REPORT TITLE: 
Taxation


DESCRIPTION:
Removes the pyramiding of the general excise tax on services.
Exempts export services from the general excist tax. (HB741 HD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        741
HOUSE OF REPRESENTATIVES                H.B. NO.           H.D. 1
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 restructure
 
 2 various taxes to promote fairness to business and individual
 
 3 taxpayers.  Specifically, this Act will:
 
 4      (1)  Remove the pyramiding of the general excise tax on
 
 5           services; and
 
 6      (2)  Exempt export services from the general excise tax.
 
 7      The result of these changes will be to bring the cost of
 
 8 doing business for service-oriented companies more in line with
 
 9 that for companies selling goods.
 
10                              PART I.
 
11      SECTION 2.  Pyramiding of the four per cent general excise
 
12 tax rate has been addressed in the sale of goods by providing a
 
13 .5 per cent tax for the wholesale sale of goods and a four per
 
14 cent tax on the final retail sale only.
 
15      The purpose of this part is to bring the taxation of
 
16 services in line with that of goods by establishing a similar
 
17 system for the taxation of wholesale services.
 
18      SECTION 3.  Chapter 237, Hawaii Revised Statutes, is amended
 
19 by adding a new section to be appropriately designated and to
 
20 read as follows:
 

 
Page 2                                                     741
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      "237-    Treatment of wholesale services.  (a)  This
 
 2 section relates to the wholesale of services and applies to all
 
 3 service businesses under section 237-7.
 
 4      (b)  A wholesale sale of services by a taxpayer occurs
 
 5 where:
 
 6      (1)  The services are acquired by the taxpayer from a
 
 7           licensed person on behalf of the ultimate recipient or
 
 8           in connection with the rendering of services by the
 
 9           taxpayer to the ultimate recipient.  The services may
 
10           or may not be furnished pursuant to an existing
 
11           contract between the licensed person and the taxpayer;
 
12      (2)  The taxpayer has not consumed the services; provided
 
13           that the taxpayer must bill the ultimate recipient
 
14           separately for those services; and
 
15      (3)  The licensed person furnishing the taxpayer with
 
16           services is subject to the five per cent tax rate under
 
17           this chapter upon the gross income or gross proceeds
 
18           received by the licensed person for the services
 
19           furnished to the taxpayer.
 
20      (c)  A deduction shall be allowed from the gross proceeds or
 
21 gross income of the taxpayer subject to subsection (b) in an
 
22 amount calculated by multiplying the gross amount paid by the
 
23 taxpayer for the services acquired from the licensed person by
 
24 .875.
 

 
Page 3                                                     741
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      The amount calculated shall be deducted from the taxpayer's
 
 2 total reported gross proceeds or gross income.  The deduction
 
 3 allowed by this subsection may be taken by fiscal and calendar
 
 4 year taxpayers.  All deductions claimed under this section shall
 
 5 be accompanied by the name and general excise tax number of the
 
 6 licensed person furnishing the services to the taxpayer.
 
 7      (d)  The taxpayer shall obtain from the licensed person a
 
 8 certificate in a form that the department may prescribe
 
 9 certifying that the licensed person is subject to tax at the rate
 
10 of four per cent under this chapter on the gross proceeds or
 
11 gross income received from the taxpayer.  The absence of the
 
12 certificate, if required, is itself a presumption that the
 
13 taxpayer is not allowed a deduction under this section.
 
14      (e)  A wholesale of services does not occur when the
 
15 business activity involves the production or sale of tangible
 
16 personal property, contracting, or retailing.  Any services
 
17 involved in those business activities shall not be severable and
 
18 shall not qualify for a deduction under this section.
 
19      (f)  As used in this section:
 
20      "Licensed person" means a person licensed under this chapter
 
21 to engage in a service business or calling under section 237-7.
 
22      "Taxpayer" means any person subject to taxation under
 
23 section 237-13(6).
 

 
Page 4                                                     741
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      "Ultimate recipient" means a person who receives the
 
 2 services or the benefits of the services and who uses or consumes
 
 3 the services."
 
