REPORT TITLE: 
Tax Restructuring


DESCRIPTION:
Restructures the tax system over a five-year period.
Establishes a retail sales tax on tangible personal property of
undecided rate to take effect over four years.  Exempts food for
home consumption and medical and health items from the retail
sales tax.  Repeals the income and general excise taxes over
four years.  Requires the state departments and agencies to
analyze methods by which they can provide their own funding by
charging fees for services and goods.  (HB188 HD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        188
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 legislature finds that new ideas and actions
 
 2 are needed to propel Hawaii into the twenty-first century.  Of
 
 3 primary concern is the strength of Hawaii's economy and its
 
 4 overall effect on Hawaii's people.  The health and well-being of
 
 5 Hawaii's people depend on the performance and soundness of our
 
 6 economy.
 
 7      To help revitalize and expand the economy, a two-pronged
 
 8 approach is needed.  First, Hawaii's tax system needs to be
 
 9 overhauled to provide a more business friendly environment.
 
10 Simultaneously, government services and functions must become
 
11 more efficient, and, where applicable, self-sufficient.
 
12      NEW TAX STRUCTURE
 
13      The legislature finds that the general excise tax
 
14 discourages business in Hawaii.  The general excise tax, which
 
15 directly taxes businesses, is a tax on the production of goods
 
16 and services.  It therefore directly increases the cost of doing
 
17 business in the state, putting the burden directly on business.
 
18 It is a tax which is based merely on income without regard to
 
19 profit or loss, value added to a product, or taxes already paid.
 

 
Page 2                                                     188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 When a business experiences a loss, this tax must still be paid.
 
 2      The general excise tax has also been criticized for the
 
 3 pyramiding effect which adds hidden taxes to the final cost of an
 
 4 item.  Although the final tax that a consumer sees on an item is
 
 5 four per cent on the cost of that item, two types of pyramiding
 
 6 add dramatically to the actual calculated tax cost.  One is the
 
 7 possibility of taxes being paid on the item during its creation
 
 8 which might be taxed at the four per cent rate or at the half per
 
 9 cent wholesale rate.  These costs might also include services
 
10 taxed at the four per cent rate.
 
11      The second type of pyramiding is the additional tax on the
 
12 tax paid by the consumer.  The tax must be paid by the seller but
 
13 may be passed on to the consumer.  When this happens, the
 
14 consumer pays tax on the tax which is passed on, or 4.166 per
 
15 cent on an item taxed at four per cent.
 
16      The general excise tax puts a particular burden on the tax
 
17 on services because of a lack of an equivalent wholesale rate as
 
18 provided for sales of goods.  Therefore, since all services are
 
19 considered a final sale, services which are provided to an item
 
20 in preparation for sale, are also taxed at the four per cent rate
 
21 increasing the pyramiding effect.
 
22      Another difficulty caused by pyramiding is that projecting
 
23 the exact amount of taxes on any one product is nearly
 

 
Page 3                                                     188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 impossible, creating a wide disparity in the actual taxes paid on
 
 2 specific goods and services, a disparity of which the consumer
 
 3 remains totally unaware.
 
 4      Income tax, even though used in most taxing jurisdictions,
 
 5 is a tax that is applied unevenly and can be overburdensome to
 
 6 some people in certain situations.  In addition, income tax is
 
 7 paid solely by Hawaii's residents.  A sales tax would be paid in
 
 8 large part by tourists and business visitors and Hawaii's
 
 9 residents would have the ability to choose to buy only those
 
10 products and services they need, thereby having the ability to
 
11 limit their tax burden.  No such choice is available for payment
 
12 of income tax.
 
13      Business in Hawaii would be better served if a sales tax
 
14 were substituted for the general excise and income taxes.  A
 
15 sales tax would not pose the pyramiding problems of the general
 
16 excise tax, and it is a well-understood tax used in an
 
17 overwhelming majority of taxing jurisdictions in the United
 
18 States.
 
19      A sales tax would provide a more direct, profit-related tax
 
20 with a large base, but a base more equitably distributed,
 
21 applying to those who actually gain from the product or service
 
22 being taxed.
 

 
 
 
Page 4                                                     188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      GOVERNMENT EFFICIENCY
 
 2      The legislature finds that the state continues to be faced
 
 3 with fiscal constraints which demand restructuring of state
 
 4 government to promote more efficiency and cost effectiveness in
 
 5 the delivery of public services.
 
 6      Due to the current fiscal crisis and the need for government
 
 7 agencies to adapt to the ever-changing needs and demands of the
 
 8 public they serve, state agencies must revise and retool their
 
 9 concepts of public service.
 
10      Four years ago, the legislature began to analyze specific
 
11 and broad steps that could be taken to reorganize government to
 
12 cut costs and make it more efficient.  A few inroads were made
 
13 but greater progress is needed.  For example, a few programs such
 
14 as the Animal Quarantine Program have been made self-sufficient.
 
15 This program now runs solely on fees charged to persons using the
 
16 facility.  
 
17      More similar actions must be taken and on a larger scale.
 
18 Certain departments and agencies, which currently depend on state
 
19 funding, must look to the possibility of changing their
 
20 operations to run on fees for services.  Two departments which
 
21 could possibly work toward that goal are the Department of
 
22 Commerce and Consumer Affairs and the Department of
 
23 Transportation.  Other departments such as the Departments of
 

 
Page 5                                                     188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 Education and Public Safety would have to remain strictly on
 
 2 public funding.
 
 3      The purpose of Parts I to III of this Act is to replace the
 
 4 revenues produced by the income and general excise taxes with
 
 5 revenues produced by a new retail sales tax.  
 
 6      The purpose of Part IV of this Act is to address state
 
 7 government reorganize to provide for more self-sufficiency within
 
 8 departments and agencies, thereby promoting government-wide
 
 9 efficiency.
 
10                         PART I. SALES TAX
 
11      SECTION 2.  The purpose of this Part is to repeal the
 
12 general excise tax provisions and replace them with a new chapter
 
13 establishing a retail sales tax.
 
14      SECTION 3.  The Hawaii Revised Statutes is amended by adding
 
15 a new chapter to be appropriately designated and to read as
 
16 follows:
 
17                             "CHAPTER
 
18                         RETAIL SALES TAX
 
19                            DEFINITIONS
 
20         -1 Definitions.  When used in this chapter, unless
 
21 otherwise required by the context, the definitions contained in
 
22 this section shall govern.
 

 
 
 
Page 6                                                     188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      "Gross receipts" means the total sales price received by
 
 2 vendors as a consideration for retails sales.
 
 3      "Penalty" or "penalties", when used in connection with the
 
 4 additions to the tax imposed for delinquency in payment, includes
 
 5 interest as well.
 
 6      "Person" or "company" includes every individual,
 
 7 partnership, society, unincorporated association, joint venture,
 
 8 group, hui, joint stock company, corporation, trustee, personal
 
 9 representative, trust estate, decedent's estate, trust, trustee
 
10 in bankruptcy, or other entity, whether such persons are doing
 
11 business for themselves or in a fiduciary capacity, and whether
 
12 the individuals are residents or nonresidents of the State, and
 
13 whether the corporation or other association is created or
 
14 organized under the laws of the State or of another jurisdiction.
 
15 Any person who has in the person's possession, for sale in the
 
16 State, the property of a nonresident owner, other than as an
 
17 employee of such owner, shall be deemed the seller of the
 
18 property, when sold.
 
19      "Purchaser" means a person who purchases tangible personal
 
20 property from the retail sale of which are taxable under this
 
21 chapter and includes a buyer, vendee, lessee, licensee, or
 
22 grantee.
 

 
 
 
Page 7                                                     188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      "Sale" or "sales" includes the transfer of title or
 
 2 possession, or both, exchange, barter, lease, rental, conditional
 
 3 or otherwise, of tangible personal property for a consideration,
 
 4 in any manner, or by any means whatsoever.
 
 5      "Sale at retail" or "retail sale" means a sale of tangible
 
 6 personal property for any purpose other than resale in the
 
 7 regular course of business.
 
 8      "Sales price" means the total amount paid by a purchaser to
 
 9 a vendor as consideration for a retail sale, valued in money or
 
10 otherwise.
 
11      "Taxpayer" means any person liable for any tax hereunder.
 
12      "Vendor" means a retailer or other person selling tangible
 
13 personal property of a kind the gross receipts from the retail
 
14 sale of which are required to be included in the measure of the
 
15 tax imposed by this chapter.
 
16                      PERMIT; TAX; EXEMPTIONS
 
17         -2  Permit for retail sales.(a)  Before any person can
 
18 make sales at retail within the State the person shall obtain a
 
19 retail sales permit from the department of taxation, upon a one-
 
20 time payment of the sum of $20.  The permit shall be issued on
 
21 the condition that the person shall collect and pay the taxes
 
22 accruing to the State under this chapter.  The permit shall not
 
23 be transferable and shall be valid only for the person in whose
 

 
Page 8                                                     188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 name it is issued.  The permit may be inspected and examined, and
 
 2 shall at all times be conspicuously displayed at the place for
 
 3 which it is issued.
 
 4      (b)  Permits and applications therefor shall be in such form
 
 5 as the department shall prescribe.  The permit provided for by
 
 6 this section shall be effective until canceled in writing.  Any
 
 7 application for the reissuance of a previously canceled permit
 
 8 identification number shall be regarded as a new permit
 
 9 application and subject to the payment of the one-time permit fee
 
10 of $20.  The director may revoke or cancel any permit issued
 
11 under this chapter for cause as provided by rules adopted
 
12 pursuant to chapter 91.
 
13      (c)  If the permit fee is paid, the department shall not
 
14 refuse to issue a license or revoke or cancel a permit for the
 
15 exercise of a privilege protected by the First Amendment of the
 
16 Constitution of the United States, or for the carrying on of
 
17 interstate or foreign commerce, or for any privilege the exercise
 
18 of which, under the Constitution and laws of the United States,
 
19 cannot be restrained on account of nonpayment of taxes, nor shall
 
20 section    -18 be invoked to restrain the exercise of such a
 
21 privilege, or the carrying on of such commerce.
 
22         -3  Imposition and rate of tax.(a)  There is hereby
 
23 imposed a retail sales tax on every sale at retail within the
 

 
Page 9                                                     188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 State of tangible personal property.  The rate of tax shall be
 
 2          of the sales price.
 
 3      (b)  The tax hereby imposed shall be paid by the purchaser
 
 4 to the vendor, and each vendor shall add to the sales price and
 
 5 shall collect from the purchaser the full amount of the tax
 
 6 imposed by this chapter, or an amount as nearly as possible or
 
 7 practical.  The tax shall be a debt from the purchaser to the
 
 8 vendor, when so added to the sales price, and shall be
 
 9 recoverable by law.
 
10      (c)  Upon each sale of tangible personal property subject to
 
11 the provisions of this chapter, the amount of tax collected by
 
12 the vendor from the purchaser shall be stated and charged
 
13 separately from the sales price on any record made at the time of
 
14 the sale, or on any evidence of sale issued; provided the retail
 
15 sales tax of liquor and cigarette and tobacco do not need to be
 
16 stated separately.
 
17         -4  Sales exempt from tax.(a)  This chapter shall not
 
18 apply to the sales of food products for home consumption.
 
19      (1)  "Food products" includes:
 
20           (A)  Cereals and cereal products, flour and flour
 
21                products, milk and milk products, including ice
 
22                cream, oleomargarine, meat and meat products, fish
 
23                and fish products, eggs and egg products,
 

 
Page 10                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1                vegetables and vegetable products, fruit and fruit
 
 2                products, soft drinks, herbs, spices, salt, sugar
 
 3                and sugar products, candy, and confectionery; 
 
 4           (B)  Coffee and coffee substitutes, tea, cocoa and
 
 5                cocoa products; and
 
 6           (C)  Ice when used for household consumption. 
 
 7      (2)  "Food products" does not include:
 
 8           (A)  Alcoholic beverages subject to chapter 244D;
 
 9           (B)  Meals consisting of any of the items in paragraph
 
10                (1) for consumption on or off the premises where
 
11                sold.
 
12      (3)  For the purposes of this chapter:
 
13           (A)  "Meals" means any food or beverage, or both,
 
14                prepared for human consumption and provided by a
 
15                restaurant, where the food or beverage is intended
 
16                for consumption on or off the restaurant premises,
 
17                and includes food or beverages sold on a "take
 
18                out" or "to go" basis, whether or not they are
 
19                wrapped or packaged and wether or not they are
 
20                taken from the premises of the restaurant.
 
21           (B)  "Restaurant" means any eating establishment where
 
22                food products, or beverages are provided and for
 
23                which a charge is made, including a cafe, lunch
 

 
Page 11                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1                counter, private or social club, cocktail lounge,
 
 2                hotel dining room, catering business, tavern,
 
 3                diner, snack bar, dining room, vending machine,
 
 4                and any other place or establishment where food or
 
 5                beverages are provided whether stationary or
 
 6                mobile, or temporary or permanent.
 
 7      (c)  This chapter shall not apply to sales of medicine,
 
 8 insulin needles and insulin syringes on prescriptions of licensed
 
 9 physicians and sales of insulin, oxygen, blood or blood plasma,
 
10 artificial devices individually designed and constructed solely
 
11 for the use of a particular person as to become a brace support,
 
12 support, supplement, correction or substitution for the bodily
 
13 structure including the extremities of the individual, sales of
 
14 artificial limbs, artificial eyes, hearing aids and other
 
15 equipment worn as a correction or substitution for any
 
16 functioning portion of the body, sales of artificial teeth by a
 
17 dentist and the materials used by a dentist in dental treatment,
 
18 sales of eyeglasses, when especially designed or prescribed by an
 
19 ophthalmologist, oculist, or optometrist for the personal use of
 
20 the owner or purchaser, sales of crutches and wheel chairs, the
 
21 rental, sales, and repairs of kidney dialysis machines, feeding
 
22 devices, suction machines, oxygen concentrators, oxygen
 
23 regulators, oxygen humidifiers, oxygen masks, life sustaining
 

 
Page 12                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 resuscitators, incubators, heart pacemakers, canes, all types of
 
 2 hospital beds for home use, tripod canes, breast prosthesis, and
 
 3 patient lifts when prescribed by a licensed physician. 
 
