any use of vessels constructed under section 189-25 prior to July
1, 1969.
(i)] (g) Each taxpayer liable
for the tax imposed by this chapter on tangible personal property, services, or
contracting shall be entitled to full credit for the combined amount or amounts
of legally imposed sales or use taxes paid by the taxpayer with respect to the
same transaction and property, services, or contracting to another state and
any subdivision thereof, but such credit shall not exceed the amount of the use
tax imposed under this chapter on account of the transaction and property,
services, or contracting. The director of taxation may require the taxpayer to
produce the necessary receipts or vouchers indicating the payment of the sales
or use tax to another state or subdivision as a condition for the allowance of
the credit.
[(j)] (h) The tax imposed by
this chapter shall not apply to any use of property, services, or contracting
exempted by section 237-26 [or section 237-29].
[(k) The tax imposed by this chapter shall
not apply to any use of air pollution control facility exempted by section
237-27.5.]"
SECTION 29. Section 239-5, Hawaii Revised Statutes, is amended by amending subsections (a) and (b) to read as follows:
"(a) There shall be levied and assessed
upon each public utility[, except airlines, motor carriers, common carriers
by water, and contract carriers taxed by section 239-6,] a tax of such rate
per cent of its gross income each year from its public utility business as
shall be determined in the manner hereinafter provided. The tax imposed by
this section is in lieu of all taxes other than those below set out, and is a
means of taxing the personal property of the public utility, tangible and
intangible, including going concern value. In addition to the tax imposed by
this chapter there also are imposed income taxes, the specific taxes imposed by
chapter 249, the fees prescribed by chapter 269, any tax specifically imposed by
the terms of the public utility's franchise or under chapter 240, the use or
consumption tax imposed by chapter 238, and employment taxes.
The rate of the tax upon the gross income of
the public utility shall be [four] ____ per cent; provided that if:
(1) A county provides by ordinance for a real property tax exemption for real property used by a public utility in its public utility business and owned by the public utility (or leased to it by a lease under which the public utility is required to pay the taxes upon the property), and
(2) The county has not denied the exemption to the public utility, but excluding a denial based upon a dispute as to the ownership, lease, or use of a specific parcel of real property,
then there shall be levied and assessed a tax in
excess of the [four] ____ per cent rate determined in the manner
hereinafter provided upon the gross income allocable to such county. The
revenues generated from the tax in excess of the [four] ____ per cent
rate hereinbefore established shall be paid by the public utility directly to
such county based upon the proportion of gross income from its public utility
business attributable to such county, based upon the allocation made in the
public utility's filings with the State of Hawaii; provided that if the gross
income from the public utility business attributable to such county is not so
allocated in the public utility's State filings, then the gross income from the
public utility business shall be equitably allocated to each county. The relative
number of access lines in each county shall be deemed an acceptable basis of
equitable allocation for telecommunication companies.
The rate of the tax in excess of the [four]
____ per cent rate hereinbefore established upon the gross income from the public
utility business shall be determined as follows:
If the ratio of the net income of the company
to its gross income is fifteen per cent or less, the rate of tax in excess of
the [four] ____ per cent rate on gross income shall be [1.885]
____ per cent; for all companies having net income in excess of fifteen per
cent of the gross, the rate of the tax on gross income shall increase
continuously in proportion to the increase in ratio of net income to gross, at
such rate that for each increase of one per cent in the ratio of net income to
gross, there shall be an increase of [.2675] _____ per cent in the rate
of the tax.
The following formula may be used to determine the rate, in which formula the term "R" is the ratio of net income to gross income, and "X" is the required rate of the tax on gross income for the utility in question:
X = (26.75R-2.1275)%;
provided that in no case governed by the formula
shall "X" be less than [1.885] _____ per cent or more than [4.2]
_____ per cent.
However, if the gross income is apportioned under section 239-8(b) or (c), there shall be no adjustment of the rate of tax on the amount of gross income so apportioned to the State on account of the ratio of the net income to the gross income being in excess of fifteen per cent, and it shall be assumed in such case that the ratio is fifteen per cent or less.
(b) Notwithstanding subsection (a), the rate
of the tax upon the portion of the gross income of a carrier of passengers by
land which consists in passenger fares for transportation between points on a
scheduled route, shall be [5.35] _____ per cent. However, if the
carrier has other public utility gross income the fares nevertheless shall be
included in applying subsection (a) in determining the rate of tax upon the
other public utility gross income."
SECTION 30. Section 239-6, Hawaii Revised Statutes, is amended to read as follows.
"§239-6 Airlines, certain carriers.