 4      SECTION 4.  Section 237-3, Hawaii Revised Statutes, is
 
 5 amended by amending subsection (b) to read as follows:
 
 6      "(b)  The words "gross income" and "gross proceeds of sales"
 
 7 shall not be construed to include:  the amounts of taxes imposed
 
 8 by this chapter on licensees and passed on, collected, and
 
 9 received from a person as part of the gross income or gross
 
10 proceeds received by a licensee for activities subject to the
 
11 four per cent tax rate in this chapter, gross receipts from the
 
12 sale of securities as defined in 15 United States Code section
 
13 78c or similar laws of jurisdictions outside the United States,
 
14 contracts for the sale of a commodity for future delivery and
 
15 other agreements, options, and rights as defined in 7 United
 
16 States Code section 2 that are permitted to be traded on a board
 
17 of trade designated by the Commodities Futures Trading Commission
 
18 under the Commodity Exchange Act, or evidence of indebtedness or,
 
19 except as otherwise provided, from the sale of land in fee
 
20 simple, improved or unimproved, dividends as defined by chapter
 
21 235; cash discounts allowed and taken on sales; the proceeds of
 
22 sale of goods, wares, or merchandise returned by customers when
 
23 the sale price is refunded either in cash or by credit; or the
 

 
Page 5                                                     741
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 sale price of any article accepted as part payment on any new
 
 2 article sold, if the full sale price of the new article is
 
 3 included in the "gross income" or "gross proceeds of sales";
 
 4 gross receipts from the sale or transfer of materials or
 
 5 supplies, interest on loans, or the provision of engineering,
 
 6 construction, maintenance, or managerial services by one "member"
 
 7 of an "affiliated public service company group" to another
 
 8 "member" of the same group as such terms are defined in
 
 9 section 239-2.  Accounts found to be worthless and actually
 
10 charged off for income tax purposes may, at corresponding
 
11 periods, be deducted from gross proceeds of sale, or gross
 
12 income, within this chapter, so far as they reflect taxable sales
 
13 made, or gross income earned, after July 1, 1935, but shall be
 
14 added to gross proceeds of sale or gross income when and if
 
15 afterwards collected."
 
16      SECTION 5.  Section 237-13, Hawaii Revised Statutes, is
 
17 amended to read as follows:
 
18      "237-13  Imposition of tax.  There is hereby levied and
 
19 shall be assessed and collected annually privilege taxes against
 
20 persons on account of their business and other activities in the
 
21 State measured by the application of rates against values of
 
22 products, gross proceeds of sales, or gross income, whichever is
 
23 specified, as follows:
 

 
Page 6                                                     741
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      (1)  Tax on manufacturers.
 
 2           (A)  Upon every person engaging or continuing within
 
 3                the State in the business of manufacturing,
 
 4                including compounding, canning, preserving,
 
 5                packing, printing, publishing, milling,
 
 6                processing, refining, or preparing for sale,
 
 7                profit, or commercial use, either directly or
 
 8                through the activity of others, in whole or in
 
 9                part, any article or articles, substance or
 
10                substances, commodity or commodities, the amount
 
11                of the tax to be equal to the value of the
 
12                articles, substances, or commodities,
 
13                manufactured, compounded, canned, preserved,
 
14                packed, printed, milled, processed, refined, or
 
15                prepared, for sale, as shown by the gross proceeds
 
16                derived from the sale thereof by the manufacturer
 
17                or person compounding, preparing, or printing
 
18                them, multiplied by one-half of one per cent.
 
19           (B)  The measure of the tax on manufacturers is the
 
20                value of the entire product for sale, regardless
 
21                of the place of sale or the fact that deliveries
 
22                may be made to points outside the State.
 