 4                       RETURNS AND PAYMENTS
 
 5         -5 Monthly, quarterly, or semiannual return,
 
 6 computation of tax, payment.(a)  The taxes levied hereunder
 
 7 shall be payable in monthly installments on or before the last
 
 8 day of the calendar month following the month in which they
 
 9 accrue.  The taxpayer, on or before the last day of the calendar
 
10 month following the month in which the taxes accrue, shall make
 
11 out and sign a return of the installment of tax for which the
 
12 taxpayer is liable for the preceding month and transmit the same,
 
13 together with a remittance, in the form required by section
 
14    -6, for the amount of the tax, to the office of the department
 
15 of taxation in the appropriate district hereinafter designated.
 
16      (b)  Notwithstanding subsection (a), the director of
 
17 taxation, for good cause, may permit a taxpayer to file the
 
18 taxpayer's return required under this section and make payments
 
19 thereon:
 
20      (1)  On a quarterly basis during the calendar or fiscal
 
21           year, the return and payment to be made on or before
 
22           the last day of the calendar month after the close of
 
23           each quarter, to wit:  for calendar year taxpayers, on
 

 
Page 13                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1           or before April 30, July 31, October 31, and January 31
 
 2           or, for fiscal year taxpayers, on or before the last
 
 3           day of the fourth month, seventh month, and tenth month
 
 4           following the beginning of the fiscal year and on or
 
 5           before the last day of the month following the close of
 
 6           the fiscal year; provided that the director is
 
 7           satisfied that the grant of the permit will not unduly
 
 8           jeopardize the collection of the taxes due thereon and
 
 9           the taxpayer's total tax liability for the calendar or
 
10           fiscal year under this chapter will not exceed $2,000;
 
11           or
 
12      (2)  On a semiannual basis during the calendar or fiscal
 
13           year, the return and payment to be made on or before
 
14           the last day of the calendar month after the close of
 
15           each six-month period, to wit:  for calendar year
 
16           taxpayers, on July 31 and January 31 or, for fiscal
 
17           year taxpayers, on or before the last day of the
 
18           seventh month following the beginning of the fiscal
 
19           year and on or before the last day of the month
 
20           following the close of the fiscal year; provided that
 
21           the director is satisfied that the grant of the permit
 
22           will not unduly jeopardize the collection of the taxes
 
23           due thereon and the taxpayer's total tax liability for
 

 
Page 14                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1           the calendar or fiscal year under this chapter will not
 
 2           exceed $1,000.
 
 3      The director, for good cause, may permit a taxpayer to make
 
 4 monthly payments based on the taxpayer's estimated quarterly or
 
 5 semiannual liability, provided the taxpayer files a
 
 6 reconciliation return at the end of each quarter or at the end of
 
 7 each six-month period during the calendar or fiscal year, as
 
 8 provided in this section.
 
 9      (c)  If a taxpayer filing the taxpayer's return on a
 
10 quarterly or semiannual basis, as provided in this section,
 
11 becomes delinquent in either the filing of the taxpayer's return
 
12 or the payment of the taxes due thereon, or if the liability of a
 
13 taxpayer, who possesses a permit to file the taxpayer's return
 
14 and to make payments on a semiannual basis exceeds $1,000 in
 
15 general excise taxes during the calendar year or exceeds $2,000
 
16 in general excise taxes during the calendar year if making
 
17 payments on a quarterly basis, or if the director determines that
 
18 any such quarterly or semiannual filing of return would unduly
 
19 jeopardize the proper administration of this chapter, including
 
20 the assessment or collection of the general excise tax, the
 
21 director may, at any time, revoke a taxpayer's permit, in which
 
22 case the taxpayer will then be required to file the taxpayer's
 
23 return and make payments thereon as herein provided in subsection
 
24 (a).
 

 
Page 15                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      (d)  The director may adopt rules to carry out the purposes
 
 2 of this section.
 
 3      (e)  Section 232-2 does not apply to a monthly return.
 
 4       -6 Remittances.  All remittances of taxes imposed by
 
 5 this chapter shall be made by money, bank draft, check, cashier's
 
 6 check, money order, or certificate of deposit to the office of
 
 7 the department of taxation to which the return was transmitted.
 
 8 The department shall issue its receipts therefor to the taxpayer
 
 9 and shall pay the moneys into the state treasury as a state
 
10 realization, to be kept and accounted for as provided by law;
 
11 provided that the sum from all general excise tax revenues
 
12 realized by the State that represents the difference between
 
13 $90,000,000 and the proceeds from the sale of any general
 
14 obligation bonds authorized for that fiscal year for the purposes
 
15 of the state educational facilities improvement special fund
 
16 shall be deposited in the state treasury in each fiscal year to
 
17 the credit of the state educational facilities improvement
 
18 special fund; provided further that a sum, not to exceed
 
19 $5,000,000, from all retail sales tax revenues realized by the
 
20 State shall be deposited in the state treasury in each fiscal
 
21 year to the credit of the compound interest bond reserve fund.
 
22       -7 Penalties.  Penalties and interest shall be added to
 
23 and become a part of the tax, when and as provided by section
 
24 231-39.
 

 
Page 16                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1       -8 Annual return, payment of tax.  On or before the
 
 2 twentieth day of the fourth month following the close of the
 
 3 taxable year, each taxpayer shall make a return showing the gross
 
 4 receipts of sales and compute the amount of tax chargeable
 
 5 against the taxpayer in accordance with this chapter and deduct
 
 6 the amount of monthly payments (as hereinbefore provided), and
 
 7 transmit with the taxpayer's report a remittance in the form
 
 8 required by section    -6 covering the residue of the tax
 
 9 chargeable against the taxpayer to the district office of the
 
10 department of taxation hereinafter designated.  The return shall
 
11 be signed by the taxpayer, if made by an individual, or by the
 
12 president, vice-president, secretary, or treasurer of a
 
13 corporation, if made on behalf of a corporation.  If made on
 
14 behalf of a partnership, firm, society, unincorporated
 
15 association, group, hui, joint venture, joint stock company,
 
16 corporation, trust estate, decedent's estate, trust, or other
 
17 entity, any individual delegated by the entity shall sign the
 
18 same on behalf of the taxpayer.  If for any reason it is not
 
19 practicable for the individual taxpayer to sign the return, it
 
20 may be done by any duly authorized agent.  The department, for
 
21 good cause shown, may extend the time for making the return on
 
22 the application of any taxpayer and grant such reasonable
 
23 additional time within which to make the same as may, by it, be
 
24 deemed advisable. 
 

 
Page 17                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      Section 232-2 applies to the annual return, but not to a
 
 2 monthly return.
 
 3       -9 Filing of returns; disclosure of returns unlawful,
 
 4 penalty; destruction of returns.(a)  All monthly and annual
 
 5 returns shall be transmitted to the office of the taxation
 
 6 district in which the privilege upon which the tax accrued is
 
 7 exercised.  Where the privilege is exercised in more than one
 
 8 taxation district the returns shall be transmitted to the office
 
 9 of the first district.
 
10      (b)  All tax returns and return information required to be
 
11 filed under this chapter, and the report of any investigation of
 
12 the return or of the subject matter of the return, shall be
 
13 confidential.  It shall be unlawful for any person or any officer
 
14 or employee of the State to intentionally make known information
 
15 imparted by any tax return or return information filed pursuant
 
16 to this chapter, or any report of any investigation of the return
 
17 or of the subject matter of the return, or to wilfully permit any
 
18 such return, return information, or report so made, or any copy
 
19 thereof, to be seen or examined by any person; provided that for
 
20 tax purposes only the taxpayer, the taxpayer's authorized agent,
 
21 or persons with a material interest in the return, return
 
22 information, or report may examine them.  Unless otherwise
 
23 provided by law, persons with a material interest in the return,
 
24 return information, or report shall include:
 

 
Page 18                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      (1)  Trustees;
 
 2      (2)  Partners;
 
 3      (3)  Persons named in a board resolution or a one per cent
 
 4           shareholder in case of a corporate return;
 
 5      (4)  The person authorized to act for a corporation in
 
 6           dissolution;
 
 7      (5)  The shareholder of an S corporation;
 
 8      (6)  The personal representative, trustee, heir, or
 
 9           beneficiary of an estate or trust in case of the
 
10           estate's or decedent's return;
 
11      (7)  The committee, trustee, or guardian of any person in
 
12           paragraphs (1) to (6) who is incompetent;
 
13      (8)  The trustee in bankruptcy or receiver, and the
 
14           attorney-in-fact of any person in paragraphs (1) to
 
15           (7);
 
16      (9)  Persons duly authorized by the State in connection with
 
17           their official duties;
 
18     (10)  Any duly accredited tax official of the United States
 
19           or of any state or territory;
 
20     (11)  The Multistate Tax Commission or its authorized
 
21           representative; and
 
22     (12)  Members of a limited liability company.
 
23 Any violation of this subsection shall be a misdemeanor.
 

 
Page 19                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      (c)  The department may destroy the monthly returns filed
 
 2 pursuant to section    -5, or any of them, upon the expiration of
 
 3 three years after the end of the calendar year in which the taxes
 
 4 so returned accrued.
 
 5       -10  Consolidated reports; interrelated business.  When
 
 6 any taxpayer is engaged in two or more forms of business activity
 
 7 taxable under this chapter which are interrelated, or which are
 
 8 of like character, the taxpayer shall file a consolidated return
 
 9 covering all business activities, which are thus interrelated or
 
10 of like character.
 
11                 ASSESSMENTS, REFUNDS, AND RECORDS
 
12       -11  Erroneous returns, disallowance of exemption,
 
13 payment.  If any return made is erroneous, or is so deficient as
 
14 not to disclose the full tax liability, or if the taxpayer, in
 
15 the taxpayer's return, shall disclaim liability for the tax on
 
16 any gross receipts of sales liable to the tax, or if the taxpayer
 
17 shall make application for an exemption under section    -4 to
 
18 which the taxpayer is not entitled, the department of taxation
 
19 shall correct the error or assess the proper amount of taxes.  If
 
20 such recomputation results in an additional tax liability, or if
 
21 the department proposes to assess any gross receipts of sales by
 
22 reason of the disallowance of an exemption claimed in the return
 
23 or for which application has been filed, the department shall
 

 
Page 20                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 first give notice to the taxpayer of the proposed assessment, and
 
 2 the taxpayer shall thereupon have an opportunity within thirty
 
 3 days to confer with the department.  After the expiration of
 
 4 thirty days from the notification, the department shall assess
 
 5 the gross receipts of retail sales of the taxpayer or any portion
 
 6 thereof which the department believes has not theretofore been
 
 7 assessed, and shall give notice to the taxpayer of the amount of
 
 8 the tax, and the amount thereof shall be paid within twenty days
 
 9 after the date the notice was mailed, properly addressed to the
 
10 taxpayer at the taxpayer's last known address or place of
 
11 business. 
 
12      No preliminary notice shall be necessary where the amount of
 
13 the tax is calculated by the department from gross receipts of
 
14 retail sales returned by the taxpayer as subject to the tax
 
15 (unless the taxpayer shall have claimed that the applicable rate
 
16 of tax is lower than the rate of tax applied by the department);
 
17 in such case the tax shall be due and payable on the tenth day
 
18 after the date the statement was mailed.  In a case of
 
19 disallowance of an exemption the department, before making an
 
20 assessment, may require the applicant, by demand made upon the
 
21 applicant by mail or delivery thereof to the address shown in the
 
22 application, to file information returns as to the applicant's
 
23 gross receipts of retail sales within such reasonable time as the
 

 
Page 21                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 department may allow, and in the event of failure, neglect, or
 
 2 refusal to comply with the demand, the department shall make an
 
 3 assessment under section    -13, in lieu of this section.
 
 4       -12  Refunds and credits.  If the amount already paid
 
 5 exceeds that which should have been paid on the basis of the tax
 
 6 recomputed as provided in section    -11, the excess so paid
 
 7 shall be immediately refunded to the taxpayer in the manner
 
 8 provided in section 231-23(c).  The taxpayer, at the taxpayer's
 
 9 election, may apply an overpayment credit to taxes subsequently
 
10 accruing hereunder.  All refunds and the details thereof,
 
11 including the names of the persons receiving the refund and the
 
12 amount refunded shall be accessible for the inspection of the
 
13 public in the office of the department of taxation in the
 
14 taxation district in which the person receiving the refund made
 
15 the person's returns. 
 
16      No recourse may be had except under section 40-35 or by
 
17 appeal for refunds of taxes paid pursuant to an assessment by the
 
18 director of taxation; provided that if the assessment by the
 
19 director shall contain clerical errors, transposition of figures,
 
20 typographical errors, and errors in calculation or if there shall
 
21 be an illegal or erroneous assessment, the usual refunds
 
22 procedures shall apply.  No refund or overpayment credit may be
 
23 had under this section in any event unless the original payment
 

 
Page 22                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 of the tax was due to the law having been interpreted or applied
 
 2 in respect of the taxpayer concerned differently than in respect
 
 3 of taxpayers generally.  As to all tax payment for which a refund
 
 4 or credit is not authorized by this section (including without
 
 5 prejudice to the generality of the foregoing cases of
 
 6 unconstitutionality) the remedies provided by appeal or under
 
 7 section 40-35 are exclusive.
 
 8       -13  Failure to make return.  If any person fails,
 
 9 neglects, or refuses to make a return, the department of taxation
 
10 may proceed as it deems best to obtain information on which to
 
11 base the assessment of the tax.  After procuring the information
 
12 the department shall proceed to assess the tax as provided in
 
13 section    -11.  The assessment shall be presumed to be correct
 
14 until and unless, upon an appeal duly taken as provided in this
 
15 chapter, the contrary shall be clearly proved by the person
 
16 assessed, and the burden of proof upon such appeal shall be upon
 
17 the person assessed to disprove the correctness of the
 
18 assessment.
 
