REPORT TITLE:
Taxation


DESCRIPTION:
Eliminates personal income tax beginning 1/1/2000.  Expands the
definition of "wholesaler" to include wholesale services to
alleviate the pyramiding of general excise taxes.  Exempts food
and health care services from general excise tax.  Increases
general excise tax rate from 4% to 8%.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                            1368        
HOUSE OF REPRESENTATIVES                H.B. NO.           
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO TAXATION.



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

 1      SECTION 1.  The purpose of this Act is to repeal the
 
 2 personal income tax for taxable years beginning after December
 
 3 31, 1999, eliminate the pyramiding of the general excise tax by
 
 4 including business to business transactions as sales at
 
 5 wholesale, increase the retail rate of general excise tax from
 
 6 four per cent to eight per cent, and exempt food and health care
 
 7 services from the general excise tax. 
 
 8      SECTION 2.  Chapter 235, Hawaii Revised Statutes, is amended
 
 9 by adding a new section to be appropriately designated and to
 
10 read as follows:
 
11      "235-     Individuals exempt from this chapter.  Beginning
 
12 January 1, 2000, individuals with gross income shall be exempt
 
13 from the taxes levied and assessed under this chapter."
 
14      SECTION 3.  Section 237-4, Hawaii Revised Statutes, is
 
15 amended to read as follows:
 
16      "237-4 "Wholesaler", "jobber", defined.  (a)  "Wholesaler"
 
17 or "jobber" applies only to a person making sales at wholesale.
 
18 Only the following are sales at wholesale:
 
19      (1)  Sales to a licensed retail merchant, jobber, or other
 

 
Page 2                                         1368        
                                     H.B. NO.           
                                                        
                                                        

 
 1           licensed seller for purposes of resale;
 
 2      (2)  Sales to a licensed manufacturer of material or
 
 3           commodities which are to be incorporated by the
 
 4           manufacturer into a finished or saleable product
 
 5           (including the container or package in which the
 
 6           product is contained) during the course of its
 
 7           preservation, manufacture, or processing, including
 
 8           preparation for market, and which will remain in such
 
 9           finished or saleable product in such form as to be
 
10           perceptible to the senses, which finished or saleable
 
11           product is to be sold and not otherwise used by the
 
12           manufacturer;
 
13      (3)  Sales to a licensed producer or cooperative association
 
14           of materials or commodities which are to be
 
15           incorporated by the producer or by the cooperative
 
16           association into a finished or saleable product which
 
17           is to be sold and not otherwise used by the producer or
 
18           cooperative association, including specifically
 
19           materials or commodities expended as essential to the
 
20           planting, growth, nurturing, and production of
 
21           commodities which are sold by the producer or by the
 
22           cooperative association;
 
23      (4)  Sales to a licensed contractor, of material or
 

 
Page 3                                         1368        
                                     H.B. NO.           
                                                        
                                                        

 
 1           commodities which are to be incorporated by the
 
 2           contractor into the finished work or project required
 
 3           by the contract and which will remain in such finished
 
 4           work or project in such form as to be perceptible to
 
 5           the senses;
 
 6      (5)  Sales to a licensed producer, or to a cooperative
 
 7           association described in section 237-23(a)(7) for sale
 
 8           to such producer, or to a licensed person operating a
 
 9           feed lot, of poultry or animal feed, hatching eggs,
 
10           semen, replacement stock, breeding services for the
 
11           purpose of raising or producing animal or poultry
 
12           products for disposition as described in section 237-5
 
13           or to be incorporated in a manufactured product as
 
14           described in paragraph (2) or for the purpose of
 
15           breeding, hatching, milking, or egg laying other than
 
16           for the customer's own consumption of the meat,
 
17           poultry, eggs, or milk so produced; provided that in
 
18           the case of a feed lot operator, only the segregated
 
19           cost of the feed furnished by the feed lot operator as
 
20           part of the feed lot operator's service to a licensed
 
21           producer of poultry or animals to be butchered or to a
 
22           cooperative association described in section
 
23           237-23(a)(7) of such licensed producers shall be deemed
 

 
Page 4                                         1368        
                                     H.B. NO.           
                                                        
                                                        

 
 1           to be a sale at wholesale; and provided further that
 
 2           any amount derived from the furnishing of feed lot
 
 3           services, other than the segregated cost of feed, shall
 
 4           be deemed taxable at the service business rate.  This
 
 5           paragraph shall not apply to the sale of feed for
 
 6           poultry or animals to be used for hauling,
 
 7           transportation, or sports purposes;
 
 8      (6)  Sales to a licensed producer, or to a cooperative
 
 9           association described in section 237-23(a)(7) for sale
 
10           to the producer, of seed for producing agricultural
 
11           products, or bait for catching fish (including the
 
12           catching of bait for catching fish), which agricultural
 
13           products or fish are to be disposed of as described in
 
14           section 237-5 or to be incorporated in a manufactured
 
15           product as described in paragraph (2);
 
16      (7)  Sales to a licensed producer, or to a cooperative
 
17           association described in section 237-23(a)(7) for sale
 
18           to such producer; of polypropylene shade cloth; of
 
19           polyfilm; of polyethylene film; of cartons and such
 
20           other containers, wrappers, and sacks, and binders to
 
21           be used for packaging eggs, vegetables, fruits, and
 
22           other agricultural products; of seedlings and cuttings
 
23           for producing nursery plants; or of chick containers;
 

 
Page 5                                         1368        
                                     H.B. NO.           
                                                        
                                                        

 
 1           which cartons and such other containers, wrappers, and
 
 2           sacks, binders, seedlings, cuttings, and containers are
 
 3           to be used as described in section 237-5, or to be
 
 4           incorporated in a manufactured product as described in
 
 5           paragraph (2);
 
 6      (8)  Sales of tangible personal property to a licensed
 
 7           person engaged in the service business; provided that
 
 8           [(A) the property is not consumed or incidental to the
 
 9           performance of the services; (B) there is a resale of
 
10           the article at the retail rate of four per cent; and
 
11           (C) the resale of the article is separately charged or
 
12           billed by the person rendering the services;]:
 
13           (A)  The property is sold upon the order or request of
 
14                the licensed person for the purpose of rendering a
 
15                service in the course of the person's service
 
16                business or calling; and
 
17           (B)  The property becomes or is used as an integral
 
18                part of the service rendered;
 
19      (9)  Sales to a licensed leasing company of capital goods
 
20           which have a depreciable life, are purchased by the
 
21           leasing company for lease to its customers, and are
 
22           thereafter leased as a service to others[.  Capital
 
23           goods means goods which have a depreciable life and
 

 
Page 6                                         1368        
                                     H.B. NO.           
                                                        
                                                        

 
 1           which are purchased by the leasing company for lease to
 
 2           its customers.]; and
 
 3     (10)  Sales of services to a licensed person engaging in a
 
 4           business or calling whenever:
 
 5           (A)  Either:
 
 6                (i)  In the context of a service-to-service
 
 7                     transaction, a service is rendered upon the
 
 8                     order or request of a licensed person for the
 
 9                     purpose of rendering another service in the
 
10                     course of the seller's service business or
 
11                     calling; or
 
12               (ii)  In the context of a service-to-goods
 
13                     transaction, a service is rendered upon the
 
14                     order or request of a licensed person for the
 
15                     purpose of manufacturing, producing,
 
16                     preparing, or acquiring tangible personal
 
17                     property to be sold; and
 
18           (B)  The benefit of the service passes to the customer
 
19                of the licensed person as an integral part of the
 
20                other service or property to be sold.
 