 
 
 
Page 7                                                     741
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1           (C)  If any person liable for the tax on manufacturers
 
 2                ships or transports the person's product, or any
 
 3                part thereof, out of the State, whether in a
 
 4                finished or unfinished condition, or sells the
 
 5                same for delivery outside of the State (for
 
 6                example, consigned to a mainland purchaser via
 
 7                common carrier f.o.b. Honolulu), the value of the
 
 8                products in the condition or form in which they
 
 9                exist immediately before entering interstate or
 
10                foreign commerce, determined as hereinafter
 
11                provided, shall be the basis for the assessment of
 
12                the tax imposed by this paragraph.  This tax shall
 
13                be due and payable as of the date of entry of the
 
14                products into interstate or foreign commerce,
 
15                whether the products are then sold or not.  The
 
16                department of taxation shall determine the basis
 
17                for assessment, as provided by this paragraph, as
 
18                follows:
 
19                (i)  If the products at the time of their entry
 
20                     into interstate or foreign commerce already
 
21                     have been sold, the gross proceeds of sale,
 
22                     less the transportation expenses, if any,
 
23                     incurred in realizing the gross proceeds for
 

 
Page 8                                                     741
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1                     transportation from the time of entry of the
 
 2                     products into interstate or foreign commerce,
 
 3                     including insurance and storage in transit,
 
 4                     shall be the measure of the value of the
 
 5                     products[.];
 
 6               (ii)  If the products have not been sold at the
 
 7                     time of their entry into interstate or
 
 8                     foreign commerce, and in cases governed by
 
 9                     clause (i) in which the products are sold
 
10                     under circumstances such that the gross
 
11                     proceeds of sale are not indicative of the
 
12                     true value of the products, the value of the
 
13                     products constituting the basis for
 
14                     assessment shall correspond as nearly as
 
15                     possible to the gross proceeds of sales for
 
16                     delivery outside the State, adjusted as
 
17                     provided in clause (i), or if sufficient data
 
18                     are not available, sales in the State, of
 
19                     similar products of like quality and
 
20                     character and in similar quantities, made by
 
21                     the taxpayer (unless not indicative of the
 
22                     true value) or by others.  Sales outside the
 
23                     State, adjusted as provided in clause (i),
 

 
Page 9                                                     741
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1                     may be considered when they constitute the
 
 2                     best available data.  The department shall
 
 3                     prescribe uniform and equitable rules for
 
 4                     ascertaining the values[.];
 
 5              (iii)  At the election of the taxpayer and with the
 
 6                     approval of the department, the taxpayer may
 
 7                     make the taxpayer's returns under clause (i)
 
 8                     even though the products have not been sold
 
 9                     at the time of their entry into interstate or
 
10                     foreign commerce[.]; and
 
11               (iv)  In all cases in which products leave the
 
12                     State in an unfinished condition, the basis
 
13                     for assessment shall be adjusted so as to
 
14                     deduct the portion of the value as is
 
15                     attributable to the finishing of the goods
 
16                     outside the State.
 
17      (2)  Tax on business of selling tangible personal property;
 
18           producing.
 
19           (A)  Upon every person engaging or continuing in the
 
20                business of selling any tangible personal property
 
21                whatsoever (not including, however, bonds or other
 
22                evidence of indebtedness, or stocks), there is
 
23                likewise hereby levied, and shall be assessed and
 

 
Page 10                                                    741
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1                collected, a tax equivalent to four per cent of
 
 2                the gross proceeds of sales of the business;
 
 3                provided that insofar as certain retailing is
 
 4                taxed by section 237-16, the tax shall be that
 
 5                levied by section 237-16, and in the case of a
 
 6                wholesaler, the tax shall be equal to one-half of
 
 7                one per cent of the gross proceeds of sales of the
 
 8                business.  Upon every person engaging or
 
 9                continuing within this State in the business of a
 
10                producer, the tax shall be equal to one-half of
 
11                one per cent of the gross proceeds of sales of the
 
12                business, or the value of the products, for sale,
 
13                if sold for delivery outside the State or shipped
 
14                or transported out of the State, and the value of
 
15                the products shall be determined in the same
 
16                manner as the value of manufactured products
 
17                covered in the cases under paragraph (1)(C).
 
18           (B)  Gross proceeds of sales of tangible property in
 
19                interstate and foreign commerce shall constitute a
 
20                part of the measure of the tax imposed on persons
 
21                in the business of selling tangible personal
 
22                property, to the extent, under the conditions, and
 
23                in accordance with the provisions of the
 

 
Page 11                                                    741
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1                Constitution of the United States and the Acts of
 
 2                the Congress of the United States [which] that may
 
 3                be now in force or may be hereafter adopted, and
 
 4                whenever there occurs in the State an activity to
 
 5                which, under the Constitution and Acts of
 
 6                Congress, there may be attributed gross proceeds
 
 7                of sales, the gross proceeds shall be so
 
 8                attributed.
 