19       -14  Audits; procedure, penalties.  For the purpose of
 
20 verification or audit of a return made by the taxpayer, or where
 
21 there is reasonable ground to believe that any return made is so
 
22 deficient as not to form the basis of a satisfactory assessment
 
23 of the tax, or for the purpose of making an assessment where no
 

 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 return has been made, the department of taxation or the
 
 2 Multistate Tax Commission pursuant to chapter 255 or the
 
 3 authorized representative thereof may examine all account books,
 
 4 bank books, bank statements, records, vouchers, taxpayer's copies
 
 5 of federal tax returns, and any and all other documents and
 
 6 evidences having any relevancy to the determination of the gross
 
 7 receipts of retail sales of any taxpayer as required to be
 
 8 returned under this chapter and may summon or require the
 
 9 attendance of the person by or for whom the return, if any, has
 
10 been made or whose tax is being assessed, and any employee of the
 
11 person, and may summon or require the attendance of any person
 
12 having knowledge in the premises, naming the time and place in
 
13 the summons, and may require the production of any books,
 
14 statements, or other evidences open to examination, and may take
 
15 testimony in reference to any such matter relevant to the gross
 
16 receipts of retail sales of the taxpayer for the period under
 
17 consideration, with power to require that the person so called
 
18 and appearing shall be interrogated under oath and to administer
 
19 the oath. 
 
20      If the department determines that any gross receipts of
 
21 retails sales liable to the tax have not been assessed the
 
22 department may assess the same as provided in sections    -11 and
 
23    -13. 
 

 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      Any individual knowingly giving false testimony under oath
 
 2 at any such hearing before the department shall be guilty of
 
 3 perjury and shall be punished as provided by law. 
 
 4      Any person refusing or neglecting to obey any summons issued
 
 5 by the department, and any individual appearing and refusing to
 
 6 testify under oath, shall be fined $50 for the first offense and
 
 7 $100 for each succeeding offense.
 
 8       -15  Limitation period.(a)  General rule.  The amount
 
 9 of sales taxes imposed by this chapter shall be assessed or
 
10 levied within three years after the annual return was filed, or
 
11 within three years of the due date prescribed for the filing of
 
12 said return, whichever is later, and no proceeding in court
 
13 without assessment for the collection of any such taxes shall be
 
14 begun after the expiration of the period.
 
15      (b)  Exceptions.  In the case of a false or fraudulent
 
16 return with intent to evade tax, or of a failure to file the
 
17 annual return, the tax may be assessed or levied at any time;
 
18 however, in the case of a return claimed to be false or
 
19 fraudulent with intent to evade tax, the determination as to the
 
20 claim shall first be made by a judge of the circuit court as
 
21 provided in section 235-111(c) which shall apply to the tax
 
22 imposed by this chapter.
 

 
 
 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      (c)  Extension by agreement.  Where, before the expiration
 
 2 of the period prescribed in subsection (a) or (d), both the
 
 3 department of taxation and the taxpayer have consented in writing
 
 4 to the assessment or levy of the tax after the date fixed by
 
 5 subsection (a) or the credit or refund of the tax after the date
 
 6 fixed by subsection (d), the tax may be assessed or levied or the
 
 7 overpayment, if any, may be credited or refunded at any time
 
 8 prior to the expiration of the period agreed upon.  The period so
 
 9 agreed upon may be extended by subsequent agreements in writing
 
10 made before the expiration of the period previously agreed upon.
 
11      (d)  Refunds.  No credit or refund shall be allowed for any
 
12 tax imposed by this chapter, unless a claim for such credit or
 
13 refund shall be filed as follows:
 
14      (1)  If an annual return is timely filed, or is filed within
 
15           three years after the date prescribed for filing the
 
16           annual return, then the credit or refund shall be
 
17           claimed within three years after the date the annual
 
18           return was filed or the date prescribed for filing the
 
19           annual return, whichever is later.
 
20      (2)  If an annual return is not filed, or is filed more than
 
21           three years after the date prescribed for filing the
 
22           annual return, a claim for credit or refund shall be
 
23           filed within: 
 

 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1           (A)  Three years after the payment of the tax; or 
 
 2           (B)  Three years after the date prescribed for the
 
 3                filing of the annual return, 
 
 4           whichever is later.
 
 5 Paragraphs (1) and (2) are mutually exclusive.  The limitation
 
 6 shall not apply to a credit or refund pursuant to an appeal
 
 7 provided for by section    -17.
 
 8         -16  Records to be kept; examination.  Every taxpayer
 
 9 shall keep in the English language within the State, and preserve
 
10 for a period of three years, suitable records of gross receipts
 
11 of retail sales, and such other books, records of account, and
 
12 invoices as may be required by the department of taxation, and
 
13 all such books, records, and invoices shall be open for
 
14 examination at any time by the department or the Multistate Tax
 
15 Commission pursuant to chapter 255, or the authorized
 
16 representative thereof.
 
17                              APPEALS
 
18         -17  Appeals.  Any person aggrieved by any assessment of
 
19 the tax for any month or any year may appeal from the assessment
 
20 in the manner and within the time and in all other respects as
 
21 provided in the case of income tax appeals by section 235-114,
 
22 provided the tax so assessed shall have been paid.
 

 
 
 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1         -18  Collection by suit; injunction.  The department of
 
 2 taxation may collect taxes due and unpaid under this chapter,
 
 3 together with all accrued penalties, by action in assumpsit or
 
 4 other appropriate proceedings in the circuit court of the
 
 5 judicial circuit in which the retail sales have occurred.   After
 
 6 delinquency shall have continued for sixty days, or if any person
 
 7 lawfully required so to do under this chapter shall fail to apply
 
 8 for and secure a permit as provided by this chapter for a period
 
 9 of sixty days after the first date when the person was required
 
10 under this chapter to secure the same, the department may proceed
 
11 in the circuit court of the judicial circuit in which the retail
 
12 sales have occurred, to obtain an injunction restraining the
 
13 further retail sales until full payment shall have been made of
 
14 all taxes and penalties and interest due under this chapter, or
 
15 until such permit is secured, or both, as the circumstances of
 
16 the case may require.
 
17         -19  District judges; concurrent civil jurisdiction in
 
18 tax collections.  Except as otherwise specifically provided by
 
19 this chapter, the several district judges shall have concurrent
 
20 jurisdiction with the circuit courts to hear and determine all
 
21 civil actions at law in assumpsit for the collection and
 
22 enforcement of collection and payment of all taxes assessed
 
23 hereunder, irrespective of the amount claimed.
 

 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1                        OFFENSES; PENALTIES
 
 2       -20  Unfair competition; penalty.  No taxpayer shall
 
 3 advertise or hold out to the public in any manner, directly or
 
 4 indirectly, that the tax hereby imposed upon the taxpayer is not
 
 5 considered as an element in the price to the purchaser.  Any
 
 6 person violating this section shall be fined not more than $50
 
 7 for each offense."
 
 8                   PART II. REPEAL OF INCOME TAX
 
 9      SECTION 4.  The purpose of this part is to repeal the income
 
10 tax over a period of four years.
 
11      SECTION 5.  Chapter 235, Hawaii Revised Statutes, is
 
12 repealed.
 
13            PART III.  REPEAL OF THE GENERAL EXCISE TAX
 
14      SECTION 6.  The purpose of this part is to repeal the
 
15 general excise tax over a period of four years.
 
16      SECTION 7.  Section 36-32, Hawaii Revised Statutes, is
 
17 amended by amending subsection (a) to read as follows:
 
18      "(a)  There is created in the treasury of the State the
 
19 state educational facilities improvement special fund, into which
 
20 shall be deposited a portion of all [general excise] retail sales
 
21 tax revenues collected by the department of taxation under
 
22 section [237-31.]    -6.  The special fund shall be used solely
 
23 to plan, design, acquire lands for and to construct public school
 

 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 facilities and to provide equipment and technology infrastructure
 
 2 to improve public schools and other facilities under the
 
 3 jurisdiction of the department of education, except public
 
 4 libraries.  In addition, activities of the department of
 
 5 education intended to eliminate the gap between the facility
 
 6 needs of schools and available resources shall be eligible for
 
 7 funding from the special fund.  Expenditures from the special
 
 8 fund shall be limited to projects authorized by the legislature
 
 9 and shall be subject to sections 37-31, and 37-33 through 37-40.
 
10 Appropriations or authorizations from the special fund shall be
 
11 expended by the comptroller."
 
12      SECTION 8.  Section 39-151, Hawaii Revised Statutes, is
 
13 amended by amending subsection (a) to read as follows:
 
14      "(a)  There is hereby established the Hawaii compound
 
15 interest bond reserve fund, as a trust fund in the state treasury
 
16 for the benefit of the State, to be held and administered by the
 
17 department of budget and finance.  The director, from time to
 
18 time, may transfer a portion of [general excise] retail sales tax
 
19 revenues collected pursuant to section [237-31]    -6 to the
 
20 credit of the compound interest bond reserve fund, up to but not
 
21 in excess of $5,000,000 during any fiscal year.  Not fewer than
 
22 thirty days before the convening of each regular session of the
 
23 legislature, the director shall submit to the legislature a
 

 
Page 30                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 report of all funds transferred to the credit of the compound
 
 2 interest bond reserve fund."
 
 3      SECTION 9.  Section 103-53, Hawaii Revised Statutes, is
 
 4 amended by amending subsection (d) to read as follows:
 
 5      "(d)  Any assignment of a contract shall require the
 
 6 assignee, as a condition precedent to the assignment, to first
 
 7 obtain a [bulk sales certificate if required under section
 
 8 237-43, and present the certificate, or] tax clearance as
 
 9 provided under subsection (a) if a bulk sales certificate is not
 
10 required, to the state or county contracting officer or agent.
 
11      SECTION 10.  Section 201E-205 Hawaii Revised Statutes, is
 
12 amended as follows:
 
13      1.  By amending the title to read:
 
14      "201E-205  Exemption from [general excise] retail sales
 
15 taxes."
 
16      2.  By amending subsection (a) to read:
 
17      "(a)  [In accordance with section 237-29, the] The
 
18 corporation may approve and certify for exemption from [general
 
19 excise] retail sales taxes any qualified person or firm involved
 
20 with a newly constructed, or moderately or substantially
 
21 rehabilitated project:
 
22      (1)  Developed under this chapter or chapter 356;
 

 
 
 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      (2)  Developed under a government assistance program
 
 2           approved by the corporation, including but not limited
 
 3           to the United States Department of Agriculture 502
 
 4           program and Federal Housing Administration 235 program;
 
 5           or
 
 6      (3)  Developed under the sponsorship of a private nonprofit
 
 7           corporation providing home rehabilitation or new homes
 
 8           for qualified families in need of decent, low-cost
 
 9           housing."
 
10      SECTION 11.  Section 201G-116, Hawaii Revised Statutes, is
 
11 amended as follows:
 
12      1.  By amending the title to read: 
 
13      "[[]201G-116[]]  Exemption from [general excise] retail
 
14 sales taxes." 
 
15      2.  By amending subsection (a) to read:
 
16      "(a)  [In accordance with section 237-29, the] The
 
17 corporation may approve and certify for exemption from [general
 
18 excise] retail sales taxes any qualified person or firm involved
 
19 with a newly constructed, or moderately or substantially
 
20 rehabilitated project:
 
21      (1)  Developed under this subpart;
 
22      (2)  Developed under a government assistance program
 
23           approved by the corporation, including but not limited
 

 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1           to, the United States Department of Agriculture 502
 
 2           program and Federal Housing Administration 235 program;
 
 3           or
 
 4      (3)  Developed under the sponsorship of a private nonprofit
 
 5           corporation providing home rehabilitation or new homes
 
 6           for qualified families in need of decent, low-cost
 
 7           housing."
 
 8      SECTION 12.  Section 201G-459, Hawaii Revised Statutes, is
 
 9 amended to read as follows:
 
10      "[[]201G-459[]]  Exemptions.(a)  [Any compensation
 
11 received by a provider agency for services rendered to homeless
 
12 families or individuals, or in operating or managing a homeless
 
13 facility authorized by this part, is exempt from taxes under
 
14 chapter 237.
 
15      (b)]  Any county mayor may exempt by executive order, donors
 
16 and homeless provider agencies from real property taxes, water
 
17 and sewer development fees, rates collected for water supplied to
 
18 consumers and for use of sewers, and any other county taxes,
 
19 charges, or fees; provided that any county may enact ordinances
 
20 to regulate the exemptions granted by this subsection.
 
21      [(c)] (b)  Any provider agency operating or managing a
 
22 homeless facility, or any other program for the homeless
 
23 authorized by this part, is exempt, for purposes of those
 

 
Page 33                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 facilities or programs, from any requirements contained in part
 
 2 VIII of chapter 346 and chapters 467 and 521."
 
 3      SECTION 13.  Section 207-12, Hawaii Revised Statutes, is
 
 4 amended to read as follows:
 
 5      "207-12  Exemptions and immunities.  A foreign lender which
 
 6 (1) does not maintain a place of business in this State, (2)
 
 7 conducts its principal activities outside this State, and (3)
 
 8 complies with this part, does not by engaging in this State in
 
 9 any or all of the activities specified in section 207-13, violate
 
10 the laws of this State relating to doing business or doing a
 
11 banking, trust, or insurance business, or become subject to
 
12 chapter 412, 415, or 431, or become subject to any taxation which
 
13 would otherwise be imposed for doing business in or doing a
 
14 banking, trust, or insurance business in, or having gross income
 
15 or receipts from sources in, property in, or the conduct of any
 
16 activity in, this State, or become subject to any taxation under
 
17 chapter 235[, 237,] or 241, and no income or receipts of any
 
18 foreign lender arising out of any of the activities specified in
 
19 the following section shall constitute income from sources in,
 
20 property in, or activities conducted in this State for the
 
21 purposes of any tax imposed by this State; provided that nothing
 
22 in this part shall be construed to exempt the real property of a
 
23 foreign lender from taxation to the same extent, according to its
 

 
Page 34                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 value, as other real property is taxed, or to preclude the
 
 2 inclusion of the dividends or other income from foreign lenders
 
 3 in the income of individuals taxable under chapter 235 to the
 
 4 same extent as is included dividends and other income from
 
 5 domestic lenders; and provided further that if any such foreign
 
 6 lender shall acquire any property in this State in enforcement of
 
 7 the rights of the foreign lender in the event of a default by any
 
 8 borrower, as permitted by section 207-13(4), then commencing one
 
 9 year after title to such property has vested in the foreign
 
10 lender, the rents or other receipts received by the foreign
 
11 lender from, and the proceeds of sale by the foreign lender of,
 
12 such property shall be subject to taxation under [chapters]
 
13 chapter 235 [and 237] in the same manner and to the same extent
 
14 as if the rents, other receipts, or proceeds were received by a
 
15 resident of this State; and provided further that if any such
 
16 foreign lender shall otherwise acquire any property in this State
 
17 or engage in any business or activities in this State not
 
18 specified in section 207-13, then the rents and other receipts
 
19 received by the foreign lender from such property and the
 
20 proceeds of sale by the foreign lender of such property and all
 
21 income and receipts from the foreign lender's business or
 
22 activities in this State not specified in section 207-13 shall be
 
23 subject to taxation under [chapters] chapter 235 [and 237] in the
 

 
Page 35                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 same manner and to the same extent as if such rents, other
 
 2 receipts, proceeds, and income were received by a resident of
 
 3 this State, but such other activities and business shall not
 
 4 deprive the foreign lender of the immunities and exemptions from
 
 5 taxation hereinabove stated with respect to the activities
 
 6 specified in section 207-13."
 
