STAND. COM. REP. NO. 1426

                                 Honolulu, Hawaii
                                                   , 1999

                                 RE: S.B. No. 1177
                                     S.D. 1
                                     H.D. 1
                                     



Honorable Calvin K.Y. Say
Speaker, House of Representatives
Twentieth State Legislature
Regular Session of 1999
State of Hawaii

Sir:

     Your Committee on Economic Development and Business
Concerns, to which was referred S.B. No. 1177, S.D. 1, entitled: 

     "A BILL FOR AN ACT RELATING TO THE GENERAL EXCISE TAX,"

begs leave to report as follows:

     The purpose of this bill is to:

     (1)  Provide that sales to a licensed retail merchant,
          jobber, or other licensed seller of bulk condiments or
          prepackaged single-serving packets of condiments that
          are provided to customers are subject to the general
          excise tax at the wholesale rate of one-half percent;
          and

     (2)  Clarify that sales to a licensed retail merchant,
          jobber, or other licensed seller of tangible personal
          property that will be incorporated or processed by the
          licensed seller into a finished or saleable product
          during the course of its preparation for market, and
          will be sold and not otherwise used by the licensed
          retail merchant, jobber, or licensed seller at retail
          is subject to the general excise tax at the wholesale
          rate of one-half percent.

     The Department of Taxation, the Hawaii Restaurant
Association, Legislative Information Services of Hawaii, and an

 
 
 
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                                 Page 2

 
individual submitted testimony in support of this measure.  The
Tax Foundation of Hawaii submitted comments.

     Based on the recommendations of the Department of Taxation,
your Committee has amended this bill by:

     (1)  Clarifying that the one-half percent intermediary
          services general excise tax rate is applicable to
          persons providing professional services, not otherwise
          taxed, under the General Excise Tax law; and

     (2)  Making technical, nonsubstantive amendments for
          purposes of style and clarity.

     As affirmed by the record of votes of the members of your
Committee on Economic Development and Business Concerns that is
attached to this report, your Committee is in accord with the
intent and purpose of S.B. No. 1177, S.D. 1, as amended herein,
and recommends that it pass Second Reading in the form attached
hereto as S.B. No. 1177, S.D. 1, H.D. 1, and be referred to the
Committee on Finance.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Economic
                                   Development and Business
                                   Concerns,



                                   ______________________________
                                   ROBERT N. HERKES, Chair