 9           (C)  No manufacturer or producer, engaged in such
 
10                business in the State and selling the
 
11                manufacturer's or producer's products for delivery
 
12                outside of the State (for example, consigned to a
 
13                mainland purchaser via common carrier f.o.b.
 
14                Honolulu), shall be required to pay the tax
 
15                imposed in this chapter for the privilege of so
 
16                selling the products, and the value or gross
 
17                proceeds of sales of the products shall be
 
18                included only in determining the measure of the
 
19                tax imposed upon the manufacturer or producer.
 
20           (D)  When a manufacturer or producer, engaged in such
 
21                business in the State, also is engaged in selling
 
22                the manufacturer's or producer's products in the
 
23                State at wholesale, retail, or in any other
 

 
Page 12                                                    741
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1                manner, the tax for the privilege of engaging in
 
 2                the business of selling the products in the State
 
 3                shall apply to the manufacturer or producer as
 
 4                well as the tax for the privilege of manufacturing
 
 5                or producing in the State, and the manufacturer or
 
 6                producer shall make the returns of the gross
 
 7                proceeds of the wholesale, retail, or other sales
 
 8                required for the privilege of selling in the
 
 9                State, as well as making the returns of the value
 
10                or gross proceeds of sales of the products
 
11                required for the privilege of manufacturing or
 
12                producing in the State.  The manufacturer or
 
13                producer shall pay the tax imposed in this chapter
 
14                for the privilege of selling its products in the
 
15                State, and the value or gross proceeds of sales of
 
16                the products, thus subjected to tax, may be
 
17                deducted insofar as duplicated as to the same
 
18                products by the measure of the tax upon the
 
19                manufacturer or producer for the privilege of
 
20                manufacturing or producing in the State; except
 
21                that no producer of agricultural products who
 
22                sells the products to a purchaser who will process
 
23                the products outside the State shall be required
 

 
Page 13                                                    741
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1                to pay the tax imposed in this chapter for the
 
 2                privilege of producing or selling those products.
 
 3           (E)  A taxpayer selling to a federal cost-plus
 
 4                contractor may make the election provided for by
 
 5                paragraph (3)(C), and in that case the tax shall
 
 6                be computed pursuant to the election,
 
 7                notwithstanding this paragraph or paragraph (1) to
 
 8                the contrary.
 
 9           (F)  The department, by rule, may provide that a seller
 
10                may take from the purchaser of tangible personal
 
11                property a certificate, in a form as the
 
12                department shall prescribe, certifying that the
 
13                sale is a sale at wholesale.  If the certificate
 
14                is so provided for by rule of the department:
 
15                (i)  Any purchaser who furnishes a certificate
 
16                     shall be obligated to pay to the seller, upon
 
17                     demand, if the sale in fact is not at
 
18                     wholesale, the amount of the additional tax
 
19                     [which] that by reason thereof is imposed
 
20                     upon the seller; and
 
21               (ii)  The absence of a certificate, unless the
 
22                     sales of the business are exclusively at
 
23                     wholesale, in itself shall give rise to the
 

 
Page 14                                                    741
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1                     presumption that the sale is not at
 
 2                     wholesale.
 
 3      (3)  Tax upon contractors.
 
 4           (A)  Upon every person engaging or continuing within
 
 5                the State in the business of contracting, the tax
 
 6                shall be equal to four per cent of the gross
 
 7                income of the business; provided that insofar as
 
 8                the business of contracting is taxed by section
 
 9                237-16, which relates to certain retailing, the
 
10                tax shall be that levied by section 237-16.
 