 7      SECTION 14.  Section 209E-2, Hawaii Revised Statutes, is
 
 8 amended by amending the definition of "qualified business" to
 
 9 read as follows:
 
10      ""Qualified business" means any corporation, partnership, or
 
11 sole proprietorship authorized to do business in the State which
 
12 is qualified under section 209E-9 and is:
 
13      (1)  Subject to the state corporate or individual income tax
 
14           under chapter 235;
 
15      (2)  Engaged in manufacturing, the wholesale sale of
 
16           tangible personal property [as defined in section
 
17           237-4,] or a service business as defined in this
 
18           chapter; or
 
19      (3)  Engaged in producing agricultural products where the
 
20           business is a producer [as defined in section 237-5]."
 
21      SECTION 15.  Section 212-8, Hawaii Revised Statutes, is
 
22 amended to read as follows:
 

 
 
 
Page 36                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      "212-8 Exemption from taxes.  Notwithstanding any law to
 
 2 the contrary, sales of all products which are categorized as
 
 3 privileged foreign merchandise, nonprivileged foreign
 
 4 merchandise, domestic merchandise, or zone-restricted
 
 5 merchandise, and which are admitted into a foreign-trade zone, as
 
 6 more specifically set forth in the Act of Congress, and any rules
 
 7 and regulations promulgated thereunder, made directly to any
 
 8 common carrier in interstate or foreign commerce, or both,
 
 9 whether ocean-going or air, for consumption out-of-state by the
 
10 crew or passengers on the shipper's vessels or airplanes, or for
 
11 use out-of-state by the vessels or airplanes, shall be exempt
 
12 from those taxes imposed under chapters [237,] 238, 243, 244D,
 
13 and 245."
 
14      SECTION 16.  Section 231-9.4, Hawaii Revised Statutes, is
 
15 amended to read as follows:
 
16      "[[]231-9.4  Credit or debit card remittances.[]]  In
 
17 addition to sections [237-31,]    -6, 237D-6.5, and 251-5, as
 
18 well as any other form of payment allowed under provisions of
 
19 title 14 administered by the department, the director, by rules
 
20 adopted pursuant to chapter 91, may permit the use of credit or
 
21 debit cards for remittances made to the department.  A service
 
22 fee shall not be required by the department for the use of debit
 
23 cards for remittances, but may be required by the department for
 
24 the use of credit cards for remittances.
 

 
Page 37                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      For purposes of this section:
 
 2      "Credit card" shall have the same meaning as provided in
 
 3 section 478-1.
 
 4      "Debit card" means any card, plate, or other single credit
 
 5 device issued with or without a fee to a cardholder to purchase
 
 6 goods or services or to obtain cash that is debited from the
 
 7 cardholder's checking or other bank account."
 
 8      SECTION 17.  Section 231-19.5, Hawaii Revised Statutes, is
 
 9 amended by amending subsection (a) to read as follows:
 
10      "(a)  Written opinions shall be open to public inspection
 
11 and copying as provided in this section, notwithstanding sections
 
12 235-116, 236D-15, [237-34,] and 237D-13 and any other law
 
13 restricting disclosure of tax returns or tax return information
 
14 to the contrary.  Except as provided in subsection (f), regarding
 
15 the disclosure of the text of written opinions, chapter 92F shall
 
16 not apply to tax returns and tax return information.
 
17      A written opinion may not be used or cited as precedent
 
18 unless otherwise provided by department rules."
 
19      SECTION 18.  Section 233-3, Hawaii Revised Statutes, is
 
20 amended to read as follows:
 
21      "233-3 Selling personal property, defined.  As used in
 
22 this chapter "the business of selling tangible personal property"
 
23 includes [both] business classed as such under chapter [237 and
 

 
Page 38                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 also the rendering of a service which involves the consumption or
 
 2 use of tangible personal property furnished by the "potential
 
 3 employer" referred to in section 233-1.]    ."
 
 4      SECTION 19.  Section 235-6, Hawaii Revised Statutes, is
 
 5 amended by amending subsection (a) to read as follows:
 
 6      "(a)  For the purposes of sections 235-21 to 235-39, a
 
 7 foreign corporation engaged in the business of manufacturing
 
 8 without the State, having its manufactured products warehoused in
 
 9 this State by another person who is engaged in the business of
 
10 warehousing in this State and whose compensation for providing
 
11 the warehousing is included in the measure of the tax imposed by
 
12 chapter [237 or] 239, shall not be deemed to be carrying on a
 
13 trade or business in this State if all of the following
 
14 requirements are met:
 
15      (1)  Every delivery of sale of such products so warehoused
 
16           is made at the warehouse to fill an order for such
 
17           property procured by a representative (as defined in
 
18           subsection (b)) from a seller licensed under chapter
 
19           [237]     and purchasing such property for purposes of
 
20           resale;
 
21      (2)  Every order so procured was made subject to acceptance
 
22           and was accepted by the corporation at an office
 
23           located out of this State;
 

 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      (3)  No collection for the payment of the products delivered
 
 2           as described in paragraph (1) is made in this State by
 
 3           any of its employees or agents or by any
 
 4           representative; and
 
 5      (4)  Except as provided in this section, it is not carrying
 
 6           on a trade or business in this State within the meaning
 
 7           of sections 235-21 to 235-39."
 
 8      SECTION 20.  Section 235-61, Hawaii Revised Statutes, is
 
 9 amended by amending subsection (e) to read as follows:
 
10      "(e)  The department, by rule, may require the deduction and
 
11 withholding of tax from any remuneration or compensation paid for
 
12 or attributable to services [that are not subject to the general
 
13 excise tax imposed by chapter 237], whether or not such
 
14 withholding is provided for hereinabove.  Every person so
 
15 required to deduct and withhold tax, or from whom tax is required
 
16 to be deducted and withheld, shall be subject to sections 235-61
 
17 to 235-67, and every person so required to deduct and withhold
 
18 tax shall be deemed an employer for the purposes of this chapter.
 
19      The department, by rule, may exempt any employer from the
 
20 requirement of deduction and withholding of taxes, even though
 
21 the requirement is imposed by this section, if and to the extent
 
22 that the department finds the requirement unduly onerous or
 
23 impracticable of enforcement."
 

 
Page 40                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      SECTION 21.  Section 235-110.7, Hawaii Revised Statutes, is
 
 2 amended as follows:
 
 3      1.  By amending its title and subsections (a) to (c) to
 
 4 read:
 
 5      "235-110.7  Capital goods [excise] retail sales tax credit.
 
 6 (a)  There shall be allowed to each taxpayer subject to the tax
 
 7 imposed by this chapter a capital goods excise tax credit which
 
 8 shall be deductible from the taxpayer's net income tax liability,
 
 9 if any, imposed by this chapter for the taxable year in which the
 
10 credit is properly claimed.
 
11      The amount of the tax credit shall be determined by the
 
12 application of the following rates against the cost of the
 
13 eligible depreciable tangible personal property used by the
 
14 taxpayer in a trade or business and placed in service within
 
15 Hawaii after December 31, 1987.  For calendar years beginning
 
16 after:  December 31, 1987, the applicable rate shall be three per
 
17 cent; December 31, 1988, and thereafter, the applicable rate
 
18 shall be [four]      per cent[, except that for the period
 
19 January 1, 1993, through December 31, 2002, and for eligible
 
20 depreciable tangible personal property used in a trade or
 
21 business that is purchased in a county in which the county
 
22 general excise and use tax surcharge is in effect and placed in
 
23 service in any county the applicable rate shall be four and one-
 

 
Page 41                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 half per cent].  For taxpayers with fiscal taxable years, the
 
 2 applicable rate shall be the rate for the calendar year in which
 
 3 the eligible depreciable tangible personal property used in the
 
 4 trade or business is placed in service within Hawaii.
 
 5      In the case of a partnership, S corporation, estate, or
 
 6 trust, the tax credit allowable is for eligible depreciable
 
 7 tangible personal property which is placed in service by the
 
 8 entity.  The cost upon which the tax credit is computed shall be
 
 9 determined at the entity level.  Distribution and share of credit
 
10 shall be determined by rules.
 
11      In the case of eligible depreciable tangible personal
 
12 property for which a credit for sales or use taxes paid to
 
13 another state is allowable under section 238-3(i), the amount of
 
14 the tax credit allowed under this section shall not exceed the
 
15 amount of use tax, and for the period January 1, 1993, through
 
16 December 31, 2002, the amount of the county general excise and
 
17 use tax surcharge, actually paid under chapter 238 relating to
 
18 such tangible personal property.
 
19      If a deduction is taken under section 179 (with respect to
 
20 election to expense certain depreciable business assets) of the
 
21 Internal Revenue Code of 1954, as amended, no tax credit shall be
 
22 allowed for that portion of the cost of property for which the
 
23 deduction was taken.
 

 
Page 42                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      (b)  [If the tax credit is claimed by a taxpayer at the rate
 
 2 of four and one-half per cent, and the tangible personal property
 
 3 is purchased in a county in which the county general excise and
 
 4 use tax surcharge is not in effect, there shall be added to and
 
 5 become part of the tax liability of the taxpayer:
 
 6      (1)  The amount of the tax credit claimed under this section
 
 7           multiplied by three; or
 
 8      (2)  Ten per cent of the income tax liability for the
 
 9           taxable year for which the income tax return is being
 
10           filed,
 
11 whichever is greater.]
 
12      If the capital goods excise tax credit allowed under
 
13 subsection (a) exceeds the taxpayer's net income tax liability,
 
14 the excess of credit over liability shall be refunded to the
 
15 taxpayer; provided that no refunds or payment on account of the
 
16 tax credit allowed by this section shall be made for amounts less
 
17 than $1.
 
18      All claims for tax credits under this section, including any
 
19 amended claims, must be filed on or before the end of the twelfth
 
20 month following the close of the taxable year for which the
 
21 credits may be claimed.  Failure to comply with the foregoing
 
22 provision shall constitute a waiver of the right to claim the
 
23 credit.
 

 
Page 43                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      (c)  Application for the capital goods [excise] sales tax
 
 2 credit shall be upon forms provided by the department of
 
 3 taxation."
 
 4      2.  By amending subsection (e) to read:
 
 5      "(e)  As used in this section, the definition of section 38
 
 6 property (with respect to investment in depreciable tangible
 
 7 personal property) as defined by section 48(a)(1)(A), (a)(1)(B),
 
 8 (a)(3), (a)(4), (a)(7), (a)(8), (a)(10)(A), (b), (c), (f), (l),
 
 9 (m), and (s) of the Internal Revenue Code of 1954, as amended as
 
10 of December 31, 1984, is operative for the purposes of this
 
11 section only.
 
12      As used in this section:
 
13      "Cost" means (1) the actual invoice price of the tangible
 
14 personal property, or (2) the basis from which depreciation is
 
15 taken under section 167 (with respect to depreciation) or from
 
16 which a deduction may be taken under section 168 (with respect to
 
17 accelerated cost recovery system) of the Internal Revenue Code of
 
18 1954, as amended, whichever is less.
 
19      "Eligible depreciable tangible personal property" is section
 
20 38 property as defined by the operative provisions of section 48
 
21 and having a depreciable life under section 167 or for which a
 
22 deduction may be taken under section 168 of the federal Internal
 
23 Revenue Code of 1954, as amended.
 

 
Page 44                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      "Placed in service" means the earliest of the following
 
 2 taxable years:
 
 3      (1)  The taxable year in which, under the:
 
 4           (A)  Taxpayer's depreciation practice, the period for
 
 5                depreciation; or
 
 6           (B)  Accelerated cost recovery system, a claim for
 
 7                recovery allowances;
 
 8           with respect to such property begins; or
 
 9      (2)  The taxable year in which the property is placed in a
 
10           condition or state of readiness and availability for a
 
11           specifically assigned function.
 
12      "Purchase" means an acquisition of property.
 
13      "Tangible personal property" means tangible personal
 
14 property which is placed in service within Hawaii after
 
15 December 31, 1987, and the purchase or importation of which
 
16 resulted in a transaction which was subject to the imposition and
 
17 payment of tax at the rate of [four]       per cent[, except that
 
18 for the period January 1, 1993, through December 31, 2002, and if
 
19 the county general excise and use tax surcharge is in effect the
 
20 tax rate shall be four and one-half per cent,] under chapter
 
21 [237]       or 238.  "Tangible personal property" does not
 
22 include tangible personal property which is an integral part of a
 
23 building or structure or tangible personal property used in a
 
24 foreign trade zone, as defined under chapter 212."
 