21      (b)  If the use tax law is finally held by a court of
 
22 competent jurisdiction to be unconstitutional or invalid insofar
 
23 as it purports to tax the use or consumption of tangible personal
 

 
Page 7                                         1368        
                                     H.B. NO.           
                                                        
                                                        

 
 1 property imported into the State in interstate or foreign
 
 2 commerce or both, wholesalers and jobbers shall be taxed
 
 3 thereafter under this chapter in accordance with the following
 
 4 definition (which shall supersede the preceding paragraph
 
 5 otherwise defining "wholesaler" or "jobber"):  "Wholesaler" or
 
 6 "jobber" means a person, or a definitely organized division
 
 7 thereof, definitely organized to render and rendering a general
 
 8 distribution service which buys and maintains at the person's
 
 9 place of business a stock or lines of merchandise which the
 
10 person distributes; and which, through salespersons, advertising,
 
11 or sales promotion devices, sells to licensed retailers, to
 
12 institutional or licensed commercial or industrial users, in
 
13 wholesale quantities and at wholesale rates.  A corporation
 
14 deemed not to be carrying on a trade or business in this State
 
15 under section 235-6 shall nevertheless be deemed to be a
 
16 wholesaler and shall be subject to the tax imposed by this
 
17 chapter."
 
18      SECTION 4.  Section 237-7, Hawaii Revised Statutes, is
 
19 amended to read as follows:
 
20      "237-7 "Service business or calling", defined."Service
 
21 business or calling" includes all activities engaged in for other
 
22 persons for a consideration which involve the rendering of a
 
23 service, including professional services, as distinguished from
 

 
Page 8                                         1368        
                                     H.B. NO.           
                                                        
                                                        

 
 1 the sale of tangible property or the production and sale of
 
 2 tangible property.  "Service business or calling" does not
 
 3 include the services rendered by an employee to the employee's
 
 4 employer."
 
 5      SECTION 5.  Section 237-13, Hawaii Revised Statutes, is
 
 6 amended to read as follows:
 
 7      "237-13  Imposition of tax.  There is hereby levied and
 
 8 shall be assessed and collected annually privilege taxes against
 
 9 persons on account of their business and other activities in the
 
10 State measured by the application of rates against values of
 
11 products, gross proceeds of sales, or gross income, whichever is
 
12 specified, as follows:
 
13      (1)  Tax on manufacturers.
 
14           (A)  Upon every person engaging or continuing within
 
15                the State in the business of manufacturing,
 
16                including compounding, canning, preserving,
 
17                packing, printing, publishing, milling,
 
18                processing, refining, or preparing for sale,
 
19                profit, or commercial use, either directly or
 
20                through the activity of others, in whole or in
 
21                part, any article or articles, substance or
 
22                substances, commodity or commodities, the amount
 
23                of the tax to be equal to the value of the
 

 
Page 9                                         1368        
                                     H.B. NO.           
                                                        
                                                        

 
 1                articles, substances, or commodities,
 
 2                manufactured, compounded, canned, preserved,
 
 3                packed, printed, milled, processed, refined, or
 
 4                prepared, for sale, as shown by the gross proceeds
 
 5                derived from the sale thereof by the manufacturer
 
 6                or person compounding, preparing, or printing
 
 7                them, multiplied by one-half of one per cent.
 
 8           (B)  The measure of the tax on manufacturers is the
 
 9                value of the entire product for sale, regardless
 
10                of the place of sale or the fact that deliveries
 
11                may be made to points outside the State.
 
12           (C)  If any person liable for the tax on manufacturers
 
13                ships or transports the person's product, or any
 
14                part thereof, out of the State, whether in a
 
15                finished or unfinished condition, or sells the
 
16                same for delivery outside of the State (for
 
17                example, consigned to a mainland purchaser via
 
18                common carrier f.o.b. Honolulu), the value of the
 
19                products in the condition or form in which they
 
20                exist immediately before entering interstate or
 
21                foreign commerce, determined as hereinafter
 
22                provided, shall be the basis for the assessment of
 
23                the tax imposed by this paragraph.  This tax shall
 

 
Page 10                                        1368        
                                     H.B. NO.           
                                                        
                                                        

 
 1                be due and payable as of the date of entry of the
 
 2                products into interstate or foreign commerce,
 
 3                whether the products are then sold or not.  The
 
 4                department of taxation shall determine the basis
 
 5                for assessment, as provided by this paragraph, as
 
 6                follows:
 
 7                (i)  If the products at the time of their entry
 
 8                     into interstate or foreign commerce already
 
 9                     have been sold, the gross proceeds of sale,
 
10                     less the transportation expenses, if any,
 
11                     incurred in realizing the gross proceeds for
 
12                     transportation from the time of entry of the
 
13                     products into interstate or foreign commerce,
 
14                     including insurance and storage in transit,
 
15                     shall be the measure of the value of the
 
16                     products.
 
17               (ii)  If the products have not been sold at the
 
18                     time of their entry into interstate or
 
19                     foreign commerce, and in cases governed by
 
20                     clause (i) in which the products are sold
 
21                     under circumstances such that the gross
 
22                     proceeds of sale are not indicative of the
 
23                     true value of the products, the value of the
 

 
Page 11                                        1368        
                                     H.B. NO.           
                                                        
                                                        

 
 1                     products constituting the basis for
 
 2                     assessment shall correspond as nearly as
 
 3                     possible to the gross proceeds of sales for
 
 4                     delivery outside the State, adjusted as
 
 5                     provided in clause (i), or if sufficient data
 
 6                     are not available, sales in the State, of
 
 7                     similar products of like quality and
 
 8                     character and in similar quantities, made by
 
 9                     the taxpayer (unless not indicative of the
 
10                     true value) or by others.  Sales outside the
 
11                     State, adjusted as provided in clause (i),
 
12                     may be considered when they constitute the
 
13                     best available data.  The department shall
 
14                     prescribe uniform and equitable rules for
 
15                     ascertaining the values.
 