11           (B)  In computing the tax levied under this paragraph
 
12                or section 237-16, there shall be deducted from
 
13                the gross income of the taxpayer so much thereof
 
14                as has been included in the measure of the tax
 
15                levied under subparagraph (A) or section 237-16,
 
16                on:
 
17                (i)  Another taxpayer who is a contractor, as
 
18                     defined in section 237-6;
 
19               (ii)  A specialty contractor, duly licensed by the
 
20                     department of commerce and consumer affairs
 
21                     pursuant to section 444-9, in respect of the
 
22                     specialty contractor's business; or
 

 
 
 
Page 15                                                    741
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1              (iii)  A specialty contractor who is not licensed by
 
 2                     the department of commerce and consumer
 
 3                     affairs pursuant to section 444-9, but who
 
 4                     performs contracting activities on federal
 
 5                     military installations and nowhere else in
 
 6                     this State;
 
 7              but any person claiming a deduction under this
 
 8              paragraph shall be required to show in the person's
 
 9              return the name and the general excise number of the
 
10              person paying the tax on the amount deducted by the
 
11              person.
 
12           (C)  In computing the tax levied under this paragraph
 
13                against any federal cost-plus contractor, there
 
14                shall be excluded from the gross income of the
 
15                contractor so much thereof as fulfills the
 
16                following requirements:
 
17                (i)  The gross income exempted shall constitute
 
18                     reimbursement of costs incurred for
 
19                     materials, plant, or equipment purchased from
 
20                     a taxpayer licensed under this chapter, not
 
21                     exceeding the gross proceeds of sale of the
 
22                     taxpayer on account of the transaction; and
 

 
 
 
Page 16                                                    741
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1               (ii)  The taxpayer making the sale shall have
 
 2                     certified to the department that the taxpayer
 
 3                     is taxable with respect to the gross proceeds
 
 4                     of the sale, and that the taxpayer elects to
 
 5                     have the tax on gross income computed the
 
 6                     same as upon a sale to the state government.
 
 7           (D)  A person who, as a business or as a part of a
 
 8                business in which the person is engaged, erects,
 
 9                constructs, or improves any building or structure,
 
10                of any kind or description, or makes, constructs,
 
11                or improves any road, street, sidewalk, sewer, or
 
12                water system, or other improvements on land held
 
13                by the person (whether held as a leasehold, fee
 
14                simple, or otherwise), upon the sale or other
 
15                disposition of the land or improvements, even if
 
16                the work was not done pursuant to a contract,
 
17                shall be liable to the same tax as if engaged in
 
18                the business of contracting, unless the person
 
19                shows that at the time the person was engaged in
 
20                making the improvements it was, and for the period
 
21                of at least one year after completion of the
 
22                building, structure, or other improvements, it
 
23                continued to be the person's purpose to hold and
 

 
Page 17                                                    741
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1                not sell or otherwise dispose of the land or
 
 2                improvements.  The tax in respect of the
 
 3                improvements shall be measured by the amount of
 
 4                the proceeds of the sale or other disposition that
 
 5                is attributable to the erection, construction, or
 
 6                improvement of such building or structure, or the
 
 7                making, constructing, or improving of the road,
 
 8                street, sidewalk, sewer, or water system, or other
 
 9                improvements.  The measure of tax in respect of
 
10                the improvements shall not exceed the amount
 
11                [which] that would have been taxable had the work
 
12                been performed by another, subject as in other
 
13                cases to the deductions allowed by subparagraph
 
14                (B).  Upon the election of the taxpayer, this
 
15                paragraph may be applied notwithstanding the
 
16                improvements were not made by the taxpayer, or
 
17                were not made as a business or as a part of a
 
18                business, or were made with the intention of
 
19                holding the same.  However, this paragraph shall
 
20                not apply in respect of any proceeds that
 
21                constitute or are in the nature of rent; all such
 
22                gross income shall be taxable under paragraph
 
23                (10); provided that insofar as the business of
 

 
Page 18                                                    741
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1                renting or leasing real property under a lease is
 
 2                taxed under section 237-16.5, the tax shall be
 
 3                levied by section 237-16.5.
 
 4      (4)  Tax upon theaters, amusements, radio broadcasting
 
 5           stations, etc.  Upon every person engaging or
 
 6           continuing within the State in the business of
 
 7           operating a theater, opera house, moving picture show,
 
 8           vaudeville, amusement park, dance hall, skating rink,
 
 9           radio broadcasting station, or any other place at which
 
10           amusements are offered to the public, the tax shall be
 
11           equal to four per cent of the gross income of the
 
12           business.
 
