Report Title:

General Excise Taxes; Holiday

 

Description:

Establishes an annual general excise tax holiday for consumers and businesses that sell clothing and food under $100 on condition that business pass the savings on to consumers.

 

HOUSE OF REPRESENTATIVES

H.B. NO.

309

TWENTY-FIRST LEGISLATURE, 2001

 

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

RELATING TO AN ANNUAL GENERAL EXCISE TAX HOLIDAY.

 

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

SECTION 1. The purpose of this Act is to give both consumers and business a break from the high cost of living in Hawaii by establishing an annual general excise tax holiday not to exceed three days each year. For years, consumers and business have suffered under the weight of this most regressive tax.

For a period not to exceed three days each August, sales of clothing and food under $100 would be exempt from the normal retail or general excise tax of four per cent. The tax holiday is established in August of each year in order to coincide with family shopping for their children's upcoming school year. However, because the tax is imposed on the seller rather than the buyer, the tax savings must be passed on to the consumer.

Tax holidays have been used successfully across the United States. For example, Texas has lifted its 6.25 per cent state sales tax--along with all local sales taxes--on clothing and footwear under $100. New York and Florida already have similar programs.

More importantly, tax holidays have been found to create sales, not merely displace sales from a different time. Many Texas retailers have reported seeing crowds usually seen only during the Christmas selling season. To accommodate all of the shoppers, stores in Texas adopted extended hours, added staff, and offered special promotions usually reserved for the Christmas season. While depressed sales might be expected after a tax holiday, retailers have not noticed fewer sales after a sales spike. The legislature finds that a similar program in Hawaii would help both consumers and retailers alike.

The legislature finds that a general excise tax holiday will stimulate retail sales and give a boost to the State's economy.

SECTION 2. Chapter 237, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§237- Tax holiday. (a) Taxes under this chapter are not due on the sale of clothing or food if the sales price of the article is less than $100, and the sale takes place during a period beginning at 12:01 a.m. on the first Friday in August and ending at 12 midnight of the following Sunday; provided that all savings generated by this section shall be passed on by the seller to the purchaser.

(b) This exemption shall apply to each article of clothing or food selling for less than $100, regardless of how many items are sold on the same invoice to a customer. For example, if a customer purchases two shirts for $80 each, both items qualify for the exemption, even though the customer's total purchase price ($160) exceeds $99.99.

(c) This exemption shall not apply to:

(1) The first $99.99 of an article selling for more than $99.99;

(2) Accessories, including jewelry, handbags, purses, briefcases, luggage, umbrellas, wallets, watches, and similar items carried on or about the human body;

(3) The rental of clothing;

(4) Taxable services performed on the clothing, such as repair, remodeling, or maintenance services and cleaning or laundry services;

(5) Purchases of items used to make or repair clothing, including fabric, thread, yarn, buttons, snaps, hooks, and zippers;

(6) Rebates, layaway sales, rain checks, or exchanges when the exchanges occur before or after the tax holiday period; or

(7) Mail, telephone, e-mail, or Internet orders.

(d) Articles that are normally sold as a unit must continue to be sold in that manner, and cannot be priced separately and sold as individual items in order to obtain the exemption.

(e) When exempt clothing is sold together with taxable merchandise as a set or single unit, the full price is subject to tax unless the price of the exempt item is separately stated. When exempt clothing is sold in a set that also contains taxable merchandise as a free gift, the exempt clothing may qualify for the exemption.

(f) A retailer may offer discounts to reduce the sales price of an item. If the discount reduces the sales price to $99.99 or less, the item qualifies for the exemption.

(g) The total price of items advertised as "buy one, get one free", or "buy one, get one for a reduced price", cannot be averaged in order for both items to qualify for the exemption.

(h) For purposes of this section, shipping and handling charges shall be included as part of the sales price of the item, whether or not separately stated.

(i) The retailer shall not be required to obtain any special license, permit, or other documentation on sales of eligible items during the exemption holiday period. However, the retailer's records shall clearly identify the type of item sold, the date the item was sold, and the sales price of the item.

(j) No special reporting procedures are necessary to report exempt sales made during the exemption holiday period. Sales shall be reported as currently required by law."

SECTION 3. New statutory material is underscored.

SECTION 4. This Act shall take effect upon its approval.

INTRODUCED BY:

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