16              (iii)  At the election of the taxpayer and with the
 
17                     approval of the department, the taxpayer may
 
18                     make the taxpayer's returns under clause (i)
 
19                     even though the products have not been sold
 
20                     at the time of their entry into interstate or
 
21                     foreign commerce.
 
22               (iv)  In all cases in which products leave the
 
23                     State in an unfinished condition, the basis
 

 
Page 12                                        1368        
                                     H.B. NO.           
                                                        
                                                        

 
 1                     for assessment shall be adjusted so as to
 
 2                     deduct the portion of the value as is
 
 3                     attributable to the finishing of the goods
 
 4                     outside the State.
 
 5      (2)  Tax on business of selling tangible personal property;
 
 6           producing.
 
 7           (A)  Upon every person engaging or continuing in the
 
 8                business of selling any tangible personal property
 
 9                whatsoever (not including, however, bonds or other
 
10                evidence of indebtedness, or stocks), there is
 
11                likewise hereby levied, and shall be assessed and
 
12                collected, a tax equivalent to [four] eight per
 
13                cent of the gross proceeds of sales of the
 
14                business; provided that insofar as certain
 
15                retailing is taxed by section 237-16, the tax
 
16                shall be that levied by section 237-16, and in the
 
17                case of a wholesaler, the tax shall be equal to
 
18                one-half of one per cent of the gross proceeds of
 
19                sales of the business.  Upon every person engaging
 
20                or continuing within this State in the business of
 
21                a producer, the tax shall be equal to one-half of
 
22                one per cent of the gross proceeds of sales of the
 
23                business, or the value of the products, for sale,
 

 
Page 13                                        1368        
                                     H.B. NO.           
                                                        
                                                        

 
 1                if sold for delivery outside the State or shipped
 
 2                or transported out of the State, and the value of
 
 3                the products shall be determined in the same
 
 4                manner as the value of manufactured products
 
 5                covered in the cases under paragraph (1)(C).
 
 6           (B)  Gross proceeds of sales of tangible property in
 
 7                interstate and foreign commerce shall constitute a
 
 8                part of the measure of the tax imposed on persons
 
 9                in the business of selling tangible personal
 
10                property, to the extent, under the conditions, and
 
11                in accordance with the provisions of the
 
12                Constitution of the United States and the Acts of
 
13                the Congress of the United States which may be now
 
14                in force or may be hereafter adopted, and whenever
 
15                there occurs in the State an activity to which,
 
16                under the Constitution and Acts of Congress, there
 
17                may be attributed gross proceeds of sales, the
 
18                gross proceeds shall be so attributed.
 
19           (C)  No manufacturer or producer, engaged in such
 
20                business in the State and selling the
 
21                manufacturer's or producer's products for delivery
 
22                outside of the State (for example, consigned to a
 
23                mainland purchaser via common carrier f.o.b.
 

 
Page 14                                        1368        
                                     H.B. NO.           
                                                        
                                                        

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

 
Page 15                                        1368        
                                     H.B. NO.           
                                                        
                                                        

 
 1                for the privilege of selling its products in the
 
 2                State, and the value or gross proceeds of sales of
 
 3                the products, thus subjected to tax, may be
 
 4                deducted insofar as duplicated as to the same
 
 5                products by the measure of the tax upon the
 
 6                manufacturer or producer for the privilege of
 
 7                manufacturing or producing in the State; except
 
 8                that no producer of agricultural products who
 
 9                sells the products to a purchaser who will process
 
10                the products outside the State shall be required
 
11                to pay the tax imposed in this chapter for the
 
12                privilege of producing or selling those products.
 
13           (E)  A taxpayer selling to a federal cost-plus
 
14                contractor may make the election provided for by
 
15                paragraph (3)(C), and in that case the tax shall
 
16                be computed pursuant to the election,
 
17                notwithstanding this paragraph or paragraph (1) to
 
18                the contrary.
 
19           (F)  The department, by rule, may provide that a seller
 
20                may take from the purchaser of tangible personal
 
21                property a certificate, in a form [as the]
 
22                prescribed by the department [shall prescribe],
 
23                certifying that the sale is a sale at wholesale[.
 

 
Page 16                                        1368        
                                     H.B. NO.           
                                                        
                                                        

 
 1                If the certificate is so provided for by rule of
 
 2                the department:]; provided that:
 
 3                (i)  Any purchaser who furnishes a certificate
 
 4                     shall be obligated to pay to the seller, upon
 
 5                     demand, [if the sale in fact is not at
 
 6                     wholesale,] the amount of the additional tax
 
 7                     [which by reason thereof] that is imposed
 
 8                     upon the seller[;] whenever the sale in fact
 
 9                     is not at wholesale; and
 
10               (ii)  The absence of a certificate[, unless the
 
11                     sales of the business are exclusively at
 
12                     wholesale,] in itself shall give rise to the
 
13                     presumption that the sale is not at
 
14                     wholesale[.] unless the sales of the business
 
15                     are exclusively at wholesale.
 
16      (3)  Tax upon contractors.
 
17           (A)  Upon every person engaging or continuing within
 
18                the State in the business of contracting, the tax
 
19                shall be equal to [four] eight per cent of the
 
20                gross income of the business; provided that
 
21                insofar as the business of contracting is taxed by
 
22                section 237-16, which relates to certain
 
23                retailing, the tax shall be that levied by section
 

 
Page 17                                        1368        
                                     H.B. NO.           
                                                        
                                                        

 
 1                237-16.
 
 2           (B)  In computing the tax levied under this paragraph
 
 3                or section 237-16, there shall be deducted from
 
 4                the gross income of the taxpayer so much thereof
 
 5                as has been included in the measure of the tax
 
 6                levied under subparagraph (A) or section 237-16,
 
 7                on:
 
 8                (i)  Another taxpayer who is a contractor, as
 
 9                     defined in section 237-6;
 
10               (ii)  A specialty contractor, duly licensed by the
 
11                     department of commerce and consumer affairs
 
12                     pursuant to section 444-9, in respect of the
 
13                     specialty contractor's business; or
 
14              (iii)  A specialty contractor who is not licensed by
 
15                     the department of commerce and consumer
 
16                     affairs pursuant to section 444-9, but who
 
17                     performs contracting activities on federal
 
18                     military installations and nowhere else in
 
19                     this State;
 
20                but any person claiming a deduction under this
 
21                paragraph shall be required to show in the
 
22                person's return the name and general excise number
 
23                of the person paying the tax on the amount
 

 
Page 18                                        1368        
                                     H.B. NO.           
                                                        
                                                        

 
 1                deducted by the person.
 