 
Page 45                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      SECTION 22.  Section 237D-1, Hawaii Revised Statutes, is
 
 2 amended by amending the definition of "gross rental" to read as
 
 3 follows:
 
 4      ""Gross rental" or "gross rental proceeds" means the gross
 
 5 receipts, cash or accrued, of the taxpayer received as
 
 6 compensation for the furnishing of transient accommodations and
 
 7 the value proceeding or accruing from the furnishing of such
 
 8 accommodations without any deductions on account of the cost of
 
 9 property or services sold, the cost of materials used, labor
 
10 cost, taxes, royalties, interest, discounts, or any other
 
11 expenses whatsoever.  Every taxpayer shall be presumed to be
 
12 dealing on a cash basis unless the taxpayer proves to the
 
13 satisfaction of the department of taxation that the taxpayer is
 
14 dealing on an accrual basis [and the taxpayer's books are so
 
15 kept, or unless the taxpayer employs or is required to employ the
 
16 accrual basis for the purposes of the tax imposed by chapter 237
 
17 for any taxable year] in which event the taxpayer shall report
 
18 the taxpayer's gross income for the purposes of this chapter on
 
19 the accrual basis for the same period.
 
20      [The words "gross rental" or "gross rental proceeds" shall
 
21 not be construed to include the amounts of taxes imposed by
 
22 chapter 237 or this chapter on operators of transient
 
23 accommodations and passed on, collected, and received from the
 

 
Page 46                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 consumer as part of the receipts received as compensation for the
 
 2 furnishing of transient accommodations.]  Where transient
 
 3 accommodations are furnished through arrangements made by a
 
 4 travel agency or tour packager at noncommissionable negotiated
 
 5 contract rates and the gross income is divided between the
 
 6 operator of transient accommodations on the one hand and the
 
 7 travel agency or tour packager on the other hand, gross rental or
 
 8 gross rental proceeds to the operator means only the respective
 
 9 portion allocated or distributed to the operator, and no more.
 
10 For purposes of this definition, where the operator maintains a
 
11 schedule of rates for identifiable groups of individuals, such as
 
12 kamaainas, upon which the accommodations are leased, let, or
 
13 rented, gross rental or gross rental proceeds means the receipts
 
14 collected and received based upon the scheduled rates and
 
15 recorded as receipts in its books and records."
 
16      SECTION 23.  Section 237D-6, Hawaii Revised Statutes, is
 
17 amended by amending subsection (a) to read as follows:
 
18      "(a)  On or before the last day of each calendar month,
 
19 every operator taxable, or plan manager liable under this chapter
 
20 during the preceding calendar month shall file a sworn return
 
21 with the director in such form as the director shall prescribe
 
22 together with a remittance for the amount of the tax in the form
 
23 required by section 237D-6.5.  Sections [237-30 and 237-32]    -5
 

 
Page 47                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 and    -7 shall apply to returns and penalties made under this
 
 2 chapter to the same extent as if the sections were set forth
 
 3 specifically in this section."
 
 4      SECTION 24.  Section 237D-8.5, Hawaii Revised Statutes, is
 
 5 amended to read as follows:
 
 6      "[[]237D-8.5[]]  Collection of rental by third party;
 
 7 filing with department; statement required.(a)  Every person
 
 8 authorized under an agreement by the owner of transient
 
 9 accommodations located within this State to collect rent on
 
10 behalf of such owner shall be subject to this section.
 
11      (b)  Every written rental collection agreement shall have on
 
12 the first page of the agreement the name, address, social
 
13 security or federal identification number, and, if available, the
 
14 general excise tax license and transient accommodations tax
 
15 registration numbers of the owner of the transient accommodations
 
16 being rented, the address of the property being rented, and the
 
17 following statement which shall be set forth in bold print and in
 
18 ten-point type size:
 
19 "HAWAII TRANSIENT ACCOMMODATIONS TAXES MUST BE PAID ON THE GROSS
 
20 RENTS COLLECTED BY ANY PERSON RENTING TRANSIENT ACCOMMODATIONS IN
 
21 THE STATE OF HAWAII.  A COPY OF THE FIRST PAGE OF THIS AGREEMENT,
 
22 OR OF FEDERAL INTERNAL REVENUE FORM 1099 STATING THE AMOUNT OF
 
23 RENTS COLLECTED, SHALL BE FILED WITH THE HAWAII DEPARTMENT OF
 
24 TAXATION."
 

 
Page 48                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      Every person entering an oral rental collection agreement
 
 2 shall furnish the department of taxation the information required
 
 3 under this subsection and shall give the owner of the property a
 
 4 copy of the notice required by this subsection.  [The statement
 
 5 required by this subsection may be combined with the statement
 
 6 required under section 237-30.5 by adding in bold print and in
 
 7 ten-point type size to the front of the statement in section
 
 8 237-30.5 the following:
 
 9           "HAWAII TRANSIENT ACCOMMODATIONS TAXES AND".]
 
10      (c)  Every person authorized to collect rent for another
 
11 person shall file a copy of the first page of the rental
 
12 collection agreement with the department of taxation within
 
13 ninety days after June 9, 1988, or within thirty days after
 
14 entering into the agreement, or shall file a copy of federal
 
15 Internal Revenue form 1099, the property owner's social security
 
16 or federal identification number, and, if available, the general
 
17 excise tax license and transient accommodations tax registration
 
18 numbers of the owner of such property being rented with the
 
19 department of taxation at the same time as such forms must be
 
20 filed with the Internal Revenue Service for the applicable tax
 
21 year.  The person also shall notify the owner that such
 
22 information is being furnished and give the owner a copy of the
 
23 notice required by subsection (b).
 

 
Page 49                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      [(d)  If a person complies with the provisions of this
 
 2 section, the person shall be deemed to have complied with section
 
 3 237-30.5.]"
 
 4      SECTION 25.  Section 237D-8.6, Hawaii Revised Statutes, is
 
 5 amended by amending subsection (a) to read as follows:
 
 6      "(a)  On or  before the twentieth day of the fourth month
 
 7 following the close of the taxable year, every person who has
 
 8 become liable for the payment of taxes under this chapter during
 
 9 the preceding taxable year and who has furnished transient
 
10 accommodations which were exempt, for any portion of the taxable
 
11 year, from the tax imposed under this chapter, shall file a
 
12 reconciliation for transient accommodations as prescribed by the
 
13 director indicating the amount of gross income that was subject
 
14 to such tax [and the amount that was subject to the general
 
15 excise tax imposed under chapter 237]."
 
16      SECTION 26.  Section 237D-16, Hawaii Revised Statutes, is
 
17 amended by amending subsection (a) to read as follows:
 
18      "(a)  The director of taxation shall administer and enforce
 
19 this chapter.  In respect of:
 
20      (1)  The examinations of books and records and of taxpayers
 
21           and other persons,
 
22      (2)  Procedure and powers upon failure or refusal by a
 
23           taxpayer to make a return or proper return, and
 

 
Page 50                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      (3)  The general administration of this chapter,
 
 2 the director of taxation shall have all rights and powers
 
 3 conferred by chapter [237]     with respect to taxes thereby or
 
 4 thereunder imposed; and, without restriction upon these rights
 
 5 and powers, sections [237-8 and 237-36 to 237-41]    -11 to
 
 6    -16 are made applicable to and with respect to the taxes,
 
 7 taxpayers, tax officers, and other persons, and the matters and
 
 8 things affected or covered by this chapter, insofar as not
 
 9 inconsistent with this chapter, in the same manner, as nearly as
 
10 may be, as in similar cases covered by chapter [237.]    ."
 
11      SECTION 27.  Section 238-1 Hawaii Revised Statutes, is
 
12 amended as follows:
 
13      1.  By repealing the definition of "general excise tax" to
 
14 read:
 
15      [""General excise tax law" means chapter 237, as amended
 
16 from time to time."]
 
17      2.  By amending the definition of "person" to read:
 
18      ""Person", "business", "engaging in business", "retailer",
 
19 ["wholesaler", "jobber",] and "contractor" have the meanings
 
20 defined by chapter [237.]    ."
 
21      3.  By amending the definition of "unlicensed seller" to
 
22 read:
 

 
 
 
Page 51                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      ""Unlicensed seller" means any seller who, with respect to
 
 2 the particular sale, is not subject to the tax imposed by chapter
 
 3 [237,]    , whether or not the seller holds a license under that
 
 4 chapter, but does not include any seller with respect to any sale
 
 5 which is expressly exempted from the tax imposed by chapter
 
 6 [237.]    ."
 
 7      4.  By amending the definition of "use" to read: 
 
 8      ""Use" (and any nounal, verbal, adjective, adverbial, and
 
 9 other equivalent form of the term) herein used interchangeably
 
10 means any use, whether the use is of such nature as to cause the
 
11 property to be appreciably consumed or not, or the keeping of the
 
12 property for such use or for sale, and shall include the exercise
 
13 of any right or power over tangible personal property incident to
 
14 the ownership of that property, but the term "use" shall not
 
15 include: 
 
16      (1)  Temporary use of property, not of a perishable or
 
17           quickly consumable nature, where the property is
 
18           imported into the State for temporary use (not sale)
 
19           therein by the person importing the same and is not
 
20           intended to be, and is not, kept permanently in the
 
21           State (as for example without limiting the generality
 
22           of the foregoing language:  (A) in the case of a
 
23           contractor importing permanent equipment for the
 

 
Page 52                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1           performance of a construction contract, with intent to
 
 2           remove, and who does remove, the equipment out of the
 
 3           State upon completing the contract; (B) in the case of
 
 4           moving picture films imported for use in theaters in
 
 5           the State with intent or under contract to transport
 
 6           the same out of the State after completion of such use;
 
 7           (C) in the case of a transient visitor importing an
 
 8           automobile or other belongings into the State to be
 
 9           used by the transient visitor while therein but which
 
10           are to be used and are removed upon the transient
 
11           visitor's departure from the State); 
 
12      (2)  Use by the taxpayer of property acquired by the
 
13           taxpayer solely by way of gift;
 
14      (3)  Use which is limited to the receipt of articles and the
 
15           return thereof, to the person from whom acquired,
 
16           immediately or within a reasonable time either after
 
17           temporary trial or without trial; 
 
18      (4)  Use of goods imported into the State by the owner of a
 
19           vessel or vessels engaged in interstate or foreign
 
20           commerce and held for and used only as ship stores for
 
21           the vessels; 
 
22      (5)  The use or keeping for use of household goods, personal
 
23           effects, and private automobiles imported into the
 

 
Page 53                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1           State for nonbusiness use by a person who (A) acquired
 
 2           them in another state, territory, district, or country,
 
 3           (B) at the time of the acquisition was a bona fide
 
 4           resident of another state, territory, district, or
 
 5           country, (C) acquired the property for use outside the
 
 6           State, and (D) made actual and substantial use thereof
 
 7           outside this State; provided that as to an article
 
 8           acquired less than three months prior to the time of
 
 9           its importation into the State it shall be presumed,
 
10           until and unless clearly proved to the contrary, that
 
11           it was acquired for use in the State and that its use
 
12           outside the State was not actual and substantial; 
 
13      (6)  The leasing or renting of any aircraft or the keeping
 
14           of any aircraft solely for leasing or renting to
 
15           lessees or renters using the aircraft for commercial
 
16           transportation of passengers and goods;
 
17      (7)  The use of oceangoing vehicles for passenger or
 
18           passenger and goods transportation from one point to
 
19           another within the State as a public utility as defined
 
20           in chapter 269; and
 
21      (8)  The use of material, parts, or tools imported or
 
22           purchased [by a person licensed under chapter 237 which
 
23           are used] for aircraft service and maintenance, or the
 

 
Page 54                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1           construction of an aircraft service and maintenance
 
 2           facility [as those terms are defined in section
 
 3           237-24.9].
 
 4      With regard to purchases made and distributed under the
 
 5 authority of chapter 421, a cooperative association shall be
 
 6 deemed the user thereof."
 
 7      SECTION 28.  Section 238-2, Hawaii Revised Statutes, is
 
 8 amended to read as follows:
 
 9      "238-2 Imposition of tax; exemptions.  There is hereby
 
10 levied [an excise] a tax on the use in this State of tangible
 
11 personal property which is imported, or purchased from an
 
12 unlicensed seller, for use in this State.  The tax imposed by
 
13 this chapter shall accrue when the property is acquired by the
 
14 importer or purchaser and becomes subject to the taxing
 
15 jurisdiction of the State.  The rates of the tax hereby imposed
 
16 and the exemptions thereof are as follows:
 
17      (1)  If the importer or purchaser is licensed under chapter
 
18           [237]     and is (A) a wholesaler or jobber importing
 
19           or purchasing for purposes of resale, or (B) a
 
20           manufacturer importing or purchasing material or
 
21           commodities which are to be incorporated by the
 
22           manufacturer into a finished or saleable product
 
23           (including the container or package in which the
 

 
Page 55                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

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

 
Page 56                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1           importing or purchasing material or commodities which
 
 2           are to be incorporated by the manufacturer into a
 
 3           finished or saleable product (including the container
 
 4           or package in which the product is contained) wherein
 
 5           it will remain in such form as to be perceptible to the
 
 6           senses, and which finished or saleable product is to be
 
 7           sold at retail in this State, in such manner as to
 
 8           result in a further tax on the activity of the
 
 9           manufacturer in selling such products at retail, or (C)
 
10           a contractor importing or purchasing material or
 
11           commodities which are to be incorporated by the
 
12           contractor into the finished work or project required
 
13           by the contract and which will remain in such finished
 
14           work or project in such form as to be perceptible to
 
15           the senses, [the tax shall be one-half of one per cent
 
16           of the purchase price of the property, if the purchase
 
17           and sale are consummated in Hawaii; or, if there is no
 
18           purchase price applicable thereto, or if the purchase
 
19           or sale is consummated outside of Hawaii, then one-half
 
20           of one per cent of the value of such property.] there
 
21           shall be no tax.
 
22      (3)  In all other cases, [four]       per cent of the value
 
23           of the property."
 

 
Page 57                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      SECTION 29.  Section 238-3, Hawaii Revised Statutes, is
 
 2 amended as follows:
 
 3      1.  By amending subsection (b) to read:
 
 4      "(b)  The tax imposed by this chapter shall not apply to any
 
 5 use of property the transfer of which property to, or the
 
 6 acquisition of which by, the person so using the same, has
 
 7 actually been or actually is taxed under chapter [237.]    ."
 
