STAND. COM. REP. NO. 1804_______

                                 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


     Your Committee on Finance, to which was referred S.B. No.
1177, S.D. 1, H.D. 1, entitled: 


begs leave to report as follows:

     The purpose of this bill is to reduce the effect of the
"pyramiding" of the general excise tax by:

     (1)  Reducing the tax rate from the retail rate of four
          percent to the wholesale rate of one-half of one
          percent for:

          (A)  Sales to a licensed seller of prepackaged, single-
               serving packets of condiments furnished to
               customers; and

          (B)  Sales of tangible personal property to a licensed
               seller who incorporates or processes the property
               into a finished product and resells the property
               at retail;

     (2)  Applying the one-half percent intermediary services
          rate to professionals.

     The Department of Taxation, Fleming Companies, Haagen-Dazs
Shops Hawaii, Kyotaru Hawaii Corporation, Bernard's New York

                                 STAND. COM. REP. NO. 1804_______
                                 Page 2

Deli, Theo Davies Food Service Group, Hawaii Restaurant
Association, and McDonald's testified in support of the bill.
The Tax Foundation of Hawaii and 3660 on the Rise commented on
the measure.

     As affirmed by the record of votes of the members of your
Committee on Finance that is attached to this report, your
Committee is in accord with the intent and purpose of S.B. No.
1177, S.D. 1, H.D. 1, and recommends that it pass Third Reading.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Finance,

                                   DWIGHT Y. TAKAMINE, Chair