 2           (C)  In computing the tax levied under this paragraph
 
 3                against any federal cost-plus contractor, there
 
 4                shall be excluded from the gross income of the
 
 5                contractor so much thereof as fulfills the
 
 6                following requirements:
 
 7                (i)  The gross income exempted shall constitute
 
 8                     reimbursement of costs incurred for
 
 9                     materials, plant, or equipment purchased from
 
10                     a taxpayer licensed under this chapter, not
 
11                     exceeding the gross proceeds of sale of the
 
12                     taxpayer on account of the transaction; and
 
13               (ii)  The taxpayer making the sale shall have
 
14                     certified to the department that the taxpayer
 
15                     is taxable with respect to the gross proceeds
 
16                     of the sale, and that the taxpayer elects to
 
17                     have the tax on gross income computed the
 
18                     same as upon a sale to the state government.
 
19           (D)  A person who, as a business or as a part of a
 
20                business in which the person is engaged, erects,
 
21                constructs, or improves any building or structure,
 
22                of any kind or description, or makes, constructs,
 
23                or improves any road, street, sidewalk, sewer, or
 

 
Page 19                                        1368        
                                     H.B. NO.           
                                                        
                                                        

 
 1                water system, or other improvements on land held
 
 2                by the person (whether held as a leasehold, fee
 
 3                simple, or otherwise), upon the sale or other
 
 4                disposition of the land or improvements, even if
 
 5                the work was not done pursuant to a contract,
 
 6                shall be liable to the same tax as if engaged in
 
 7                the business of contracting, unless the person
 
 8                shows that at the time the person was engaged in
 
 9                making the improvements it was, and for the period
 
10                of at least one year after completion of the
 
11                building, structure, or other improvements, it
 
12                continued to be the person's purpose to hold and
 
13                not sell or otherwise dispose of the land or
 
14                improvements.  The tax in respect of the
 
15                improvements shall be measured by the amount of
 
16                the proceeds of the sale or other disposition that
 
17                is attributable to the erection, construction, or
 
18                improvement of such building or structure, or the
 
19                making, constructing, or improving of the road,
 
20                street, sidewalk, sewer, or water system, or other
 
21                improvements.  The measure of tax in respect of
 
22                the improvements shall not exceed the amount which
 
23                would have been taxable had the work been
 

 
Page 20                                        1368        
                                     H.B. NO.           
                                                        
                                                        

 
 1                performed by another, subject as in other cases to
 
 2                the deductions allowed by subparagraph (B).  Upon
 
 3                the election of the taxpayer, this paragraph may
 
 4                be applied notwithstanding the improvements were
 
 5                not made by the taxpayer, or were not made as a
 
 6                business or as a part of a business, or were made
 
 7                with the intention of holding the same.  However,
 
 8                this paragraph shall not apply in respect of any
 
 9                proceeds that constitute or are in the nature of
 
10                rent; all such gross income shall be taxable under
 
11                paragraph [(10);] (9); provided that insofar as
 
12                the business of renting or leasing real property
 
13                under a lease is taxed under section 237-16.5, the
 
14                tax shall be levied by section 237-16.5.
 
15      (4)  Tax upon theaters, amusements, radio broadcasting
 
16           stations, etc.  Upon every person engaging or
 
17           continuing within the State in the business of
 
18           operating a theater, opera house, moving picture show,
 
19           vaudeville, amusement park, dance hall, skating rink,
 
20           radio broadcasting station, or any other place at which
 
21           amusements are offered to the public, the tax shall be
 
22           equal to [four] eight per cent of the gross income of
 
23           the business.
 

 
Page 21                                        1368        
                                     H.B. NO.           
                                                        
                                                        

 
 1      (5)  Tax upon sales representatives, etc.  Upon every person
 
 2           classified as a representative or purchasing agent
 
 3           under section 237-1, engaging or continuing within the
 
 4           State in the business of performing services for
 
 5           another, other than as an employee, there is likewise
 
 6           hereby levied and shall be assessed and collected a tax
 
 7           equal to [four] eight per cent of the commissions and
 
 8           other compensation attributable to the services so
 
 9           rendered by the person.
 
10      (6)  Tax on service business.
 
11           (A)  Upon every person engaging or continuing within
 
12                the State in any service business or calling [not
 
13                otherwise specifically taxed under this chapter,]
 
14                there is likewise hereby levied and shall be
 
15                assessed and collected a tax equal to [four] eight
 
16                per cent of the gross income of the business[;
 
17                provided that where any person engaging or
 
18                continuing within the State in any service
 
19                business or calling renders those services upon
 
20                the order of or at the request of another taxpayer
 
21                who is engaged in the service business and who, in
 
22                fact, acts as or acts in the nature of an
 
23                intermediary between the person rendering those
 

 
Page 22                                        1368        
                                     H.B. NO.           
                                                        
                                                        

 
 1                services and the ultimate recipient of the
 
 2                benefits of those services, so much of the gross
 
 3                income as is received by the person rendering the
 
 4                services shall be subjected to the tax at the rate
 
 5                of one-half of one per cent and all of the gross
 
 6                income received by the intermediary from the
 
 7                principal shall be subjected to a tax at the rate
 
 8                of four per cent; and provided that where], and in
 
 9                the case of a wholesaler, the tax shall be equal
 
10                to one-half of one per cent of the gross income of
 
11                the business.
 
12           (B)  The department, by rule, may require that the
 
13                person rendering the service take from the
 
14                licensed person a certificate, in the form as
 
15                prescribed by the department, certifying that the
 
16                sale is a sale at wholesale; provided that:
 
17                (i)  Any licensed person who furnishes a
 
18                     certificate shall be obligated to pay to the
 
19                     person rendering the service whenever the
 
20                     sale in fact is not a sale at wholesale; and
 
21               (ii)  The absence of a certificate in itself shall
 
22                     give rise to the presumption that the sale is
 
23                     not a sale at wholesale unless the person
 

 
Page 23                                        1368        
                                     H.B. NO.           
                                                        
                                                        

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

 
Page 24                                        1368        
                                     H.B. NO.           
                                                        
                                                        

 
 1           or subagent pursuant to chapter 431, there is hereby
 
 2           levied and shall be assessed and collected a tax equal
 
 3           to .15 per cent of the commissions due to that
 
 4           activity.
 
 5     [(8)  Professions.  Upon every person engaging or continuing
 
 6           within the State in the practice of a profession,
 
 7           including those expounding the religious doctrines of
 
 8           any church, there is likewise hereby levied and shall
 
 9           be assessed and collected a tax equal to four per cent
 
10           of the gross income on the practice or exposition.
 