[(a) There shall be levied and assessed upon each airline a tax of four per
cent of its gross income each year from the airline business; provided that if
an airline adopts a rate schedule for students in grade twelve or below
traveling in school groups providing such students at reasonable hours a rate
less than one-half of the regular adult fare, the tax shall be three per cent
of its gross income each year from the airline business.
(b) There shall be levied and assessed upon
each motor carrier, each common carrier by water, and upon each contract
carrier other than a motor carrier, a tax of four per cent of its gross income
each year from the motor carrier or contract carrier business.
(c) The tax imposed by this section is a
means of taxing the personal property of the airline or other carrier, tangible
and intangible, including going concern value, and is in lieu of the tax
imposed by chapter 237 but is not in lieu of any other tax.
(d) Notwithstanding subsections (a), (b),
and (c), the rate of tax upon the portion of the gross income of a motor
carrier which consists of the receipts from the sale of its products or
services to a contractor shall be as follows:
(1) In calendar year 2000, 3.5 per cent;
(2) In calendar year 2001, 3.0 per cent;
(3) In calendar year 2002, 2.5 per cent;
(4) In calendar year 2003, 2.0 per cent;
(5) In calendar year 2004, 1.5 per cent;
(6) In calendar year 2005, 1.0 per cent;
and
(7) In calendar year 2006, and thereafter,
0.5 per cent;
provided that there is a resale of the products
or services and the resale by the contractor is subject to taxation at the
highest rate under section 237-13; the gross income of the motor carrier is not
divided as provided in the definition of "gross income" in section
239-2 for the tax imposed under this chapter or chapter 237; and the gross
income of the motor carrier from the sale of its products or services to the
contractor is not subject to a deduction under chapter 237 by the contractor;
and in the case of services provided by the motor carrier, the benefit of the
service passes to the customer of the contractor as an identifiable element of
the contracting or service provided by the contractor and does not constitute
overhead as defined in section 237-1.
The department shall have the authority to
implement the tax rate changes in paragraphs (1) through (7) by prescribing tax
forms and instructions that require tax reporting and payment by deduction,
allocation, or any other method to determine tax liability with due regard to
the tax rate changes.
For purposes of this subsection,
"contractor" has the same meaning as defined in section 237-6.
(e) Notwithstanding subsections (a) through
(d), beginning] Beginning on October 1, 2001, the tax under this
chapter shall not apply to airlines, motor carriers, common carriers by water,
and contract carriers other than motor carriers; provided that the gross income
received on or after October 1, 2001, by these carriers shall be subject to the
tax imposed under chapter 237. [For the taxable year in which October 1,
2001 occurs, the tax imposed and due under this chapter for the affected carriers
shall be abated in an amount equal to:
(1) The tax imposed on the first day of the
taxpayer's taxable year in which October 1, 2001 occurs;
(2) Divided by the number of months in the
taxpayer's affected taxable year; and
(3) Multiplied by the number of months in
the taxpayer's taxable year remaining after September 30, 2001.]"
SECTION 31. Section 239-7, Hawaii Revised Statutes, is amended as follows:
1. By amending subsection (a) to read:
"(a) The tax imposed by this chapter shall
be assessed against each public service company in the manner provided by this
chapter, and shall be paid to the department of taxation at the times and in
the manner (in installments or otherwise) provided by this section, except as
provided in section 239-5(a), where there is levied and assessed a tax in
excess of [four] ____ per cent upon gross income, the revenues generated
from the tax in excess of the [four] ____ per cent rate shall be paid to
the respective county director of finance at the times and in the manner (in
installments or otherwise) provided by this section."
2. By amending subsection (c) to read:
"(c) The department shall prescribe the
forms in which returns shall be made so as to reflect clearly the liability of
each public service company subject to this tax, and may provide in the forms
for such additional information as it may deem necessary. All provisions of
the laws, not inapplicable and not inconsistent with this chapter, relating to
returns for income tax purposes, the assessment (including additional
assessments), collection, and payment (in installments or otherwise) of income
taxes and the powers and duties of the department and the state director of
finance in connection therewith, and relating to appeals from or other
adjustments of such assessments, limitation periods for assessments,
enforcement of attendance of witnesses, and the production of evidence,
examination of witnesses and records, the effect of assessments, tax books, and
lists and other official tax records as evidence, delinquent dates and
penalties, and the rights and liabilities (civil and criminal) of taxpayers and
other persons in connection with any matters dealt with by chapter 235, are
made applicable (1) to the taxes and the assessment, payment, and collection thereof,
provided by this chapter, and (2) to the department and the state director of
finance in connection with the taxes and the assessment, payment, or
enforcement of payment and collection thereof, and (3) to taxpayers and other
persons affected by this chapter, as the case may be. The provisions of
chapter 235 regarding the limitation period for assessment and refunds shall
run from the filing of the return for the taxable year, or the due date
prescribed for the filing of the return, whichever is later. With respect to
payments due to a county of the revenues generated from the tax in excess of
the [four] _____ per cent rate imposed under section 239-5(a), a county
director of finance shall be afforded such rights and procedures of the
department in the enforcement of payment and collection of the taxes assessed
and levied under this chapter."