13      (5)  Tax upon sales representatives, etc.  Upon every person
 
14           classified as a representative or purchasing agent
 
15           under section 237-1, engaging or continuing within the
 
16           State in the business of performing services for
 
17           another, other than as an employee, there is likewise
 
18           hereby levied and shall be assessed and collected a tax
 
19           equal to four per cent of the commissions and other
 
20           compensation attributable to the services so rendered
 
21           by the person.
 
22      (6)  Tax on service business.  Upon every person engaging or
 
23           continuing within the State in any service business or
 
24           calling not otherwise specifically taxed under this
 

 
Page 19                                                    741
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1           chapter, there is likewise hereby levied and shall be
 
 2           assessed and collected a tax equal to four per cent of
 
 3           the gross income of the business; provided that where
 
 4           any person engaging or continuing within the State in
 
 5           any service business or calling renders those services
 
 6           upon the order of or at the request of another taxpayer
 
 7           who is engaged in the service business and who, in
 
 8           fact, acts as or acts in the nature of an intermediary
 
 9           between the person rendering those services and the
 
10           ultimate recipient of the benefits of those services,
 
11           so much of the gross income as is received by the
 
12           person rendering the services shall be subjected to the
 
13           tax at the rate of one-half of one per cent and all of
 
14           the gross income received by the intermediary from the
 
15           principal shall be subjected to a tax at the rate of
 
16           four per cent; and provided that where any person is
 
17           engaged in the business of selling interstate or
 
18           foreign common carrier telecommunication services
 
19           within and without the State, the tax shall be imposed
 
20           on that portion of gross income received by a person
 
21           from service [which] that is originated or terminated
 
22           in this State and is charged to a telephone number,
 
23           customer, or account in this State notwithstanding any
 

 
Page 20                                                    741
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1           other state law (except for the exemption under section
 
 2           237-23(a)(1)) to the contrary.  If, under the
 
 3           Constitution and laws of the United States, the entire
 
 4           gross income as determined under this paragraph of a
 
 5           business selling interstate or foreign common carrier
 
 6           telecommunication services cannot be included in the
 
 7           measure of the tax, the gross income shall be
 
 8           apportioned as provided in section 237-21; provided
 
 9           that the apportionment factor and formula shall be the
 
10           same for all persons providing those services in the
 
11           State.
 
12      (7)  Tax on insurance solicitors and agents.  Upon every
 
13           person engaged as a licensed solicitor, general agent,
 
14           or subagent pursuant to chapter 431, there is hereby
 
15           levied and shall be assessed and collected a tax equal
 
16           to .15 per cent of the commissions due to that
 
17           activity.
 
18      (8)  Professions.  Upon every person engaging or continuing
 
19           within the State in the practice of a profession,
 
20           including those expounding the religious doctrines of
 
21           any church, there is likewise hereby levied and shall
 
22           be assessed and collected a tax equal to four per cent
 
23           of the gross income on the practice or exposition.
 

 
Page 21                                                    741
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      (9)  Tax on receipts of sugar benefit payments.  Upon the
 
 2           amounts received from the United States government by
 
 3           any producer of sugar (or the producer's legal
 
 4           representative or heirs), as defined under and by
 
 5           virtue of the Sugar Act of 1948, as amended, or other
 
 6           Acts of the Congress of the United States relating
 
 7           thereto, there is hereby levied a tax of one-half of
 
 8           one per cent of the gross amount received[,]; provided
 
 9           that the tax levied hereunder on any amount so received
 
10           and actually disbursed to another by a producer in the
 
11           form of a benefit payment shall be paid by the person
 
12           or persons to whom the amount is actually disbursed,
 
13           and the producer actually making a benefit payment to
 
14           another shall be entitled to claim on the producer's
 
15           return a deduction from the gross amount taxable
 
16           hereunder in the sum of the amount so disbursed.  The
 
17           amounts taxed under this paragraph shall not be taxable
 
18           under any other paragraph, subsection, or section of
 
19           this chapter.
 