11      (9)] (8)  Tax on receipts of sugar benefit payments.  Upon
 
12           the amounts received from the United States government
 
13           by any producer of sugar (or the producer's legal
 
14           representative or heirs), as defined under and by
 
15           virtue of the Sugar Act of 1948, as amended, or other
 
16           Acts of the Congress of the United States relating
 
17           thereto, there is hereby levied a tax of one-half of
 
18           one per cent of the gross amount received, provided
 
19           that the tax levied hereunder on any amount so received
 
20           and actually disbursed to another by a producer in the
 
21           form of a benefit payment shall be paid by the person
 
22           or persons to whom the amount is actually disbursed,
 
23           and the producer actually making a benefit payment to
 

 
Page 25                                        1368        
                                     H.B. NO.           
                                                        
                                                        

 
 1           another shall be entitled to claim on the producer's
 
 2           return a deduction from the gross amount taxable
 
 3           hereunder in the sum of the amount so disbursed.  The
 
 4           amounts taxed under this paragraph shall not be taxable
 
 5           under any other paragraph, subsection, or section of
 
 6           this chapter.
 
 7    [(10)] (9)  Tax on other business.  Upon every person engaging
 
 8           or continuing within the State in any business, trade,
 
 9           activity, occupation, or calling not included in the
 
10           preceding paragraphs or any other provisions of this
 
11           chapter, there is likewise hereby levied and shall be
 
12           assessed and collected, a tax equal to [four] eight per
 
13           cent of the gross income thereof.  In addition, the
 
14           rate prescribed by this paragraph shall apply to a
 
15           business taxable under one or more of the preceding
 
16           paragraphs or other provisions of this chapter, as to
 
17           any gross income thereof not taxed thereunder as gross
 
18           income or gross proceeds of sales or by taxing an
 
19           equivalent value of products, unless specifically
 
20           exempted."
 
21      SECTION 6.  Section 237-16, Hawaii Revised Statutes, is
 
22 amended to read as follows:
 
23      "237-16  Tax on certain retailing.(a)  This section
 

 
Page 26                                        1368        
                                     H.B. NO.           
                                                        
                                                        

 
 1 relates to certain retailing in the State as follows:
 
 2      (1)  This section relates to the sale of tangible personal
 
 3           property, for consumption or use by the purchaser and
 
 4           not for resale, the renting of tangible personal
 
 5           property, and the rendering of services by one engaged
 
 6           in a service business or calling, as defined, to a
 
 7           person who is not purchasing the services for resale,
 
 8           but does not relate to the sale or rental of tangible
 
 9           personal property or the rendering of services to the
 
10           State, its political subdivisions, or agencies or
 
11           instrumentalities of the State or a political
 
12           subdivision, or to the United States or its agencies or
 
13           instrumentalities (other than national banks), or to a
 
14           corporation, organization, or other person designated
 
15           in section 237-23 who is not subject to the tax imposed
 
16           by this chapter, or to a person licensed under this
 
17           chapter in connection with the person's business.
 
18      (2)  This section relates to the business of a contractor,
 
19           as defined, but does not relate to contracting with, or
 
20           any gross income or proceeds of a subcontractor if the
 
21           principal contract is with the State, its political
 
22           subdivisions, or agencies or instrumentalities of the
 
23           State or a political subdivision, or with the United
 

 
Page 27                                        1368        
                                     H.B. NO.           
                                                        
                                                        

 
 1           States or its agencies or instrumentalities (other than
 
 2           national banks), or with a person designated in section
 
 3           237-23 who is not subject to the tax imposed by this
 
 4           chapter, or with a person licensed under this chapter
 
 5           in connection with the person's business.
 
 6      (3)  This section relates to furnishing of transient
 
 7           accommodations in a hotel, apartment hotel, or other
 
 8           place in which lodgings are regularly furnished to
 
 9           transients for a consideration which includes the
 
10           rendering of services.
 
11      (b)  There is hereby levied, and shall be assessed and
 
12 collected annually, a privilege tax against persons engaging or
 
13 continuing within the State in the retailing to which this
 
14 section relates, on account of such retailing activities, as set
 
15 forth in subsection (a), equal to [four] eight per cent of the
 
16 gross proceeds of sale or gross income received or derived from
 
17 such retailing.  Persons on whom a tax is imposed by this section
 
18 hereinafter are called "retailers".
 
19      (c)  No retailer shall advertise or hold out to the public
 
20 in any manner, directly or indirectly, that the tax imposed by
 
21 this section is not considered as an element in the price to the
 
22 consumer.  Any person violating this subsection shall be fined
 
23 not more than $50 for each offense.
 

 
Page 28                                        1368        
                                     H.B. NO.           
                                                        
                                                        

 
 1      (d)  This section shall not cause the tax upon a taxpayer,
 
 2 with respect to any item of the taxpayer's gross income, to
 
 3 exceed [four] eight per cent.
 
 4      (e)  This section shall not apply to:
 
 5      (1)  Sales of tangible personal property to a licensed
 
 6           person engaged in a service business or calling as
 
 7           defined in section 237-4(a)(8); and
 
 8      (2)  Sales of services to a licensed person engaged in a
 
 9           business or calling as defined in section
 
10           237-4(a)(10)."
 
11      SECTION 7.  Section 237-16.5, Hawaii Revised Statutes, is
 
12 amended as follows:
 
13      1. By amending subsection (a) to read:
 
14      "(a)  This section relates to the leasing of real property
 
15 by a lessor to a lessee.  There is hereby levied, and shall be
 
16 assessed and collected annually, a privilege tax against persons
 
17 engaging or continuing within the State in the business of
 
18 leasing real property to another, equal to [four] eight per cent
 
19 of the gross proceeds or gross income received or derived from
 
20 the leasing; provided that where real property is subleased by a
 
21 lessee to a sublessee, the lessee, as provided in this section,
 
22 shall be allowed a deduction from the amount of gross proceeds or
 
23 gross income received from its sublease of the real property.
 

 
Page 29                                        1368        
                                     H.B. NO.           
                                                        
                                                        

 
 1 The deduction shall be in the amount allowed under this section.
 
 2      All deductions under this section and the name and general
 
 3 excise tax number of the lessee's lessor shall be reported on the
 
 4 general excise tax return.  Any deduction allowed under this
 
 5 section shall only be allowed with respect to leases and
 
 6 subleases in writing and relating to the same real property."
 
 7      2. By amending subsection (f) to read:
 
 8      "(f)  This section shall not cause the tax upon a lessor,
 
 9 with respect to any item of the lessor's gross proceeds or gross
 
10 income, to exceed [four] eight per cent."
 
11      SECTION 8.  Section 237-18, Hawaii Revised Statutes, is
 
12 amended by amending subsection (f) to read as follows:
 
13      "(f)  Where tourism related services are furnished through
 
14 arrangements made by a travel agency or tour packager and the
 
15 gross income is divided between the provider of the services and
 
16 the travel agency or tour packager, the tax imposed by this
 
17 chapter shall apply to each such person with respect to such
 
18 person's respective portion of the proceeds, and no more.
 