SECTION 32. Section 239-9, Hawaii Revised Statutes, is amended by amending subsections (c) and (d) to read as follows:
"(c) First year of doing business. The measure of the tax for the year in which the company begins business is an estimate of the gross income of the public service company for that year or for the part of that year in which it is in business.
The tax thereon for the year in which the company begins business shall be at the following rate:
(1) If subsection (a)(2) applies, at the rate of [four]
per cent, or
(2) If subsection (a)(1) applies but the company
though in business at the commencement of the calendar year was not in business
during any part of the preceding year, the tax shall be at the rate provided by
[sections] section 239-5 [and 239-6], except that there
shall be no adjustment of the rate of tax on account of the ratio of the net
income to the gross income being in excess of fifteen per cent and it shall be
assumed for purposes of this subsection and subsection (e) that the ratio is
fifteen per cent or less.
The estimate shall be made and the tax returned on or before the twentieth day of the third month after the month in which the company begins business and shall be subject to adjustment by the filing of an amended return as provided in subsection (e). Payment of the tax shall accompany the return unless time for payment is extended by the director of taxation. The extension may be granted by the director in order to provide for payment of the tax in installments during the remainder of the taxable year.
(d) Second year of doing business. The
measure of the tax for the year following the year in which the company began
business is an estimate of the average gross income for a taxable year, subject
to adjustment by the filing of an amended return as provided in subsection
(e). The estimate shall be made and the tax returned and paid at the times
provided for other companies which are in business at the commencement of the
calendar year. The tax thereon shall be at the rate provided by [sections]
section 239-5 [and 239-6], except that there shall be no
adjustment of the rate of tax on account of the ratio of the net income to the
gross income being in excess of fifteen per cent and it shall be assumed for
purposes of this subsection and subsection (e) that the ratio is fifteen per
cent or less."
SECTION 33. Section 239-10, Hawaii Revised Statutes, is amended to read as follows:
"§239-10 Disposition of revenues.
All taxes collected under this chapter shall be state realizations; provided
that where a tax in excess of the [four] ____ per cent rate upon gross
income is levied and assessed under section 239-5(a), such tax revenues to be
paid to the county shall be realizations of such county."
SECTION 34. Section 246-34.5, Hawaii Revised Statutes, is amended to read as follows:
"[[]§246-34.5[]]
Exemptions for air pollution control facility. The value of all property in
the State (not including a building and its structural components, other than a
building which is exclusively a treatment facility) actually and solely used or
to be used as an air pollution control facility [as the term is defined in
chapter 237] shall be exempted from the measure of the taxes imposed by
this chapter; provided, however, the property exemption shall be applicable
only with respect to a certified facility which is property (1) the
construction, reconstruction or erection of which is completed by the taxpayer
after June 30, 1969, or, (2) acquired by the taxpayer after June 30, 1969, if
the original use of the property commences with the taxpayer after
June 30, 1969; provided further the facility is placed in service by the
taxpayer before July 1, 1975.
Application for the exemption provided herein shall first be made with the director of health who shall, if satisfied that the facility meets the pollution emission criteria established by the department of health, certify to that fact. Upon receipt of the certification from the department of health, the director of taxation shall exempt the facility from the tax imposed by this chapter. A new certificate shall be obtained from the director of health and filed with the director of taxation every two years certifying that the pollution control facility complies with the pollutant emission criteria established by the department of health. The director of taxation shall furnish all forms required by this section.
The director of taxation shall, pursuant to chapter 91, promulgate rules and regulations necessary to administer this section."
SECTION 35. Section 349-10, Hawaii Revised Statutes, is amended to read as follows:
"§349-10 Annual senior citizen's fair.
Each county may hold an annual senior citizen's fair in its respective county.
The county shall be responsible for the planning, organizing, and coordinating
of the fair in every respect. The state policy advisory board for elder
affairs may assist the county in any aspect upon request. [Proceeds earned
from this fair are deemed to be proceeds earned from casual sales as defined in
chapter 237.] The county shall distribute such proceeds to the various
senior citizen organizations and individuals who participate in the fair in
accordance with appropriate methods of distribution as determined by the
county."
