Bill Text: HI HB2877 | 2010 | Regular Session | Amended
Bill Title: General Excise, Use, and Public Service Company Taxes; Temporary Increase
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Engrossed - Dead) 2010-03-19 - (S) Report adopted; Passed Second Reading, as amended (SD 1) and referred to WAM. [HB2877 Detail]
Download: Hawaii-2010-HB2877-Amended.html
|
HOUSE OF REPRESENTATIVES |
H.B. NO. |
2877 |
|
TWENTY-FIFTH LEGISLATURE, 2010 |
H.D. 1 |
|
|
STATE OF HAWAII |
S.D. 1 |
|
|
|
|
|
|
|
||
|
|
||
A BILL FOR AN ACT
RELATING TO TAXATION.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
PART I
SECTION 1. The purpose of this Act is to address the $1,200,000,000 revenue shortfall that the State of Hawaii faces for the fiscal year 2010 and fiscal year 2011 fiscal biennium.
During the last legislative session, the state legislature reduced government spending by over $1,000,000,000 in general fund budget cuts. It reduced tax credits or imposed new taxes in the amount of over $550,000,000, added $115,000,000 in federal stimulus funds and made over $150,000,000 worth of transfers from special funds in order to tackle the original $2,100,000,000 revenue shortfall.
However, the range of alternative solutions is severely limited during this year's session. With furlough Fridays in Hawaii's public schools criticized both nationally and internationally, and further public outcry over cutbacks to human services and social services programs, delayed payments to QUEST and other health care providers, or the loss of critically-needed agriculture inspectors, the legislature would be hard-pressed to reduce government spending by another $1,000,000,000 in general fund cuts.
As such, among the available options remaining is that which is proposed in this measure: a temporary increase in the State's four per cent general excise tax for a limited period for the specific purposes of maintaining critical state services, preserving existing jobs within the private and nonprofit sectors, and collectively pursuing the State's economic recovery.
SECTION 2. Section 235-110.7, Hawaii Revised Statutes, is amended by amending 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:
(1) December 31, 1987, the applicable rate shall be three per cent;
(2) December 31, 1988, the applicable rate shall be four per cent;
(3) December 31, 2008, the applicable rate shall be
zero per cent; [and]
(4) December 31, 2009, and thereafter, the applicable
rate shall be four per cent[.]; and
(5) October 1, 2010, and thereafter, the applicable rate shall be five 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), 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 the definition of "tangible personal property" to read:
""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] five 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 3. 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] five 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] five 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] five
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] five 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] five 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 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] five
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 4. 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] five per
cent which is generally applied to professions and services."
SECTION 5. 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] five
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] five per cent."
SECTION 6. 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] five per cent tax
under this chapter or chapter 239."
SECTION 7. 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] five 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 8. 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] five per cent on the
value of the imported or purchased services or contracting."
SECTION 9. Section 239-5, Hawaii Revised Statutes, is amended by amending subsection (a) 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] five 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] five 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] five 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]
five 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] five 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."
SECTION 10. Section 239-6, Hawaii Revised Statutes, is amended by amending subsections (a) and (b) to read as follows:
"(a) There shall be levied and assessed
upon each airline a tax of [four] five 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] five per cent of its
gross income each year from the motor carrier or contract carrier
business."
SECTION 11. 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] five per cent upon gross income, the revenues
generated from the tax in excess of the [four] five 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] five 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 12. Section 239-9, Hawaii Revised Statutes, is amended by amending subsection (c) 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]
five 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 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."
SECTION 13. 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] five 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."
PART II
SECTION 14. The purpose of this part is to provide a refundable state earned income tax credit equal to twenty per cent of the federal earned income tax credit.
SECTION 15. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:
"§235- Earned income tax credit. (a) Each resident individual taxpayer who:
(1) Files an individual income tax return for a taxable year; and
(2) Is not claimed or is not eligible to be claimed as a dependent by another taxpayer for income tax purposes;
may claim a refundable earned income tax credit. The tax credit, for the appropriate taxable year, shall be equal to twenty per cent of the earned income tax credit allowed under section 32 (with respect to earned income) of the Internal Revenue Code and reported as an earned income tax credit on the resident individual's federal income tax return.
(b) In the case of a part-year resident, the tax credit shall equal the amount of the tax credit calculated in subsection (a) multiplied by the ratio of adjusted gross income attributed to this State to the entire adjusted gross income computed without regard to source in the State pursuant to section 235-5.
(c) For purposes of claiming the tax credit allowed by this section, a resident individual taxpayer shall use the same filing status on the taxpayer's Hawaii tax return as is used on the taxpayer's federal return for the taxable year. In the case of a husband and wife filing separately, the credit allowed may be applied against the income tax liability of either, or divided between them, as elected by the husband and wife.
(d) The tax credit shall be reduced by other tax credits allowed under this chapter. If the tax credit under this section exceeds the taxpayer's income tax liability, the excess of tax credits over liability shall be refunded to the taxpayer; provided that no refund or payment on account of the tax credits allowed by this section shall be made for amounts less than $1.
(e) All claims, including any amended claims for the tax credit under this section, shall be filed on or before the end of the twelfth month following the close of the taxable year for which the tax credit may be claimed. Failure to comply with this subsection shall constitute a waiver of the right to claim the tax credit.
(f) The director of taxation:
(1) Shall prepare any forms that may be necessary to claim a tax credit under this section;
(2) May require proof from the taxpayer for their claim of the tax credit;
(3) Shall alert eligible taxpayers of the tax credit using appropriate and available means;
(4) Shall prepare an annual report to the governor and legislature containing the:
(A) Number of credits granted for the prior calendar year;
(B) Total amount of the credits granted; and
(C) Average value of the credits granted to taxpayers whose earned income falls within various income ranges; and
(5) May adopt rules necessary to effectuate the purposes of this section pursuant to chapter 91."
PART III
SECTION 16. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 17. This Act shall take effect on October 1, 2010; provided that on September 30, 2012, sections two through thirteen shall be repealed and sections 235-110.7, 237-13, 237‑15, 237-16.5(a) and (f), 237-18(f), 238-2, 238-2.3, 239‑5(a), 239-6(a), 239-6(b), 239-7(a) and (c), 239-9(c), and 239-10, Hawaii Revised Statutes, shall be reenacted in the form in which they read on the day before the effective date of this Act; and provided further that section 15 shall apply to taxable years beginning after December 31, 2010.
Report Title:
General Excise, Use, and Public Service Company Taxes; Temporary Increase
Description:
Part I increases the general excise tax, the use tax, and the public service company tax from four to five per cent for the period of October 1, 2010, through September 30, 2012; part II provides a refundable state earned income tax credit equivalent to twenty per cent of the federal earned income tax credit; effective 10/1/10, with tax increases repealed 9/30/12. (SD1)
The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.