19      As used in this subsection "tourism related services" means
 
20 catamaran cruises, canoe rides, dinner cruises, lei greetings,
 
21 transportation included in a tour package, sightseeing tours not
 
22 subject to chapter 239, admissions to luaus, dinner shows,
 
23 extravaganzas, cultural and educational facilities, and other
 

 
Page 30                                        1368        
                                     H.B. NO.           
                                                        
                                                        

 
 1 services rendered directly to the customer or tourist, but only
 
 2 if the providers of the services other than air transportation
 
 3 are subject to a [four] eight per cent tax under this chapter or
 
 4 chapter 239."
 
 5      SECTION 9.  Section 237-24.3, Hawaii Revised Statutes, is
 
 6 amended to read as follows:
 
 7      "237-24.3  Additional amounts not taxable.  In addition to
 
 8 the amounts not taxable under section 237-24, this chapter shall
 
 9 not apply to:
 
10      (1)  Amounts received from the loading, transportation, and
 
11           unloading of agricultural commodities shipped for a
 
12           producer or produce dealer on one island of this State
 
13           to a person, firm, or organization on another island of
 
14           this State.  The terms "agricultural commodity",
 
15           "producer", and "produce dealer" shall be defined in
 
16           the same manner as they are defined in section 147-1;
 
17           provided that agricultural commodities need not have
 
18           been produced in the State;
 
19      (2)  Amounts received from sales of:
 
20           (A)  Intoxicating liquor as the term "liquor" is
 
21                defined in chapter 244D;
 
22           (B)  Cigarettes and tobacco products as defined in
 
23                chapter 245; and
 

 
Page 31                                        1368        
                                     H.B. NO.           
                                                        
                                                        

 
 1           (C)  Agricultural, meat, or fish products grown,
 
 2                raised, or caught in Hawaii, to any person or
 
 3                common carrier in interstate or foreign commerce,
 
 4                or both, whether ocean-going or air, for
 
 5                consumption out-of-state on the shipper's vessels
 
 6                or airplanes;
 
 7      (3)  Amounts received by the manager or board of directors
 
 8           of:
 
 9           (A)  An association of apartment owners of a
 
10                condominium property regime established in
 
11                accordance with chapter 514A; or
 
12           (B)  A nonprofit homeowners or community association
 
13                incorporated in accordance with chapter 415B or
 
14                any predecessor thereto and existing pursuant to
 
15                covenants running with the land,
 
16           in reimbursement of sums paid for common expenses;
 
17      (4)  Amounts received or accrued from:
 
18           (A)  The loading or unloading of cargo from ships,
 
19                barges, vessels, or aircraft, whether or not the
 
20                ships, barges, vessels, or aircraft travel between
 
21                the State and other states or countries or between
 
22                the islands of the State;
 
23           (B)  Tugboat services including pilotage fees performed
 

 
Page 32                                        1368        
                                     H.B. NO.           
                                                        
                                                        

 
 1                within the State, and the towage of ships, barges,
 
 2                or vessels in and out of state harbors, or from
 
 3                one pier to another; and
 
 4           (C)  The transportation of pilots or governmental
 
 5                officials to ships, barges, or vessels offshore;
 
 6                rigging gear; checking freight and similar
 
 7                services; standby charges; and use of moorings and
 
 8                running mooring lines;
 
 9      (5)  Amounts received by an employee benefit plan by way of
 
10           contributions, dividends, interest, and other income;
 
11           and amounts received by a nonprofit organization or
 
12           office, as payments for costs and expenses incurred for
 
13           the administration of an employee benefit plan;
 
14           provided that this exemption shall not apply to any
 
15           gross rental income or gross rental proceeds received
 
16           after June 30, 1994, as income from investments in real
 
17           property in this State; and provided further that gross
 
18           rental income or gross rental proceeds from investments
 
19           in real property received by an employee benefit plan
 
20           after June 30, 1994, under written contracts executed
 
21           prior to July 1, 1994, shall not be taxed until the
 
22           contracts are renegotiated, renewed, or extended, or
 
23           until after December 31, 1998, whichever is earlier.
 

 
Page 33                                        1368        
                                     H.B. NO.           
                                                        
                                                        

 
 1           For the purposes of this paragraph, "employee benefit
 
 2           plan" means any plan as defined in section 1002(3) of
 
 3           title 29 of the United States Code, as amended;
 
 4      (6)  Amounts received for purchases [made with United States
 
 5           Department of Agriculture food coupons under the
 
 6           federal food stamp program, and amounts received for
 
 7           purchases made with United States Department of
 
 8           Agriculture food vouchers under the Special
 
 9           Supplemental Foods Program for Women, Infants and
 
10           Children;] of food.
 
11           "Food" means the same as defined in 7 United States
 
12           Code Section 2012(g), as amended, and includes:
 
13           (A)  Any food or food product for home consumption
 
14                except alcoholic beverages, tobacco, and hot foods
 
15                or hot food products ready for immediate
 
16                consumption other than those authorized;
 
17           (B)  Seeds and plants for use in gardens to produce
 
18                food for the personal household consumption;
 
19           (C)  In the case of those persons who are sixty years
 
20                of age or over or who receive supplemental
 
21                security income benefits or disability or
 
22                blindness payments under title I, II, X, XIV, or
 
23                XVI, of the Social Security Act (42 U.S.C.A. 301
 

 
Page 34                                        1368        
                                     H.B. NO.           
                                                        
                                                        

 
 1                et seq., 401 et seq., 1201 et seq., 1351 et seq.,
 
 2                or 1381 et seq.), and their spouses, meals
 
 3                prepared by and served in senior citizens'
 
 4                centers, apartment buildings occupied primarily by
 
 5                such persons, public or private nonprofit
 
 6                establishments (eating or otherwise) that feed
 
 7                such persons, private establishments that contract
 
 8                with the appropriate agency of the State to offer
 
 9                meals for such persons at concessional prices, and
 
10                meals prepared for and served to residents of
 
11                federally subsidized housing for the elderly;
 
12           (D)  In the case of persons sixty years of age or over
 
13                and persons who are physically or mentally
 
14                handicapped or otherwise so disabled that they are
 
15                unable adequately to prepare all of their meals,
 
16                meals prepared for and delivered to them (and
 
17                their spouses) at their home by a public or
 
18                private nonprofit organization or by a private
 
19                establishment that contracts with the appropriate
 
20                state agency to perform such services at
 
21                concessional prices;
 
22           (E)  In the case of narcotics addicts or alcoholics,
 
23                and their children, served by drug addiction or
 

 
Page 35                                        1368        
                                     H.B. NO.           
                                                        
                                                        

 
 1                alcoholic treatment and rehabilitation programs,
 
 2                meals prepared and served under such programs;
 
 3           (F)  In the case of disabled or blind recipients of
 
 4                benefits under title I, II, X, XIV, or XVI of the
 
 5                Social Security Act (42 U.S.C.A. 301 et seq., 401
 
 6                et seq., 1201 et seq., 1351 et seq., or 1381 et
 
 7                seq.), or residents in a public or private
 
 8                nonprofit group living arrangement that serves no
 
 9                more than sixteen residents and is certified by
 
10                the appropriate state agency meals prepared and
 
11                served under such arrangement;
 
12           (G)  In the case of women and children temporarily
 
13                residing in public or private nonprofit shelters
 
14                for battered women and children, meals prepared
 
15                and served, by such shelters; and
 
16           (H)  In the case of households that do not reside in
 
17                permanent dwellings and households that have no
 
18                fixed mailing addresses, meals prepared for and
 
19                served by a public or private nonprofit
 
20                establishment (approved by an appropriate state
 
21                agency) that feeds such individuals and by private
 
22                establishments that contract with the appropriate
 
23                agency of the State to offer meals for such
 

 
Page 36                                        1368        
                                     H.B. NO.           
                                                        
                                                        

 
 1                individuals at concessional prices.
 