SECTION 36. Section 356D-129, Hawaii Revised Statutes, is amended to read as follows:
"[[]§356D-129[]]
Exemptions. [(a) Any compensation received by a provider agency for services
rendered to homeless families or individuals, or in operating or managing a
homeless facility authorized by this part, is exempt from taxation under
chapter 237.
(b)] (a) Any county mayor may
exempt, by executive order, donors and provider agencies from real property
taxes, water and sewer development fees, rates collected for water supplied to
consumers and for use of sewers, and any other county taxes, charges, or fees;
provided that any county may enact ordinances to regulate the exemptions granted
by this subsection.
[(c)] (b) Any provider agency
operating or managing a homeless facility, or any other program for the
homeless authorized by this part, is exempt, for purposes of those facilities
or programs, from any requirements contained in part VIII of chapter 346 and
chapters 467 and 521."
SECTION 37. Section 421H-4, Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows:
"(c) The membership shares and
cooperative fees are interests in real property for purposes of[:
(1) Cooperative] cooperative
housing corporations under section 216 of the federal Internal Revenue Code of
1954, as amended[; and
(2) Exemption from state general
excise tax under section 237-24(16)]."
SECTION 38. Section 182-16, Hawaii Revised Statutes, is repealed.
["[§182-16] Levy and assessment of
general excise tax. Notwithstanding any provision to the contrary,
the levy and assessment of the general excise tax on the gross proceeds from
any manner of sale of (1) geothermal resources or (2) electrical energy
produced by the geothermal resources producer from such geothermal resources,
shall be made only as a tax on the business of a producer, at the rate assessed
producers, under section 237-13(2)(A)."]
SECTION 39. Section 201H-36, Hawaii Revised Statutes, is repealed.
["[§201H-36] Exemption from general
excise taxes. (a) In accordance with section 237-29, the
corporation may approve and certify for exemption from general excise taxes any
qualified person or firm involved with a newly constructed, or moderately or
substantially rehabilitated project:
(1) Developed under this part;
(2) Developed under a government assistance
program approved by the corporation, including but not limited to the United
States Department of Agriculture 502 program and Federal Housing Administration
235 program;
(3) Developed under the sponsorship of a
private nonprofit organization providing home rehabilitation or new homes for
qualified families in need of decent, low-cost housing; or
(4) Developed by a qualified person or firm
to provide affordable rental housing where at least fifty per cent of the
available units are for households with incomes at or below eighty per cent of
the area median family income as determined by the United States Department of
Housing and Urban Development, of which at least twenty per cent of the
available units are for households with incomes at or below sixty per cent of
the area median family income as determined by the United States Department of
Housing and Urban Development.
(b) All claims for exemption under this
section shall be filed with and certified by the corporation and forwarded to
the department of taxation. Any claim for exemption that is filed and
approved, shall not be considered a subsidy for the purpose of this part.
(c) For the purposes of this section:
"Moderate rehabilitation" means
rehabilitation to upgrade a dwelling unit to a decent, safe, and sanitary
condition, or to repair or replace major building systems or components in
danger of failure.
"Substantial rehabilitation":
(1) Means the improvement of a property to
a decent, safe, and sanitary condition that requires more than routine or minor
repairs or improvements. It may include but is not limited to the gutting and
extensive reconstruction of a dwelling unit, or cosmetic improvements coupled
with the curing of a substantial accumulation of deferred maintenance; and
(2) Includes renovation, alteration, or
remodeling to convert or adapt structurally sound property to the design and
condition required for a specific use, such as conversion of a hotel to housing
for elders.
(d) The corporation may establish, revise,
charge, and collect a reasonable service fee, as necessary, in connection with
its approvals and certifications under this section. The fees shall be
deposited into the dwelling unit revolving fund."]
SECTION 40. Section 237-16.8, Hawaii Revised Statutes, is repealed.
["[§237-16.8] Exemption of certain
convention, conference, and trade show fees. In addition to any
other applicable exemption provided under this chapter, there shall be exempted
from the measure of taxes imposed by this chapter all of the value or gross
income derived by a fraternal benefit, religious, charitable, scientific,
educational, or other nonprofit organization under section 501(c) of the
Internal Revenue Code of 1986, as amended, from fees for convention,
conference, or trade show exhibit or display spaces; provided that the gross
proceeds of sales by a vendor through the use of exhibit or display space at a
conference, convention, or trade show shall be subject to the imposition of the
general excise tax under section 237-13."]
SECTION 41. Section 237-17, Hawaii Revised Statutes, is repealed.