 8      2.  By amending subsection (f) to read:
 
 9      "(f)  The tax imposed by this chapter shall not apply to any
 
10 use or consumption of aircraft and vessels, the transfer of which
 
11 aircraft or vessel to, or the acquisition of which by, the person
 
12 so using or consuming the same, or the rental for the use of the
 
13 aircraft or vessel, has actually been or actually is taxed under
 
14 chapter [237.]    ."
 
15      3.  By amending subsection (f) to read:
 
16      "(j)  The tax imposed by this chapter shall not apply to any
 
17 use of property exempted [by section 237-26 or section 237-29.]
 
18 under chapter    ."
 
19      4.  By amending subsection (k) to read:
 
20      "(k)  The tax imposed by this chapter shall not apply to any
 
21 use of air pollution control facility exempted [by section
 
22 237-27.5.] from chapter    ." 
 

 
 
 
Page 58                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      SECTION 30.  Section 238-5, Hawaii Revised Statutes, is
 
 2 amended by amending subsections (b), and (c) to read as follows:
 
 3      "(b)  Notwithstanding subsection (a), a taxpayer may be
 
 4 eligible to file the taxpayer's return required under this
 
 5 section and make payments thereon on a quarterly or semiannual
 
 6 basis during the calendar or fiscal year, the return and payment
 
 7 to be made on or before the last day of the calendar month after
 
 8 the close of each quarter or semiannual period, to wit:
 
 9      (1)  For calendar year taxpayers filing on a quarterly
 
10           basis, on or before April 30, July 31, October 31, and
 
11           January 31;
 
12      (2)  For calendar year taxpayers filing on a semiannual
 
13           basis, on or before July 31, and January 31;
 
14      (3)  For fiscal year taxpayers filing on a quarterly basis,
 
15           on or before the last day of the fourth month, seventh
 
16           month, and tenth month following the beginning of the
 
17           fiscal year and on or before the last day of the month
 
18           following the close of the fiscal year; or
 
19      (4)  For fiscal year taxpayers filing on a semiannual basis,
 
20           on or before the last day of the seventh month
 
21           following the beginning of the fiscal year and on or
 
22           before the last day of the month following the close of
 
23           the fiscal year;
 

 
Page 59                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 if the taxpayer possesses a valid and current permit to file the
 
 2 taxpayer's [general excise] sales tax return and to make payments
 
 3 thereon on a quarterly or semiannual basis issued by the director
 
 4 pursuant to section [237-30.]    -5.  A taxpayer may also be
 
 5 eligible to make monthly payments based on the taxpayer's
 
 6 estimated quarterly or semiannual liability with a reconciliation
 
 7 return at the end of each quarter or semiannual period during the
 
 8 calendar or fiscal year, as heretofore provided, if the taxpayer
 
 9 possesses a valid and current permit to file quarterly or
 
10 semiannual reconciliation [general excise] retail sales tax
 
11 returns and to make monthly payments, issued by the director
 
12 pursuant to section [237-30.]    -5.
 
13      (c)  On or before the twentieth day of the fourth month
 
14 following the close of the taxable year, every person who has
 
15 become liable for the payment of taxes both under this chapter
 
16 and also under chapter [237]     during the preceding calendar or
 
17 fiscal year shall file a return summarizing the person's
 
18 liability under this chapter for the taxable year, in such form
 
19 as the director shall prescribe and shall file it with the
 
20 person's annual return of [general excise] retail sales taxes."
 
21      SECTION 31.  Section 238-7, Hawaii Revised Statutes, is
 
22 amended to read as follows:
 

 
 
 
Page 60                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      "238-7 Audits; additional assessments; refunds.  Sections
 
 2 [237-36 to 237-40 of the general excise]    -11 to    -15 of the
 
 3 retail sales tax law are hereby made applicable to the taxes
 
 4 imposed by this chapter, to the refunding of overpayments
 
 5 thereof, and to assessments, investigations, and audits in
 
 6 connection therewith, [for which purpose any references therein
 
 7 to "gross income" or "gross proceeds of sale" shall be deemed to
 
 8 refer to the purchase price or value, as the case may be, subject
 
 9 to tax under this chapter,] and any references to the "annual
 
10 return" shall, if the taxpayer is not required to file an annual
 
11 return under this chapter, be deemed to refer to the monthly
 
12 return mentioned in the first paragraph of section 238-5."
 
13      SECTION 32.  Section 238-13, Hawaii Revised Statutes, is
 
14 amended to read as follows:
 
15      "238-13  Other provisions of [general excise] retail sales
 
16 tax law applicable.  In respect of (1) the examination of books
 
17 and records and of taxpayers and other persons, (2) procedure and
 
18 powers upon failure or refusal by a taxpayer to make a return or
 
19 a proper return, and (3) the general administration of this
 
20 chapter, the director of taxation shall have all the rights and
 
21 powers conferred upon the director by the [general excise] retail
 
22 sales tax law with respect to taxes thereby or thereunder
 
23 imposed; and, without restriction upon these rights and powers,
 

 
Page 61                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 sections [237-8, 237-30, and 237-36 to 237-41]    -5 and    -11
 
 2 to    -16 are hereby made applicable to and with respect to the
 
 3 taxes and the taxpayers, tax officers, and other persons, and the
 
 4 matters and things affected or covered by this chapter, insofar
 
 5 as not inconsistent with this chapter, in the same manner, as
 
 6 nearly as may be, as in similar cases covered by the [general
 
 7 excise] retail sales tax law."
 
 8      SECTION 33.  Section 245-11, Hawaii Revised Statutes, is
 
 9 amended to read as follows:
 
10      "245-11  Chapter 235 and chapter [237]     applicable.  All
 
11 of the provisions of chapter 235 and chapter [237]     not
 
12 inconsistent with this chapter and which may appropriately be
 
13 applied to the taxes, persons, circumstances, and situations
 
14 involved in this chapter, including (without prejudice to the
 
15 generality of the foregoing) provisions as to penalties and
 
16 interest, and provisions granting administrative powers to the
 
17 department of taxation, and provisions for the assessment, levy,
 
18 and collection of taxes, shall be applicable to the taxes imposed
 
19 by this chapter, and to the assessment, levy, and collection
 
20 thereof."
 
21      SECTION 34.  Section 246-34.5, Hawaii Revised Statutes, is
 
22 amended to read as follows:
 

 
 
 
Page 62                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      "246-34.5  Exemptions for air pollution control facility.
 
 2 The value of all property in the State (not including a building
 
 3 and its structural components, other than a building which is
 
 4 exclusively a treatment facility) actually and solely used or to
 
 5 be used as an air pollution control facility [as the term is
 
 6 defined in chapter 237] shall be exempted from the measure of the
 
 7 taxes imposed by this chapter; provided, however, the property
 
 8 exemption shall be applicable only with respect to a certified
 
 9 facility which is property (1) the construction, reconstruction
 
10 or erection of which is completed by the taxpayer after June 30,
 
11 1969, or, (2) acquired by the taxpayer after June 30, 1969, if
 
12 the original use of the property commences with the taxpayer
 
13 after June 30, 1969; provided further the facility is placed in
 
14 service by the taxpayer before July 1, 1975. 
 
15      Application for the exemption provided herein shall first be
 
16 made with the director of health who shall, if satisfied that the
 
17 facility meets the pollution emission criteria established by the
 
18 department of health, certify to that fact.  Upon receipt of the
 
19 certification from the department of health, the director of
 
20 taxation shall exempt the facility from the tax imposed by this
 
21 chapter.  A new certificate shall be obtained from the director
 
22 of health and filed with the director of taxation every two years
 
23 certifying that the pollution control facility complies with the
 

 
Page 63                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 pollutant emission criteria established by the department of
 
 2 health.  The director of taxation shall furnish all forms
 
 3 required by this section.
 
 4      The director of taxation shall, pursuant to chapter 91,
 
 5 promulgate rules and regulations necessary to administer this
 
 6 section."
 
 7      SECTION 35.  Section 251-1, Hawaii Revised Statutes, is
 
 8 amended by amending the definition of "person" to read as
 
 9 follows:
 
10      ""Person" has the same meaning as defined in section
 
11 [237-1.]    -1."
 
12      SECTION 36.  Section 251-4, Hawaii Revised Statutes, is
 
13 amended by amending subsection (a) to read as follows:
 
14      "(a)  On or before the last day of each calendar month,
 
15 every person taxable under this chapter during the preceding
 
16 calendar month shall file a sworn return with the director in
 
17 such form as the director shall prescribe together with a
 
18 remittance for the amount of the surcharge tax in the form
 
19 required by section 251-5.  Sections [237-30 and 237-32]    -5
 
20 and    -7 shall apply to returns and penalties made under this
 
21 chapter to the same extent as if the sections were set forth
 
22 specifically in this section."
 

 
 
 
Page 64                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      SECTION 37.  Section 251-15, Hawaii Revised Statutes, is
 
 2 amended by amending subsection (a) to read as follows:
 
 3      "(a)  The director shall administer and enforce this chapter
 
 4 in respect of:
 
 5      (1)  The examination of books and records and of lessors,
 
 6           tour vehicle operators, and other persons;
 
 7      (2)  Procedure and powers upon failure or refusal by a
 
 8           person to make a return or proper return; and
 
 9      (3)  The general administration of this chapter.
 
10 All of the provisions of chapter [237]     not inconsistent with
 
11 this chapter and which may appropriately be applied to the taxes,
 
12 persons, circumstances, and situations involved in this chapter,
 
13 including (without prejudice to the generality of the foregoing)
 
14 provisions as to penalties and interest, and provisions granting
 
15 administrative powers to the department, and provisions for the
 
16 assessment, levy, and collection of taxes, shall be applicable to
 
17 the surcharge taxes imposed by this chapter, and to the
 
18 assessment, levy, and collection thereof."
 
19      SECTION 38.  Section 346E-1, Hawaii Revised Statutes, is
 
20 amended by amending the definition of "nursing facility income"
 
21 to read as follows:
 
22      ""Nursing facility income" means the total compensation
 
23 received for furnishing nursing facility services, including all
 

 
Page 65                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 receipts from "ancillary services" (as defined in 42 Code of
 
 2 Federal Regulations 413.53(b)) to the provision of nursing
 
 3 facility services, and receipts from items supplied in connection
 
 4 with these services.  "Nursing facility income" shall not include
 
 5 the following:  compensation received from services covered by
 
 6 Title XVIII of the federal Social Security Act (including
 
 7 copayments and deductibles received from beneficiaries of the
 
 8 Medicare program); income from an affiliated entity that operates
 
 9 as a prepaid health maintenance organization; settlements from
 
10 third party payors for services delivered or items supplied prior
 
11 to the effective date of this Act (such as settlements of cost
 
12 reports or decisions on rate reconsideration requests); income
 
13 from services provided by separately licensed units (such as
 
14 distinct part intermediate care facilities for the mentally
 
15 retarded); income from the provision of adult day health and
 
16 adult day care programs; income from the provision of home health
 
17 agency services; income from the provision of "nursing homes
 
18 without walls" programs; income from the provision of inpatient
 
19 hospital services; income from grants, bequests, donations,
 
20 endowments, or investments; or amounts of taxes imposed by
 
21 chapter [237]     or this chapter and passed on, collected, and
 
22 received from the consumer as part of nursing facility income."
 

 
 
 
Page 66                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      SECTION 39.  Section 346E-3, Hawaii Revised Statutes, is
 
 2 amended by amending subsection (a) to read as follows:
 
 3      "(a)  On or before the fifteenth day of February, May,
 
 4 August, and November, or for fiscal year taxpayers on or before
 
 5 the forty-fifth day after the close of the fiscal quarter, every
 
 6 operator taxable under this chapter during the preceding calendar
 
 7 or fiscal quarter shall file a sworn return with the director in
 
 8 such form as the director shall prescribe, together with a
 
 9 remittance for the amount of the tax in the form of cash, bank
 
10 draft, cashier's check, money order, or certificate of deposit.
 
11 In lieu of the remittance, the operator may request withholding
 
12 from payments made to the operator by the department under
 
13 section 346E-4.  Sections [237-30 and 237-32]    -5 and    -7
 
14 shall apply to returns and penalties made under this chapter to
 
15 the same extent as if the sections were set forth specifically in
 
16 this section."
 
17      SECTION 40.  Section 346-13, Hawaii Revised Statutes, is
 
18 amended by amending subsection (a) to read as follows:
 
19      "(a)  The director shall administer and enforce this
 
20 chapter.  With respect to:
 
21      (1)  The examinations of books and records, and operators
 
22           and other persons;
 

 
 
 
Page 67                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      (2)  Procedures and powers upon failure or refusal by an
 
 2           operator to make a return or proper return; and
 
 3      (3)  The general administration of this chapter;
 
 4 the director shall have all rights, powers, and duties conferred
 
 5 by chapters 231 and [237]     with respect to powers and duties
 
 6 or with respect to taxes imposed under chapter [237.]    .
 
 7 Without restriction upon these rights and powers, [section 237-8
 
 8 and] sections [237-36 to 237-41]    -5 and    -11 to    -16 are
 
 9 made applicable to and with respect to taxes, operators,
 
10 department officers, and other persons, and the matters and
 
11 things affected or covered by this chapter, insofar as these
 
12 sections are not inconsistent with this chapter, in the same
 
13 manner, as nearly as may be, as in similar cases covered by
 
14 chapter [237.]    ."
 
15      SECTION 41.  Section 349-10, Hawaii Revised Statutes, is
 
16 amended to read as follows:
 
17      "349-10  Annual senior citizen's fair.  Each county may
 
18 hold an annual senior citizen's fair in its respective county.
 
19 The county shall be responsible for the planning, organizing, and
 
20 coordinating of the fair in every respect.  The state policy
 
21 advisory board for elder affairs may assist the county in any
 
22 aspect upon request.  Proceeds earned from this fair are deemed
 
23 to be proceeds earned from casual sales as defined in chapter
 

 
Page 68                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 [237.]    .  The county shall distribute such proceeds to the
 
 2 various senior citizen organizations and individuals who
 
 3 participate in the fair in accordance with appropriate methods of
 
 4 distribution as determined by the county." 
 
