Honolulu, Hawaii
                                                   , 1999

                                 RE: S.B. No. 638
                                     S.D. 1
                                     H.D. 2

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.
638, 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 on the sale of services by
reducing to one-half of one percent the tax rate on the wholesale
sale of services that are currently taxed at a four percent rate.
The reduction would occur over a seven-year phase-in period.

     The Hawaii Association of Realtors, the Honolulu Japanese
Chamber of Commerce, the Hawaii Business Roundtable, the Retail
Merchants of Hawaii, the Building Industry Association of Hawaii,
the Pacific Resource Partnership, the Big Island Business
Council, the Hawaii Farm Bureau, West Hawaii Concrete, the
Filipino Chamber of Commerce of Hawaii, the Hawaii Business
League, Aloha Airlines, the Tax Section of the Hawaii State Bar
Association, the Tax Committee of the Hawaii Society of Certified
Public Accountants, and the Chamber of Commerce of Hawaii
testified in support of the bill.  The Department of Taxation
testified in support of the intent of the measure.  The Tax
Foundation of Hawaii commented on the measure.

     Your Committee has amended the bill by:

                                 STAND. COM. REP. NO. 1836
                                 Page 2

     (1)  Clarifying that sales of services to licensed
          contractors and persons furnishing transient
          accommodations are wholesale sales that are subject to
          the reduced tax rate;

     (2)  Clarifying that the wholesale sale of tangible personal
          property is subject to the reduced tax rate; and

     (3)  Making technical, nonsubstantive revisions for style
          and clarity.

     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.
638, S.D. 1, H.D. 1, as amended herein, and recommends that it
pass Third Reading in the form attached hereto as S.B. No. 638,
S.D. 1, H.D. 2.

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

                                   DWIGHT Y. TAKAMINE, Chair