["§237-17 Persons with impaired
sight, hearing, or who are totally disabled. Anything in section
237-13 to the contrary notwithstanding, the privilege tax levied, assessed, and
collected on account of the business or other activities of individuals who are
blind, deaf, or totally disabled, corporations all of whose outstanding shares
are owned by individuals who are blind, deaf, or totally disabled, general,
limited, or limited liability partnerships, all of whose partners are blind,
deaf, or totally disabled, or limited liability companies, all of whose members
are blind, deaf, or totally disabled, shall not exceed one-half of one per cent
of the proceeds, sales, income, or other receipts subject to tax. For the
purpose of this chapter "blind", "deaf", or "totally
disabled" is defined as in section 235-1. The impairment of sight or
hearing, or the disability, shall be certified to as provided in section 235-1."]
SECTION 42. Section 237-24.5, Hawaii Revised Statutes, is repealed.
["§237-24.5 Additional exemptions.
(a) In addition to the amounts exempt under section 237-24, this chapter shall
not apply to amounts received by:
(1) An exchange from:
(A) Transaction fees charged
exchange members by the exchange for:
(i) The sale or purchase of
securities or products, or both, bought or sold on an exchange by exchange
members for their own account or an account for which they have responsibility
as an agent, broker, or fiduciary;
(ii) Order book executions made for
purposes of effecting transactions; and
(iii) Trade processing performed by an
exchange in matching trades, keypunching, record keeping, post cashiering, and
notarization;
(B) Membership dues, fees, charges,
assessments, and fines from individuals or firms, including charges for firm
symbols (member identification), application processing, registration,
initiation, membership transfers, floor or post privileges, transaction time
extensions, expediting transactions, crossover trades (trading out of assigned
functions) and rule infractions;
(C) Service fees charged to members
including fees for communications, badges, forms, documents, and reports;
(D) Listing fees and listing
maintenance fees charged to companies that wish to be listed and have their
securities or products traded on the exchange; and
(E) Participation in the communication
network consortium operated collectively by United States exchanges or other
markets recognized by the Securities and Exchange Commission, the Commodities
Futures Trading Commission, or similar regulatory authorities outside the
United States that provides last sale and quote securities information to
subscribers or that connects such markets or exchanges for purposes of data
transmission;
(2) Exchange members by reason of executing
a securities or product transaction on an exchange; provided that this
exemption shall apply only to amounts received by exchange members from brokers
or dealers registered with the Securities and Exchange Commission, from futures
commission merchants, brokers, or associates registered with the Commodities
Futures Trading Commission, or from similar individuals or firms registered
with similar regulatory authorities outside the United States; and
(3) Exchange members as proceeds from the
sale of their exchange memberships.
(b) As used in this section:
"Exchange" means an exchange or
board of trade as defined in 15 United States Code section 78c(a)(1) or in 7
United States Code section 7, respectively, which is subject to regulation by
the Securities and Exchange Commission or the Commodities Futures Trading
Commission or an organization subject to similar regulation under the laws of a
jurisdiction outside the United States.
"Exchange member" means an
individual or firm that is qualified by an exchange as a member and pays
membership dues to an exchange in order to trade securities or products on an
exchange.
"Securities" means securities as
defined in 15 United States Code section 78c and "products" means
contracts of sale of commodities for future delivery, futures contracts,
options, calls, puts, and similar rights as defined in 7 United States Code
section 2, which securities or products are permitted to be traded on an
exchange."]
SECTION 43. Section 237-24.9, Hawaii Revised Statutes, is repealed.
["§237-24.9 Aircraft service and
maintenance facility. (a) This chapter shall not apply to amounts
received from the servicing and maintenance of aircraft or from the
construction of an aircraft service and maintenance facility in the State.
(b) As used in this section:
"Aircraft" means any craft or
artificial contrivance of whatever description engaged in intrastate,
interstate, or international scheduled commercial use as defined in chapter
263, that operates with two or more jet engines.
"Aircraft service and maintenance"
means all scheduled and unscheduled tasks performed within an aircraft service
and maintenance facility for the inspection, modification, maintenance, and
repair of aircraft and related components including engines, hydraulic and
electrical systems, and all other components which are an integral part of an
aircraft.
"Aircraft service and maintenance
facility" means a facility for aircraft service and maintenance that is
not less than thirty thousand square feet in area, and which may include
ancillary space which is integral to the facility, such as parts and inventory
warehouse space, tool rooms, and related administrative and employee space.
"Construction of an aircraft service
and maintenance facility" means all design, engineering, labor, and
material costs associated with the construction of facilities the principle
purpose of which is the provision of facilities for aircraft service and
maintenance.
"Maintenance" means the upkeep of
aircraft engines, hydraulic and electrical systems, and all other components
which are an integral part of an aircraft, but does not include refueling,
janitorial services or cleaning, restocking of aircraft and passenger supplies,
or loading or unloading of cargo and passenger baggage."]