 5      SECTION 42.  Section 356-42, Hawaii Revised Statutes, is
 
 6 amended by amending subsection (a) to read as follows:
 
 7      "(a)  [In accordance with section 237-29, the] The authority
 
 8 may approve and certify for exemption from [general excise]
 
 9 retail sales taxes eligible [gross income received] purchases by
 
10 any qualified person or firm from any qualified, newly
 
11 constructed or rehabilitated project developed under chapters 356
 
12 and 359."
 
13      SECTION 43.  Section 421-23, Hawaii Revised Statutes, is
 
14 amended to read as follows:
 
15      "421-23  Taxation.  Domestic associations organized under
 
16 this chapter shall pay an annual license fee of $10 to the
 
17 director of commerce and consumer affairs (and which shall be a
 
18 general realization of the State) which shall be in lieu of all
 
19 other corporation, franchise, and income taxes, and taxes and
 
20 charges upon reserves held by the association for distribution to
 
21 members, including without limitation upon the generality of the
 
22 foregoing any taxes imposed under chapter 235.
 

 
 
 
Page 69                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      To obtain the exemptions from taxation granted by this
 
 2 section or any other law, the association annually shall file
 
 3 with the director of taxation a copy of its report made under
 
 4 section 421-22, and in addition thereto, within ninety days after
 
 5 the close of its fiscal year, shall file with the tax assessor of
 
 6 each district in which there are persons doing business to whom
 
 7 it has paid, during the preceding fiscal year, any proceeds of
 
 8 goods marketed, a report showing the name of each person to whom
 
 9 the proceeds were paid, the total proceeds of sales for which
 
10 such person is taxable under chapter [237]     for the fiscal
 
11 year, and the rate or rates of such tax applicable thereto or to
 
12 the several amounts thereof, as the case may be."
 
13      SECTION 44.  Section 421H-4, Hawaii Revised Statutes, is
 
14 amended by amending subsection (c) to read as follows:
 
15      "(c)  The membership shares and cooperative fees are
 
16 interests in real property for purposes of[:
 
17      (1)  Cooperative] cooperative housing corporations under
 
18           section 216 of the federal Internal Revenue Code of
 
19           1954, as amended[; and
 
20      (2)  Exemption from state general excise tax under section
 
21           237-24(16)]."
 
22      SECTION 45.  Section 431:7-204, Hawaii Revised Statutes, is
 
23 amended to read as follows:
 

 
Page 70                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      "431:7-204  In lieu provision.  As to insurers, the taxes
 
 2 and fees imposed by section 431:7-201 to section 431:7-204, and
 
 3 the fees imposed by this code, when paid shall be in settlement
 
 4 of and in lieu of all demands for taxes, licenses, or fees of
 
 5 every character imposed by the laws of this State, the ordinances
 
 6 or other laws, rules, or regulations of any county of this State,
 
 7 except:
 
 8      (1)  As expressly otherwise provided;
 
 9      (2)  Taxes on real property;
 
10      (3)  Taxes on the purchase, use, or ownership of tangible
 
11           personal property; and
 
12      (4)  Taxes on gross income, gross proceeds, gross rental, or
 
13           gross rental proceeds under chapter [237 or] 237D.
 
14 Nothing in this section shall be deemed to exempt insurers from
 
15 liability for withholding taxes payable by their employees and
 
16 paying the same to the proper collection officers, or from
 
17 keeping such records, and making such returns and reports, as may
 
18 be required in the case of other persons enjoying tax exemption."
 
19      SECTION 46.  Section 432:2-503, Hawaii Revised Statutes, is
 
20 amended to read as follows:
 
21      "432:2-503  Taxation.  Every society organized and
 
22 operating or licensed under this article shall be, from the time
 
23 of such organization, exempt from every state, county, and
 

 
Page 71                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 municipal tax, except real property taxes and unemployment
 
 2 compensation taxes; provided that nothing in this section shall
 
 3 be deemed to exempt the association or society from liability to
 
 4 withhold such taxes payable by its employees and pay the same to
 
 5 the proper collection officers, and to keep such records and make
 
 6 such returns and reports, as may be required in the case of other
 
 7 corporations, associations, or societies similarly exempt from
 
 8 the taxes hereinabove first mentioned[; provided further, that
 
 9 the exemption hereby granted as to general excise taxes under
 
10 chapter 237 shall not apply to any activity the primary purpose
 
11 of which is to produce income]."
 
12      SECTION 47.  Section 444-17, Hawaii Revised Statutes, is
 
13 amended to read as follows:
 
14      "444-17 Revocation, suspension, and renewal of licenses.
 
15 In addition to any other actions authorized by law, the board may
 
16 revoke any license issued pursuant to this section, or suspend
 
17 the right of a licensee to use a license, or refuse to renew a
 
18 license for any cause authorized by law, including but not
 
19 limited to the following:
 
20      (1)  Any dishonest, fraudulent, or deceitful act as a
 
21           contractor that causes substantial damage to another;
 
22      (2)  Engaging in any unfair or deceptive act or practice as
 
23           prohibited by section 480-2;
 

 
Page 72                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      (3)  Abandonment of any construction project or operation
 
 2           without reasonable or legal excuse;
 
 3      (4)  Wilful diversion of funds or property received for
 
 4           prosecution or completion of a specific construction
 
 5           project or operation, or for a specified purpose in the
 
 6           prosecution or completion of any construction project
 
 7           or operation, and the use thereof for any other
 
 8           purpose;
 
 9      (5)  Wilful departure from, or wilful disregard of plans or
 
10           specifications in any material respect without consent
 
11           of the owner or the owner's duly authorized
 
12           representative, that is prejudicial to a person
 
13           entitled to have the construction project or operation
 
14           completed in accordance with those plans and
 
15           specifications;
 
16      (6)  Wilful violation of any law of the State, or any
 
17           county, relating to building, including any violation
 
18           of any applicable rule of the department of health, or
 
19           of any applicable safety or labor law;
 
20      (7)  Failure to make and keep records showing all contracts,
 
21           documents, records, receipts, and disbursements by a
 
22           licensee of all the licensee's transactions as a
 
23           contractor for a period of not less than three years
 

 
Page 73                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1           after completion of any construction project or
 
 2           operation to which the records refer or to permit
 
 3           inspection of those records by the board;
 
 4      (8)  When the licensee being a partnership or a joint
 
 5           venture permits any partner, member, or employee of the
 
 6           partnership or joint venture who does not hold a
 
 7           license to have the direct management of the
 
 8           contracting business thereof;
 
 9      (9)  When the licensee being a corporation permits any
 
10           officer or employee of the corporation who does not
 
11           hold a license to have the direct management of the
 
12           contracting business thereof;
 
13     (10)  Misrepresentation of a material fact by an applicant in
 
14           obtaining a license;
 
15     (11)  Failure of a licensee to complete in a material respect
 
16           any construction project or operation for the agreed
 
17           price if the failure is without legal excuse;
 
18     (12)  Wilful failure in any material respect to comply with
 
19           this chapter or the rules adopted pursuant thereto;
 
20     (13)  Wilful failure or refusal to prosecute a project or
 
21           operation to completion with reasonable diligence;
 
22     (14)  Wilful failure to pay when due a debt incurred for
 
23           services or materials rendered or purchased in
 

 
Page 74                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1           connection with the licensee's operations as a
 
 2           contractor when the licensee has the ability to pay or
 
 3           when the licensee has received sufficient funds
 
 4           therefor as payment for the particular operation for
 
 5           which the services or materials were rendered or
 
 6           purchased;
 
 7     (15)  The false denial of any debt due or the validity of the
 
 8           claim therefor with intent to secure for a licensee,
 
 9           the licensee's employer, or other person, any discount
 
10           of the debt or with intent to hinder, delay, or defraud
 
11           the person to whom the debt is due;
 
12     (16)  Failure to secure or maintain workers' compensation
 
13           insurance, unless the licensee is authorized to act as
 
14           a self-insurer under chapter 386 or is excluded from
 
15           the requirements of chapter 386;
 
16     (17)  Entering into a contract with an unlicensed contractor
 
17           involving work or activity for the performance of which
 
18           licensing is required under this chapter;
 
19     (18)  Performing service on a residential or commercial air
 
20           conditioner, utilizing CFCs, without using refrigerant
 
21           recovery and recycling equipment;
 
22     (19)  Performing service on any air conditioner after
 
23           January 1, 1994, without successful completion of an
 

 
Page 75                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1           appropriate training course in the recovery and
 
 2           recycling of CFC and HCFC refrigerants, which included
 
 3           instruction in the proper use of refrigerant recovery
 
 4           and recycling equipment that is certified by
 
 5           Underwriters Laboratories, Incorporated;
 
 6     (20)  Violating chapter 342C; and
 
 7     (21)  Failure to pay delinquent taxes, interest, and
 
 8           penalties assessed [under chapter 237] that relate to
 
 9           the business of contracting, or to comply with the
 
10           terms of a conditional payment plan with the department
 
11           of taxation for the payment of such delinquent taxes,
 
12           interest, and penalties."
 
13      SECTION 48.  Section 481I-3, Hawaii Revised Statutes, is
 
14 amended by amending subsection (b) to read as follows:
 
15      "(b)  If the manufacturer, its agents, distributors, or
 
16 authorized dealers are unable to conform the motor vehicle to any
 
17 applicable express warranty by repairing or correcting any defect
 
18 or condition which substantially impairs the use, market value,
 
19 or safety of the motor vehicle after a reasonable number of
 
20 documented attempts, then the manufacturer shall provide the
 
21 consumer with a replacement motor vehicle or accept return of the
 
22 vehicle from the consumer and refund to the consumer the
 
23 following:  the full purchase price including, but not limited
 

 
Page 76                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 to, charges for undercoating, dealer preparation, transportation
 
 2 and installed options, and all collateral and incidental charges,
 
 3 excluding finance and interest charges, and less a reasonable
 
 4 offset for the consumer's use of the motor vehicle.
 
 5      If either a replacement motor vehicle or a refund is
 
 6 awarded, an "offset" may be made for damage to the vehicle not
 
 7 attributable to normal wear and tear, if unrelated to the
 
 8 nonconformity.  Refunds made pursuant to this subsection shall be
 
 9 deemed to be refunds of the sales price and treated as such for
 
10 purposes of [section 237-3.] chapter    .  Refunds shall be made
 
11 to the consumer and lienholder, if any, as their interests may
 
12 appear on the records of ownership.  If applicable, refunds shall
 
13 be made to the lessor and lessee pursuant to rules adopted by the
 
14 department of commerce and consumer affairs."
 
15      SECTION 49.  Section 842-11, Hawaii Revised Statutes, is
 
16 amended to read as follows:
 
17      "842-11  Failure to report income; penalty.  Any law to the
 
18 contrary notwithstanding, no person shall willfully fail to
 
19 report income or to pay the taxes due thereon as provided by
 
20 [chapters] chapter 235 or [237.]    .  Whoever violates this
 
21 section shall be fined not more than $10,000 or imprisoned not
 
22 more than ten years, or both, in addition to any assessment and
 
23 collection of taxes, penalties and interest to which the State
 
24 may be entitled under chapters 235 and [237.]    ."
 

 
Page 77                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      SECTION 50.  Chapter 237, Hawaii Revised Statutes, is
 
 2 repealed.
 
 3      SECTION 51.  Section 46-16.7, Hawaii Revised Statutes, is
 
 4 repealed.
 
 5      ["46-16.7  County general excise and use tax surcharge.
 
 6 (a)  Each county, except the county of Kalawao, may establish a
 
 7 general excise and use tax surcharge of one-half per cent.  Each
 
 8 county shall establish the general excise and use tax surcharge
 
 9 by ordinance adopted before October 1, 1992, which shall take
 
10 effect on January 1, 1993, and remain in effect for ten years
 
11 through December 31, 2002, unless earlier repealed, pursuant to
 
12 subsection (c).  No ordinance shall be adopted until the county
 
13 has conducted a public hearing on the proposed ordinance.  Notice
 
14 of the public hearing shall be published in a newspaper of
 
15 general circulation within the county at least twice within a
 
16 period of thirty days immediately preceding the date of the
 
17 hearing.  If a county fails to adopt a county general excise and
 
18 use tax surcharge ordinance by October 1, 1992, the county shall
 
19 not be covered by this section.
 
20      (b)  Each county shall notify the director of taxation
 
21 within ten days after the county has adopted a general excise and
 
22 use tax surcharge ordinance, and the director of taxation shall
 
23 levy, assess, collect, and otherwise administer the general
 

 
Page 78                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 excise and use tax surcharge for the taxable year beginning
 
 2 January 1, 1993, and for taxable years thereafter through
 
 3 December 31, 2002, as provided by chapters 237 and 238.
 
 4      (c)  The general excise and use tax surcharges received from
 
 5 the State by each county shall be used as follows:
 
 6      (1)  The city and county of Honolulu shall use the
 
 7           surcharges to develop a fixed rail rapid transit
 
 8           system.  All private source revenues generated or
 
 9           pledged to develop a fixed rail rapid transit system
 
10           that are received prior to the operation of the system
 
11           shall be used as county matching funds for moneys
 
12           requested from the transit capital development fund,
 
13           pursuant to chapter 51D, before surcharges may be used.
 
14           The director of finance shall determine whether or not
 
15           private sources are adequate to meet county matching
 
16           requirements.  The director of finance shall submit a
 
17           report of the findings to the legislature.  Upon
 
18           legislative acceptance of the findings, within sixty
 
19           days of the first regular legislative session convened
 
20           following the submittal of the findings, no additional
 
21           moneys may be expended from the transit fund; provided
 
22           that:
 

 
 
 
Page 79                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1           (A)  Such limitation on the expenditure of moneys from
 
 2                the transit fund shall not occur prior to
 
 3                December 31, 1992; and
 
 4           (B)  Private source revenues received prior to the
 
 5                operation of the system or received in each year
 
 6                that the surcharge is in effect shall be committed
 
 7                to the funding of the capital costs of the fixed
 
 8                rail rapid transit system prior to any
 
 9                determination regarding the duration of the
 
10                surcharge.
 