 2      (7)  Amounts received by a hospital, infirmary, medical
 
 3           clinic, health care facility, pharmacy, or a licensed
 
 4           practitioner [licensed to administer the drug to an
 
 5           individual for selling prescription drugs or prosthetic
 
 6           devices to an individual; provided that this paragraph
 
 7           shall not apply to any] for health care services
 
 8           rendered including amounts received for services
 
 9           provided in selling prescription drugs or prosthetic
 
10           devices.  As used in this paragraph:
 
11           (A)  "Prescription drugs" are those drugs defined under
 
12                section [[]328-1[]] and dispensed by filling or
 
13                refilling a written or oral prescription by a
 
14                practitioner licensed under law to administer the
 
15                drug and sold by a licensed pharmacist under
 
16                section 328-16 or practitioners licensed to
 
17                administer drugs; and
 
18           (B)  "Prosthetic device" means any artificial device or
 
19                appliance, instrument, apparatus, or contrivance,
 
20                including their components, parts, accessories,
 
21                and replacements thereof, used to replace a
 
22                missing or surgically removed part of the human
 
23                body, which is prescribed by a licensed
 

 
Page 37                                        1368        
                                     H.B. NO.           
                                                        
                                                        

 
 1                practitioner of medicine, osteopathy, or podiatry
 
 2                and which is sold by the practitioner or which is
 
 3                dispensed and sold by a dealer of prosthetic
 
 4                devices; provided that "prosthetic device" shall
 
 5                not mean any auditory, ophthalmic, dental, or
 
 6                ocular device or appliance, instrument, apparatus,
 
 7                or contrivance;
 
 8      (8)  Taxes on transient accommodations imposed by chapter
 
 9           237D and passed on and collected by operators holding
 
10           certificates of registration under that chapter;
 
11      (9)  Amounts received as dues by an unincorporated merchants
 
12           association from its membership for advertising media,
 
13           promotional, and advertising costs for the promotion of
 
14           the association for the benefit of its members as a
 
15           whole and not for the benefit of an individual member
 
16           or group of members less than the entire membership;
 
17           and
 
18      (10) Amounts received by a labor organization for real
 
19           property leased to:
 
20           (A)  A labor organization; or
 
21           (B)  A trust fund established by a labor organization
 
22                for the benefit of its members, families, and
 
23                dependents for medical or hospital care, pensions
 

 
Page 38                                        1368        
                                     H.B. NO.           
                                                        
                                                        

 
 1                on retirement or death of employees,
 
 2                apprenticeship and training, and other membership
 
 3                service programs.
 
 4           As used in this paragraph, "labor organization" means a
 
 5           labor organization exempt from federal income tax under
 
 6           section 501(c)(5) of the Internal Revenue Code, as
 
 7           amended."
 
 8      SECTION 10.  Section 238-2, Hawaii Revised Statutes, is
 
 9 amended to read as follows:
 
10      "238-2 Imposition of tax; exemptions.  There is hereby
 
11 levied an excise tax on the use in this State of tangible
 
12 personal property which is imported, or purchased from an
 
13 unlicensed seller, for use in this State.  The tax imposed by
 
14 this chapter shall accrue when the property is acquired by the
 
15 importer or purchaser and becomes subject to the taxing
 
16 jurisdiction of the State.  The rates of the tax hereby imposed
 
17 and the exemptions thereof are as follows:
 
18      (1)  If the importer or purchaser is licensed under chapter
 
19           237 and is (A) a wholesaler or jobber importing or
 
20           purchasing for purposes of resale, or (B) a
 
21           manufacturer importing or purchasing material or
 
22           commodities which are to be incorporated by the
 
23           manufacturer into a finished or saleable product
 

 
Page 39                                        1368        
                                     H.B. NO.           
                                                        
                                                        

 
 1           (including the container or package in which the
 
 2           product is contained) wherein it will remain in such
 
 3           form as to be perceptible to the senses, and which
 
 4           finished or saleable product is to be sold in such
 
 5           manner as to result in a further tax on the activity of
 
 6           the manufacturer as the manufacturer or as a
 
 7           wholesaler, and not as a retailer, there shall be no
 
 8           tax, provided that if the wholesaler, jobber, or
 
 9           manufacturer is also engaged in business as a retailer
 
10           (so classed under chapter 237), paragraph (2) shall
 
11           apply to the wholesaler, jobber, or manufacturer, but
 
12           the director of taxation shall refund to the
 
13           wholesaler, jobber, or manufacturer, in the manner
 
14           provided under section 231-23(c) such amount of tax as
 
15           the wholesaler, jobber, or manufacturer shall, to the
 
16           satisfaction of the director, establish to have been
 
17           paid by the wholesaler, jobber, or manufacturer to the
 
18           director with respect to property which has been used
 
19           by the wholesaler, jobber, or manufacturer for the
 
20           purposes stated in this paragraph.
 
21      (2)  If the importer or purchaser is licensed under chapter
 
22           237 and is:
 
23           (A)  [a] A retailer or other person importing or
 

 
Page 40                                        1368        
                                     H.B. NO.           
                                                        
                                                        

 
 1                purchasing for purposes of resale, not exempted by
 
 2                paragraph (1)[, or];
 
 3           (B)  [a] A manufacturer importing or purchasing
 
 4                material or commodities which are to be
 
 5                incorporated by the manufacturer into a finished
 
 6                or saleable product (including the container or
 
 7                package in which the product is contained) wherein
 
 8                it will remain in such form as to be perceptible
 
 9                to the senses, and which finished or saleable
 
10                product is to be sold at retail in this State, in
 
11                such manner as to result in a further tax on the
 
12                activity of the manufacturer in selling such
 
13                products at retail[, or];
 
14           (C)  [a] A contractor importing or purchasing material
 
15                or commodities which are to be incorporated by the
 
16                contractor into the finished work or project
 
17                required by the contract and which will remain in
 
18                such finished work or project in such form as to
 
19                be perceptible to the senses[,]; or
 
20           (D)  A person engaged in a service business or calling
 
21                as defined in section 237-7, in which the import
 
22                or purchase of tangible personal property would
 
23                have qualified as a sale at wholesale as defined
 

 
Page 41                                        1368        
                                     H.B. NO.           
                                                        
                                                        

 
 1                in section 237-4(a)(8) had the person been subject
 
 2                to the tax in chapter 237,
 
 3           the tax shall be one-half of one per cent of the
 
 4           purchase price of the property, if the purchase and
 
 5           sale are consummated in Hawaii; or, if there is no
 
 6           purchase price applicable thereto, or if the purchase
 
 7           or sale is consummated outside of Hawaii, then one-half
 
 8           of one per cent of the value of such property.
 