SECTION 44. Section 237-26, Hawaii Revised Statutes, is repealed.
["§237-26 Exemption of certain
scientific contracts with the United States. (a) Any provision of
law to the contrary notwithstanding, there shall be exempted from the measure
of the taxes imposed by chapter 237, all of the gross proceeds derived by a
contractor or subcontractor arising from the performance of any scientific work
as defined in subsection (b), under a contract or subcontract entered into with
the United States (including any agency or instrumentality thereof but not
including national banks), and all of the gross proceeds derived from the sale
of tangible personal property by a seller of such tangible personal property to
such contractor or subcontractor; provided the exemption herein shall apply
only to such tangible personal property which is to be affixed to, or to become
a physical, integral part of the scientific facility, or which is to be
entirely consumed during the performance of the service required by the
contract or subcontract.
(b) For purposes of this section,
"scientific work" is work involving primarily the research and
development for, or the design, manufacture, instrumentation, installation,
maintenance, or operation of aerospace, agricultural, astronomical, biomedical,
electronic, geophysical, oceanographic, test range, or other scientific
facilities. Maintenance or operation, for purposes of this section, shall
include housekeeping functions in providing certain nonscientific logistic and
support services."]
SECTION 45. Section 237-27.5, Hawaii Revised Statutes, is repealed.
["§237-27.5 Air pollution control
facility. (a) As used in this section, "air pollution control
facility" shall mean a new identifiable treatment facility, equipment,
device, or the like, which is used to abate or control atmospheric pollution or
contamination by removing, reducing, or rendering less noxious air contaminants
emitted into the atmosphere from a point immediately preceding the point of
such removal, reduction, or rendering to the point of discharge of air, meeting
emission standards as established by the department of health, excluding air
conditioner, fan, or other similar facility for the comfort of persons at a
place of business.
(b) Any provision of law to the contrary
notwithstanding, and upon receipt of the certification required by subsection
(c), there shall be exempted from, and excluded from the measure of, the taxes
imposed by this chapter, all of the gross proceeds arising from, and all of the
amount of tangible personal property furnished in conjunction with, the
construction, reconstruction, erection, operation, use, or maintenance of an
air pollution control facility.
(c) Application for the exemption provided
by this section shall first be made with the director of health who, if
satisfied that the facility meets the pollution emission criteria established
by the department of health, shall certify to that fact. A new certificate
shall be obtained from the director of health and filed with the director of
taxation every five years certifying that the pollution control facility
complies with the pollutant emission criteria established by the department of
health."]
SECTION 46. Section 237-28.1, Hawaii Revised Statutes, is repealed.
["[§237-28.1] Exemption of certain
shipbuilding and ship repair business. There shall be exempted
from, and excluded from the measure of, the taxes imposed by this chapter all
of the gross proceeds arising from shipbuilding and ship repairs rendered to
surface vessels federally owned or engaged in interstate or international
trade."]
SECTION 47. Section 237-29, Hawaii Revised Statutes, is repealed.
["§237-29 Exemptions for certified
or approved housing projects. (a) All gross income received by any
qualified person or firm for the planning, design, financing, construction,
sale, or lease in the State of a housing project that has been certified or
approved under section 201H-36 shall be exempt from general excise taxes.
(b) All gross income received by a
nonprofit or a limited distribution mortgagor for a low- and moderate-income
housing project certified or approved under section 201H-36 shall be exempt
from general excise taxes.
(c) The director of taxation and the Hawaii
housing finance and development corporation shall adopt rules pursuant to
chapter 91 for the purpose of this section, including any time limitation for
the exemptions."]
SECTION 48. Section 237-29.5, Hawaii Revised Statutes, is repealed.
["§237-29.5 Exemption for sales of
tangible personal property shipped out of the State. (a) There
shall be exempted from, and excluded from the measure of, the taxes imposed by
this chapter all of the value or gross proceeds arising from the manufacture,
production, or sale of tangible personal property:
(1) Shipped by the manufacturer, producer,
or seller to a point outside the State where the property is resold or
otherwise consumed or used outside the State; or
(2) The sale of which is exempt under
section 237-24.3(2).
(b) For the purposes of this section, the
manufacturer, producer, or seller shall take from the purchaser, a certificate,
in such form as the department shall prescribe, certifying that the tangible
personal property purchased is to be resold or otherwise consumed or used
outside the State. Any purchaser who shall furnish such a certificate shall be
obligated to pay to the seller, upon demand, if the property purchased is not
resold or otherwise consumed or used outside the State, the amount of the
additional tax which by reason thereof is imposed upon the seller."]