20     (10)  Tax on other business.  Upon every person engaging or
 
21           continuing within the State in any business, trade,
 
22           activity, occupation, or calling not included in the
 
23           preceding paragraphs or any other provisions of this
 

 
Page 22                                                    741
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1           chapter, there is likewise hereby levied and shall be
 
 2           assessed and collected, a tax equal to four per cent of
 
 3           the gross income thereof.  In addition, the rate
 
 4           prescribed by this paragraph shall apply to a business
 
 5           taxable under one or more of the preceding paragraphs
 
 6           or other provisions of this chapter, as to any gross
 
 7           income thereof not taxed thereunder as gross income or
 
 8           gross proceeds of sales or by taxing an equivalent
 
 9           value of products, unless specifically exempted."
 
10                             PART II.
 
11      SECTION 6.  As a means of encouraging businesses to relocate
 
12 to Hawaii, part II exempts from the general excise tax all
 
13 services exported out of the State.
 
14      SECTION 7.  Chapter 237, Hawaii Revised Statutes, is amended
 
15 by adding a new section to be appropriately designated and to
 
16 read as follows:
 
17      "237-      Exemption for services exported out of state.
 
18 There shall be exempted from, and excluded from the measure of,
 
19 taxes imposed by this chapter all of the value or gross proceeds
 
20 derived from services performed in the State by a Hawaii service
 
21 provider for an out-of-state customer where:
 
22      (1)  The services performed in the State are exported and
 
23           resold, consumed, or used wholly outside the State; and
 

 
Page 23                                                    741
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      (2)  The gross income derived from the services performed
 
 2           would otherwise be subject to taxation at the highest
 
 3           rate under section 237-13(6) and (8), or equivalent
 
 4           sections imposing the tax at the highest rate upon the
 
 5           gross income derived from the rendering of services
 
 6           under this chapter.
 
 7 For the purposes of this section, the seller or person rendering
 
 8 the services exported and resold, consumed or used outside the
 
 9 State shall take from the purchaser, a certificate (or an
 
10 equivalent), in the form as the department shall prescribe,
 
11 certifying that the service purchased is to be resold or
 
12 otherwise consumed or used outside the State.  Any purchaser who
 
13 furnishes this certificate (or an equivalent specified by the
 
14 department) shall be obligated to pay the seller or person
 
15 rendering the services, upon demand, if the service purchased is
 
16 not resold or otherwise consumed or used outside the State, the
 
17 amount of the additional tax which by reason thereof is imposed
 
18 upon the seller or person rendering the service."
 
19      SECTION 8.  Section 237-29.6, Hawaii Revised Statutes, is
 
20 repealed.
 
21      ["[237-29.6]  Exemption of certain computer services.(a)
 
22 There shall be exempted from, and excluded from the measure of,
 
23 the taxes imposed by this chapter all of the gross proceeds
 

 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 arising from technical services necessary for the production and
 
 2 sale of computer software where that software is shipped or
 
 3 transmitted by the provider of technical services to a customer
 
 4 at a point outside the State for use outside the State. 
 
 5      As used in this section: 
 
 6      "Computer software" means a set of computer programs,
 
 7 procedures, or associated documentation concerned with the
 
 8 operation and function of a computer system, and includes both
 
 9 systems and application programs and subdivisions, such as
 
10 assemblers, compilers, routines, generators, and utility
 
11 programs.
 
12      "Technical services" include the development, design,
 
13 modification, and programming of computer software.
 
14      (b)  For the purposes of this section, the provider of
 
15 technical services shall take from the purchaser a certificate,
 
16 in such form as the department shall prescribe, certifying that
 
17 the software purchased is to be used outside the State.  Any
 
18 purchaser who shall furnish such a certificate shall be obligated
 
19 to pay to the provider of technical services, upon demand, if the
 
20 software purchased is used or sold by the purchaser in the State,
 
21 the amount of the additional tax which by reason of such use or
 
22 sale is imposed upon the provider of technical services."]
 

 
 
 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      SECTION 9. Statutory material to be repealed is bracketed.
 
 2 New statutory material is underscored.
 
 3      SECTION 10.  This Act shall take effect upon its approval;
 
 4 provided that:
 
 5      (1)  Part I shall apply to gross receipts received on or
 
 6           after January 1, 2000; and
 
 7      (2)  Part II shall apply to gross proceeds or gross income
 
 8           received after June 30, 1999.