 9      (3)  In all other cases, [four] eight per cent of the value
 
10           of the property."
 
11      SECTION 11.  Section 238-3, Hawaii Revised Statutes, is
 
12 amended to read as follows:
 
13      "238-3 Application of tax, etc.(a)  The tax imposed by
 
14 this chapter shall not apply to any property, or to any use of
 
15 the property, which cannot legally be so taxed under the
 
16 Constitution or laws of the United States, but only so long as,
 
17 and only to the extent to which the State is without power to
 
18 impose the tax.
 
19      Any provision of law to the contrary notwithstanding,
 
20 exemptions or exclusions from tax under this chapter allowed on
 
21 or before April 1, 1978 under the provisions of the Constitution
 
22 of the United States or an act of the Congress of the United
 
23 States to persons or common carriers engaged in interstate or
 

 
Page 42                                        1368        
                                     H.B. NO.           
                                                        
                                                        

 
 1 foreign commerce, or both, whether ocean-going or air, shall
 
 2 continue undiminished and be available thereafter.
 
 3      (b)  The tax imposed by this chapter shall not apply to any
 
 4 use of property the transfer of which property to, or the
 
 5 acquisition of which by, the person so using the same, has
 
 6 actually been or actually is taxed under chapter 237.
 
 7      (c)  The tax imposed by this chapter shall be paid only once
 
 8 upon or in respect of the same property; provided that nothing in
 
 9 this chapter contained shall be construed to exempt any property
 
10 or the use thereof from taxation under any other law of the
 
11 State.
 
12      (d)  The tax imposed by this chapter shall be in addition to
 
13 any other taxes imposed by any other laws of the State, except as
 
14 otherwise specifically provided herein; provided that if it be
 
15 finally held by any court of competent jurisdiction, that the tax
 
16 imposed by this chapter may not legally be imposed in addition to
 
17 any other tax or taxes imposed by any other law or laws with
 
18 respect to the same property or the use thereof, then this
 
19 chapter shall be deemed not to apply to the property and the use
 
20 thereof under such specific circumstances, but such other laws
 
21 shall be given full effect with respect to the property and use.
 
22      (e)  The tax imposed by this chapter shall not apply to any
 
23 use of property exempted by section 238-4.
 

 
Page 43                                        1368        
                                     H.B. NO.           
                                                        
                                                        

 
 1      (f)  The tax imposed by this chapter shall not apply to any
 
 2 use or consumption of aircraft and vessels, the transfer of which
 
 3 aircraft or vessel to, or the acquisition of which by, the person
 
 4 so using or consuming the same, or the rental for the use of the
 
 5 aircraft or vessel, has actually been or actually is taxed under
 
 6 chapter 237.
 
 7      (g)  The tax imposed by this chapter shall not apply to any
 
 8 intoxicating liquor as defined in chapter 244D and cigarettes and
 
 9 tobacco products as defined in chapter 245, imported into the
 
10 State and sold to any person or common carrier in interstate
 
11 commerce, whether ocean-going or air, for consumption out-of-
 
12 state by the person, crew, or passengers on the shipper's vessels
 
13 or airplanes.
 
14      (h)  The tax imposed by this chapter shall not apply to any
 
15 use of vessels constructed under section 189-25 prior to July 1,
 
16 1969.
 
17      (i)  Each taxpayer liable for the tax imposed by this
 
18 chapter on tangible personal property shall be entitled to full
 
19 credit for the combined amount or amounts of legally imposed
 
20 sales or use taxes paid by the taxpayer with respect to the same
 
21 transaction and property to another state and any subdivision
 
22 thereof, but such credit shall not exceed the amount of the use
 
23 tax imposed under this chapter on account of the transaction and
 

 
Page 44                                        1368        
                                     H.B. NO.           
                                                        
                                                        

 
 1 property.  The director of taxation may require the taxpayer to
 
 2 produce the necessary receipts or vouchers indicating the payment
 
 3 of the sales or use tax to another state or subdivision as a
 
 4 condition for the allowance of the credit.
 
 5      (j)  The tax imposed by this chapter shall not apply to any
 
 6 use of property exempted by section 237-26 or section 237-29.
 
 7      (k)  The tax imposed by this chapter shall not apply to any
 
 8 use of air pollution control facility exempted by section
 
 9 237-27.5.
 
10      (l)  The tax imposed by this chapter shall not apply to food
 
11 exempt from general excise tax under paragraph 237-24.3(6)."
 
12      SECTION 12.  Section 239-6, Hawaii Revised Statutes, is
 
13 amended to read as follows:
 
14      "239-6 Airlines, certain carriers.  There shall be levied
 
15 and assessed upon each airline a tax of [four] eight per cent of
 
16 its gross income each year from the airline business; provided
 
17 that if an airline adopts a rate schedule for students in grade
 
18 twelve or below travelling in school groups providing such
 
19 students at reasonable hours a rate less than one-half of the
 
20 regular adult fare, the tax shall be three per cent of its gross
 
21 income each year from the airline business.  There shall be
 
22 levied and assessed upon each motor carrier, each common carrier
 
23 by water, and upon each contract carrier other than a motor
 

 
Page 45                                        1368        
                                     H.B. NO.           
                                                        
                                                        

 
 1 carrier, a tax of [four] eight per cent of its gross income each
 
 2 year from the motor carrier or contract carrier business.  The
 
 3 tax imposed by this section is a means of taxing the personal
 
 4 property of the airline or other carrier, tangible and
 
 5 intangible, including going concern value, and is in lieu of the
 
 6 tax imposed by chapter 237 but is not in lieu of any other tax."
 
 7      SECTION 13.  The department of taxation shall make
 
 8 recommendations for statutory amendments necessary to carry out
 
 9 section 2 of this Act.  The director of taxation shall report to
 
10 the legislature, no later than twenty days before the convening
 
11 of the regular session of 2000.
 
12      SECTION 14.  Statutory material to be repealed is bracketed.
 
13 New statutory material is underscored.
 
14      SECTION 15.  This Act shall take effect on July 1, 1999.
 
15 
 
16                           INTRODUCED BY:  _______________________