SECTION 49. Section 237-29.53, Hawaii Revised Statutes, is repealed.
["§237-29.53 Exemption for
contracting or services exported out of State. (a) There shall be
exempted from, and excluded from the measure of, taxes imposed by this chapter,
all of the value or gross income derived from contracting (as defined under
section 237-6) or services performed by a person engaged in a service business
or calling in the State for use outside the State where:
(1) The contracting or services are for
resale, consumption, or use outside the State; and
(2) The value or gross income derived from
the contracting or services performed would otherwise be subject to the tax
imposed under this chapter on contracting or services at the highest rate.
For the purposes of this subsection, the seller
or person rendering the contracting or services exported and resold, consumed,
or used outside the State shall take from the customer, a certificate or an
equivalent, in a form the department prescribes, certifying that the
contracting or service purchased is to be otherwise resold, consumed, or used
outside the State. Any customer who furnishes this certificate or an
equivalent shall be obligated to pay the seller or person rendering the
contracting or services, upon demand, if the contracting or service purchased
is not resold or otherwise consumed or used outside the State, the amount of
the additional tax which by reason thereof is imposed upon the seller or person
rendering the contracting or service.
(b) There shall be exempted from, and
excluded from the measure of, taxes imposed by this chapter, all of the value
or gross income derived from contracting (as defined in section 237-6) or
services performed by a person engaged in a service business or calling in the
State for a purchaser who resells all of the contracting or services for
resale, consumption, or use outside the State pursuant to subsection (a). For
the purposes of this subsection, the seller or person rendering the contracting
or services for a purchaser who resells the contracting or services for resale,
consumption, or use outside the State shall take from the purchaser, a
certificate or an equivalent, in a form that the department prescribes,
certifying that the contracting or services purchased is to be for resale,
consumption, or use outside the State pursuant to subsection (a). Any
purchaser who furnishes this certificate or an equivalent shall be obligated to
pay the seller or person rendering the contracting or services, upon demand, if
the contracting or services purchased is not resold in its entirety to a
customer of the purchaser who has complied with subsection (a), the amount of
the additional tax which by reason thereof is imposed upon the seller or the
person rendering the contracting or service."]
SECTION 50. Section 237-29.8, Hawaii Revised Statutes, is repealed.
["[§237-29.8] Call centers;
exemption; engaging in business; definitions. (a) This chapter
shall not apply to amounts received from a person operating a call center by a
person engaged in business as a telecommunications common carrier for
interstate or foreign telecommunications services, including toll-free
telecommunications, telecommunications capabilities for electronic mail, voice,
and data telecommunications, computerized telephone support, facsimile, wide
area telecommunications services, or computer-to-computer communication.
(b) The establishment of a call center in
this State by any person shall not be used by itself by the State to find that
any other part of the person's business is engaged in business in this State
for the purposes of this chapter. Gross income or gross proceeds received by a
call center for customer service and support shall be exempt from the measure
of taxes imposed by this chapter.
(c) The department, by rule, may provide
that the person providing the telecommunications service may take from the
person operating a call center a certificate, in a form that the department
shall prescribe, certifying that the amounts received for telecommunications
services are for operating a call center. If the certificate is required by
rule of the department, the absence of the certificate in itself shall give
rise to the presumption that the amounts received from the sale of
telecommunications services are not for operating a call center.
(d) As used in this section:
"Call center" means a physical or
electronic operation that focuses on providing customer service and support for
computer hardware and software companies, manufacturing companies, software
service organizations, and telecommunications support services, within an
organization in which a managed group of individuals spend most of their time
engaging in business by telephone, usually working in a computer-automated
environment; provided that the operation shall not include telemarketing or
sales.
"Customer service and support"
means product support, technical assistance, sales support, phone or
computer-based configuration assistance, software upgrade help lines, and
traditional help desk services.
"Telecommunications common
carrier" means any person that owns, operates, manages, or controls any
facility used to furnish telecommunications services for profit to the public,
or to classes of users as to be effectively available to the public, engaged in
the provision of services, such as voice, data, image, graphics, and video
services, that make use of all or part of their transmission facilities,
switches, broadcast equipment, signalling, or control devices.
"Telecommunications service" or
"telecommunications" means the offering of transmission between or
among points specified by a user, of information of the user's choosing,
including voice, data, image, graphics, and video without change in the form or
content of the information, as sent and received, by means of electromagnetic
transmission, or other similarly capable means of transmission, with or without
benefit of any closed transmission medium.
(e) This section shall not apply to gross
proceeds or gross income received after June 30, 2010."]