11      (2)  All surcharges collected by the State for the city and
 
12           county of Honolulu but not used for the purpose of
 
13           developing a fixed rail rapid transit system shall be
 
14           deposited into the state treasury to be returned to the
 
15           taxpayers who resided in the city and county of
 
16           Honolulu for more than two hundred days of the taxable
 
17           year in the aggregate during the time that the
 
18           surcharges were collected, in the form of an income tax
 
19           credit, the amount of the credit to be determined by
 
20           law.
 
21      (3)  The general excise and use tax surcharge shall be
 
22           repealed upon the determination by the director of
 
23           finance that all authorized capital costs of the fixed
 

 
Page 80                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1           rail rapid transit system or county projects under
 
 2           paragraph (4) have been collected and distributed
 
 3           pursuant to chapter 248.
 
 4      (4)  The counties of Hawaii, Kauai, and Maui shall use the
 
 5           surcharges for public transportation systems, including
 
 6           mass transportation, sewage, or water development, and
 
 7           parks, including park operation, maintenance,
 
 8           infrastructure, or purchase.
 
 9      (d)  As used in this section:
 
10      "Capital costs" means nonrecurring costs required to
 
11 construct a transit facility or system, including debt service,
 
12 costs of land acquisition and development, acquiring of rights-
 
13 of-way, planning, design, and construction, including equipping
 
14 and furnishing the facility or system.
 
15      "Private source revenue" means all funds, concessions,
 
16 development rights, or those assets of value contractually agreed
 
17 upon with the county from sources other than state, county, or
 
18 federal governments as a result of, or for the purposes of,
 
19 developing mass transportation."]
 
20      SECTION 52.  Section 182-16, Hawaii Revised Statutes, is
 
21 repealed.
 

 
 
 
 
 
Page 81                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      ["[182-16]  Levy and assessment of general excise tax.
 
 2 Notwithstanding any provision to the contrary, the levy and
 
 3 assessment of the general excise tax on the gross proceeds from
 
 4 any manner of sale of (1) geothermal resources or (2) electrical
 
 5 energy produced by the geothermal resources producer from such
 
 6 geothermal resources, shall be made only as a tax on the business
 
 7 of a producer, at the rate assessed producers, under section
 
 8 237-13(2)(A)."]
 
 9      SECTION 53.  Section 209E-11, Hawaii Revised Statutes, is
 
10 repealed.
 
11      ["209E-11  State general excise and use tax exemptions.
 
12 The department shall certify annually to the department of
 
13 taxation that any qualified business is exempt from the payment
 
14 of general excise taxes on the gross proceeds from the
 
15 manufacture of tangible personal property, the wholesale sale of
 
16 tangible personal property, or the engaging in a service business
 
17 by a qualified business in the enterprise zone and exempt from
 
18 the use tax for purchases by a qualified business.  The gross
 
19 proceeds received by a contractor shall be exempt from the
 
20 general excise tax for construction within an enterprise zone
 
21 performed for a qualified business within an enterprise zone.
 
22 The exemption shall extend for a period not to exceed seven
 
23 years."]
 

 
Page 82                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      SECTION 54.  Section 235-16, Hawaii Revised Statutes, is
 
 2 repealed.
 
 3      ["235-16  County surcharge excise tax credit.  (a)  If the
 
 4 collection of the county general excise and use tax surcharge
 
 5 starts on January 1, 1993, as provided in sections 46-16.7,
 
 6 237-8.5, and 238-2.5, then for taxable years, in each year that
 
 7 the surcharge is in effect, beginning after December 31, 1992,
 
 8 and ending before January 1, 2003, each resident individual
 
 9 taxpayer, who files an individual income tax return for a taxable
 
10 year, and who is not claimed or is not otherwise eligible to be
 
11 claimed as a dependent by another taxpayer for federal or Hawaii
 
12 state individual income tax purposes, may claim a county
 
13 surcharge excise tax credit in the amount computed under this
 
14 section against the resident taxpayer's individual income tax
 
15 liability for the taxable year for which the individual income
 
16 tax return is being filed; provided that a resident individual
 
17 who has no income or no income taxable under this chapter and who
 
18 is not claimed or is not otherwise eligible to be claimed as a
 
19 dependent by a taxpayer for federal or Hawaii state individual
 
20 income tax purposes may claim this credit.
 
21      (1)  Each resident individual taxpayer who resides for more
 
22           than two hundred days of the taxable year in the
 
23           aggregate in a county in which the county general
 

 
Page 83                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1           excise and use tax surcharge is in effect may claim the
 
 2           tax credit according to the adjusted gross income
 
 3           bracket shown in the following schedule:
 
 4                        TAX CREDIT SCHEDULE
 
 5           Adjusted Gross Income             Tax Credit
 
 6                    Under $5,000                $ 25
 
 7            $5,000 under $10,000                  45
 
 8           $10,000 under $15,000                  65
 
 9           $15,000 under $20,000                  90
 
10           $20,000 under $30,000                 110
 
11           $30,000 under $40,000                 125
 
12           $40,000 under $50,000                 145
 
13           $50,000 under $75,000                 185
 
14          $75,000 under $100,000                 205
 
15               $100,000 and over                 210
 
16      (2)  Each resident individual taxpayer who resides for more
 
17           than two hundred days of the taxable year in the
 
18           aggregate in a county which has not adopted the county
 
19           general excise and use tax surcharge may claim a tax
 
20           credit according to the adjusted gross income bracket
 
21           shown in the schedule below:
 

 
 
 
 
 
Page 84                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1                        TAX CREDIT SCHEDULE
 
 2           Adjusted Gross Income             Tax Credit
 
 3                    Under $5,000                 $ 5
 
 4            $5,000 under $10,000                  10
 
 5           $10,000 under $20,000                  15
 
 6           $20,000 under $30,000                  20
 
 7           $30,000 under $40,000                  25
 
 8           $40,000 under $50,000                  30
 
 9           $50,000 under $75,000                  35
 
10                $75,000 and over                  40
 
11      A husband and wife filing separate returns for a taxable
 
12 year for which a joint return could have been filed by them shall
 
13 claim only the tax credit to which they would have been entitled
 
14 had a joint return been filed.
 
15      (b)  The tax credit under this section shall not be
 
16 available to (1) any person who has been convicted of a felony
 
17 and who has been committed to prison and has been physically
 
18 confined for the full taxable year; (2) any person who would
 
19 otherwise be eligible to be claimed as a dependent but who has
 
20 been committed to a youth correctional facility and has resided
 
21 at the facility for the full taxable year; or (3) any
 
22 misdemeanant who has been committed to jail and has been
 
23 physically confined for the full taxable year.
 

 
Page 85                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      (c)  The tax credits claimed by a resident taxpayer pursuant
 
 2 to this section shall be deductible from the resident taxpayer's
 
 3 individual income tax liability, if any, for the tax year in
 
 4 which they are properly claimed.  If the tax credits claimed by a
 
 5 resident taxpayer exceed the amount of income tax payment due
 
 6 from the resident taxpayer, the excess of credits over payments
 
 7 due shall be refunded to the resident taxpayer; provided that tax
 
 8 credits properly claimed by a resident individual who has no
 
 9 income tax liability shall be paid to the resident individual.
 
10      (d)  If the tax credit is claimed by an individual who does
 
11 not reside in the appropriate county as set forth in subsection
 
12 (a)(1) or (a)(2), there shall be added to and become a part of
 
13 the tax liability of the individual:
 
14      (1)  The amount of the tax credit claimed under this section
 
15           multiplied by three; or
 
16      (2)  Ten per cent of the income tax liability for the
 
17           taxable year for which the individual income tax return
 
18           is being filed,
 
19 whichever is greater.
 
20      All claims for tax credits under this section, including any
 
21 amended claims, must be filed on or before the end of the twelfth
 
22 month following the close of the taxable year for which the
 
23 credits may be claimed.  Failure to comply with the foregoing
 

 
Page 86                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 provision shall constitute a waiver of the right to claim the
 
 2 credit."]
 
 3      SECTION 55.  Section 238-4, Hawaii Revised Statutes, is
 
 4 repealed.
 
 5      ["238-4 Certain property used by producers.  If a licensed
 
 6 producer, or a cooperative association acting under the authority
 
 7 of chapter 421 or 422, in order to sell to such producer, or a
 
 8 licensed person, imports into the State or acquires in the State
 
 9 commodities, materials, items, services, or living things
 
10 enumerated in section 237-4(3) and (5) to (7), then section 237-4
 
11 shall apply.  If section 237-4 applies and the producer is
 
12 engaged in the sale of the producer's products at retail or in
 
13 any manner other than at wholesale, then the tax upon use of
 
14 property in the State imposed by section 238-2(2) shall apply the
 
15 same as in the case of a purchaser who is a licensed retailer.
 
16 In other such cases no tax shall be imposed under this chapter."] 
 
17      SECTION 56.  Section 239-6, Hawaii Revised Statutes, is
 
18 repealed.
 
19      ["239-6 Airlines, certain carriers.  There shall be levied
 
20 and assessed upon each airline a tax of four per cent of its
 
21 gross income each year from the airline business; provided that
 
22 if an airline adopts a rate schedule for students in grade twelve
 
23 or below travelling in school groups providing such students at
 

 
Page 87                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 reasonable hours a rate less than one-half of the regular adult
 
 2 fare, the tax shall be three per cent of its gross income each
 
 3 year from the airline business.  There shall be levied and
 
 4 assessed upon each motor carrier, each common carrier by water,
 
 5 and upon each contract carrier other than a motor carrier, a tax
 
 6 of four per cent of its gross income each year from the motor
 
 7 carrier or contract carrier business.  The tax imposed by this
 
 8 section is a means of taxing the personal property of the airline
 
 9 or other carrier, tangible and intangible, including going
 
10 concern value, and is in lieu of the tax imposed by chapter 237
 
11 but is not in lieu of any other tax."] 
 
12      SECTION 57.  Section 248-2.5, Hawaii Revised Statutes, is
 
13 repealed.
 
14      ["[248-2.5]  County general excise and use tax surcharge;
 
15 disposition of proceeds.(a)  All county general excise and use
 
16 tax surcharges collected by the director of taxation shall be
 
17 paid into the state treasury each month within ten working days
 
18 after collection, and shall be kept by the state director of
 
19 finance in special accounts.  Out of the county general excise
 
20 and use tax surcharges paid into the state treasury special
 
21 accounts, the state director of finance shall retain, from time
 
22 to time, sufficient amounts to reimburse the State for the costs
 
23 of assessment, collection, and disposition of the county general
 

 
Page 88                                                    188
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 excise and use tax surcharge incurred by the State.  Amounts
 
 2 retained shall be general fund realizations of the State.
 
 3      (b)  The costs of assessment, collection, and disposition of
 
 4 county general excise and use tax surcharges shall be withheld
 
 5 from payment to the several counties by the State out of the
 
 6 county general excise and use tax surcharges collected for the
 
 7 current calendar year.
 
 8      The costs of assessment, collection, and disposition of the
 
 9 county general excise and use tax surcharges shall be borne by
 
10 each of the several counties in an amount proportional to the
 
11 total amount of surcharges allocated to that county divided by
 
12 the total amount of surcharges collected for the entire State for
 
13 the preceding calendar year.
 
14      For the purpose of this section, the costs of assessment,
 
15 collection, and disposition of the county general excise and use
 
16 tax surcharges shall include any and all costs, direct or
 
17 indirect, which are deemed necessary and proper to effectively
 
18 administer this section and sections 237-8.5 and 238-2.5.  Costs
 
19 include refunds or reductions of income taxes under section
 
20 235-110.7 attributable to the county general excise and use tax
 
21 surcharge.
 
22      (c)  After the deduction of the costs under subsection (b),
 
23 the state director of finance shall pay the remaining balance on
 

 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 a monthly or quarterly basis to the director of finance for each
 
 2 county which has adopted a county general excise and use tax
 
 3 surcharge under section 46-16.7.  The payments shall be made as
 
 4 soon as possible after the county general excise and use tax
 
 5 surcharges have been paid into the state treasury special
 
 6 accounts, or after the disposition of any tax appeal, as the case
 
 7 may be.  All county general excise and use tax surcharges
 
 8 collected shall be distributed by the state director of finance
 
 9 to the county in which the county general excise tax surcharge is
 
10 generated and shall be a general fund realization of the county
 
11 to be used for the purposes specified in section 46-16.7 by each
 
12 of the several counties."]
 
13                  PART IV.  GOVERNMENT EFFICIENCY
 
14      SECTION 58.  The following departments and agencies shall
 
15 draft implementation plans toward self-sufficiency.  This shall
 
16 be attained through the use of fees for services or other similar
 
17 provisions which the department or agency formulate.
 
18      No later than twenty days prior to the regular session of
 
19 2001, each department and agency shall submit a detailed plan for
 
20 self-sufficiency including:
 
21      1.   The department or agency's total budget;
 
22      2.   Areas within the department or agency which could
 
23           provide income through fees;
 

 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      3.   The amount of each fee proposed and an estimate of the
 
 2           total income which that fee would generate;
 
 3      4.   Total savings to the department of instituting the
 
 4           fees; and
 
 5      5.   Proposed legislation to accomplish a change-over to a
 
 6           fee structure.
 
 7                    PART V. GENERAL PROVISIONS
 
 8      SECTION 59.  Statutory material to be repealed is bracketed.
 
 9 New statutory material is underscored.
 
10      SECTION 60.  This Act shall take effect on January 1, 2000;
 
11 provided that:
 
12      (1)  Parts II and III shall take effect on January 1, 2004;
 
13           provided that all general excise and income tax rates
 
14           shall be cut by twenty per cent of the current rate
 
15           each year beginning on January 1, 2000, until the rates
 
16           reach zero on January 1, 2004; and
 
17      (2)  Twenty percent of the retail sales tax rate shall
 
18           become effective on January 1, 2000, with an additional
 
19           twenty percent of the rate becoming effective each year
 
20           until the full rate is in effect on January 1, 2004.