REPORT TITLE:
General Excise Tax


DESCRIPTION:
Exempts from the general excise tax all services sold or exported
out of State.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        
THE SENATE                              S.B. NO.           503
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT
RELATING TO THE GENERAL EXCISE TAX.



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

 1      SECTION 1.  Chapter 237, Hawaii Revised Statutes, is amended
 
 2 by adding two new sections to be appropriately designated and to
 
 3 read as follows:
 
 4      "237-A  Treatment of gross income or gross proceeds
 
 5 received from exported services.  (a)  A Hawaii service provider
 
 6 who provides exported services to a foreign customer under a
 
 7 written agreement entered into after June 30, 1999, may deduct
 
 8 from its taxable gross income or gross proceeds the amount of the
 
 9 gross income or gross proceeds paid by the foreign customer for
 
10 the Hawaii service provider's exported services.
 
11      (b)  A Hawaii service provider shall provide to the
 
12 department:
 
13      (1)  The name of the foreign customer receiving services;
 
14      (2)  The tax identification number and tax jurisdiction of
 
15           the foreign customer; and
 
16      (3)  The value of the services applicable for deduction.
 
17      (c)  As used in this section:
 
18      "Exported services" means services provided to a foreign
 
19 customer by a Hawaii service provider under a written agreement
 
20 entered into after June 30, 1999, for use or consumption outside
 

 
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 1 of Hawaii, but does not include:
 
 2      (1)  Telecommunication services;
 
 3      (2)  Meals, lodging, and tourism-related services described
 
 4           in section 237-18(f) provided to a foreign customer
 
 5           while present in Hawaii; or 
 
 6      (3)  Any other services provided to a foreign customer who
 
 7           receives more than a de minimis portion of the services
 
 8           in Hawaii.
 
 9      "Foreign customer" means a nonresident person who:
 
10      (1)  Is not subject to this chapter;
 
11      (2)  If an individual, has not been physically present in
 
12           the State for more than thirty consecutive days in the
 
13           six-month period prior to entering into a written
 
14           exported services agreement with a Hawaii service
 
15           provider; and
 
16      (3)  Is the recipient of the exported services provided by
 
17           the Hawaii service provider.
 
18      "Hawaii service provider" means a person that is subject to
 
19 this chapter and who is engaged in a service business or calling
 
20 as defined under section 237-7.
 
21      237-B  Treatment of gross income or gross proceeds received
 
22 for resold exported services.  (a)  A Hawaii service provider
 
23 (the original provider) who provides exported services through
 

 
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                                     S.B. NO.           503
                                                        
                                                        

 
 1 another Hawaii service provider (the reselling provider) to a
 
 2 foreign customer under section 237-A, may deduct from its taxable
 
 3 gross income or gross proceeds the amount of the gross income or
 
 4 gross proceeds paid by the foreign customer through the reselling
 
 5 provider for the original provider's exported services.
 
 6      (b)  A Hawaii service provider shall provide to the
 
 7 department:
 
 8      (1)  The name of the foreign customer receiving services;
 
 9      (2)  The tax identification number and tax jurisdiction of
 
10           the foreign customer; and
 
11      (3)  The value of the services applicable for deduction.
 
12      (c)  "Exported services", "foreign customer", and "Hawaii
 
13 service provider" have the meanings defined by section 237-A."
 
14      SECTION 2.  Section 237-29.6, Hawaii Revised Statutes, is
 
15 repealed.
 
16      ["[237-29.6]  Exemption of certain computer services.(a)
 
17 There shall be exempted from, and excluded from the measure of,
 
18 the taxes imposed by this chapter all of the gross proceeds
 
19 arising from technical services necessary for the production and
 
20 sale of computer software where that software is shipped or
 
21 transmitted by the provider of technical services to a customer
 
22 at a point outside the State for use outside the State.
 
23      As used in this section:
 

 
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 1      "Computer software" means a set of computer programs,
 
 2 procedures, or associated documentation concerned with the
 
 3 operation and function of a computer system, and includes both
 
 4 systems and application programs and subdivisions, such as
 
 5 assemblers, compilers, routines, generators, and utility
 
 6 programs.
 
 7      "Technical services" include the development, design,
 
 8 modification, and programming of computer software.
 
 9      (b)  For the purposes of this section, the provider of
 
10 technical services shall take from the purchaser a certificate,
 
11 in such form as the department shall prescribe, certifying that
 
12 the software purchased is to be used outside the State.  Any
 
13 purchaser who shall furnish such a certificate shall be obligated
 
14 to pay to the provider of technical services, upon demand, if the
 
15 software purchased is used or sold by the purchaser in the State,
 
16 the amount of the additional tax which by reason of such use or
 
17 sale is imposed upon the provider of technical services."]
 
18      SECTION  3.  In codifying the new sections added by
 
19 section 1 of this Act, the revisor of statutes shall substitute
 
20 appropriate section numbers for the letters used in designating
 
21 the new sections in this Act.
 
22      SECTION 4.  Statutory material to be repealed is bracketed.
 
23 New statutory material is underscored.
 

 
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                                     S.B. NO.           503
                                                        
                                                        

 
 1      SECTION 5.  This Act shall take effect on July 1, 1999, and
 
 2 shall apply to gross proceeds or gross income received after
 
 3 June 30, 1999.
 
 4 
 
 5                           INTRODUCED BY:  _______________________