SECTION 51. Section 239-6.5, Hawaii Revised Statutes, is repealed.
["[§239-6.5] Tax credit for
lifeline telephone service subsidy. A telephone public utility
subject to this chapter that has been authorized to establish lifeline
telephone service rates by the public utilities commission shall be allowed a
tax credit, equal to the lifeline telephone service costs incurred by the
utility, to be applied against the utility's tax imposed by this chapter. The
amount of this credit shall be determined and certified annually by the public
utilities commission. The tax liability for a telephone public utility
claiming the credit shall be calculated in the manner prescribed in section
239-5; provided that the amount of tax due from the utility shall be net of the
lifeline service credit."]
SECTION 52. Section 239-11, Hawaii Revised Statutes, is repealed.
["§239-11 Exemption of certain
contract carriers. (a) There shall be exempted and excluded from
the measure of the tax imposed by this chapter the gross income from any
contract carrier by water which is engaged primarily in the business of
transporting persons between harbors or wharves of the various counties for
interisland cruises within the State; provided that such exemption shall be
applicable for the period July 1, 1981, to June 30, 1996.
(b) Any contract carrier and related
partners, if any, claiming an exemption under subsection (a) shall submit an
annual financial report, prepared by an independent certified public
accountant, to the department of taxation and to the department of business,
economic development, and tourism on or before the fifteenth day of the fifth
month following the close of each taxable year for which the exemption is being
claimed; provided that in addition to reports in 1992, 1993, 1994, and 1995, an
annual financial report shall be due on or before March 1, 1996. The annual
financial report, prepared in a form approved by the director of taxation,
shall include but not be limited to:
(1) A balance sheet of assets and
liabilities;
(2) A statement of income and expenses;
(3) Supplementary information to financial
statements;
(4) A summary of financial condition; and
(5) An apportionment of income and expenses
of the contract carrier and related partners, if any, within and without the
State.
Within thirty days of the receipt of the
financial report from the contract carrier and related partners, if any, the
director of taxation shall submit relevant financial data to the legislature.
Failure to comply with this subsection by the contract carrier or related partners,
if any, as determined by the director of taxation, shall constitute a waiver of
the right to claim the exemption."]
SECTION 53. Section 239-12, Hawaii Revised Statutes, is repealed.
["[§239-12] Call centers;
exemption; engaging in business; definitions. (a) This chapter
shall not apply to amounts received from a person operating a call center by a
person engaged in business as a telecommunications common carrier for
interstate or foreign telecommunications services, including toll-free telecommunications,
telecommunications capabilities for electronic mail, voice and data
telecommunications, computerized telephone support, facsimile, wide area
telecommunications services, or computer to computer communication.
(b) The department, by rule, may provide
that the person providing the telecommunications service may take from the
person operating a call center a certificate, in a form that the department
shall prescribe, certifying that the amounts received for telecommunications
services are for operating a call center. If the certificate is required by
rule of the department, the absence of the certificate in itself shall give
rise to the presumption that the amounts received from the sale of
telecommunications services are not for operating a call center.
(c) As used in this section:
"Call center" means a physical or
electronic operation that focuses on providing customer service and support for
computer hardware and software companies, manufacturing companies, software
service organizations, and telecommunications support services, within an
organization in which a managed group of individuals spend most of their time
engaging in business by telephone, usually working in a computer-automated
environment; provided that the operation shall not include telemarketing or
sales.
"Customer service and support"
means product support, technical assistance, sales support, phone or
computer-based configuration assistance, software upgrade help lines, and
traditional help desk services.
(d) This section shall not apply to income
received after June 30, 2010."]
SECTION 54. The revisor of statutes shall not include section 237-27.1, Hawaii Revised Statutes, in any replacement volume of the Hawaii Revised Statutes published after June 30, 2009.
SECTION 55. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 56. This Act shall take effect on January 1, 2010 and shall be repealed on December 31, 2015; provided that:
(1) The amendments made to sections 237-24.3 and 237-24.7, Hawaii Revised Statutes, by sections 20 and 21 of this Act shall not be repealed when those sections are reenacted on December 31, 2009, pursuant to section 4 of Act 239, Session Laws of Hawaii 2007;
(2) With the exception of sections 237-24.3 and 237-24.7, Hawaii Revised Statutes, all sections of the Hawaii Revised Statutes amended by this Act shall be reenacted on January 1, 2016, in the form in which they read on the day prior to the effective day of this Act; and
(3) Sections 237-24.3 and 237-24.7, Hawaii Revised Statutes, shall be reenacted on January 1, 2016, in the form in which they read on December 31, 2007, pursuant to section 4 of Act 239, Session Laws of Hawaii 2007.
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