Honolulu, Hawaii
                                                   , 1999

                                 RE: S.B. No. 788
                                     S.D. 2
                                     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 Health, to which was referred S.B. No.
788, S.D. 2, entitled: 


begs leave to report as follows:

     The purpose of this bill is to ensure that state cigarette
excise taxes are paid by:

     (1)  Requiring that each package of cigarettes sold in the
          State be identified with a stamp signifying that the
          cigarette tax has been paid; and

     (2)  Including civil and criminal penalties to be enforced
          by the police departments, liquor commissions,
          prosecuting attorneys, and the Attorney General.

     The Department of Health and the American Lung Association
testified in support of this measure.  The Department of Taxation
and the Tax Foundation of Hawaii submitted comments on this

     Your Committee notes that this bill is similar in general
purpose and intent as H.B. No. 176, H.D. 2, which was passed out
of the House of Representatives after public hearings before this
Committee and the Committee on Finance.

     Your Committee has amended this measure by:

                                 STAND. COM. REP. NO. 1259
                                 Page 2


     (1)  Providing for the repeal of this law in 2005 upon a
          finding by the Legislative Auditor that this law has
          not reduced the loss of tax revenue due to the illegal
          sale of untaxed cigarettes, instead of the automatic
          "drop dead" date which would require further
          legislative action prior to 2005, should the measure
          prove effective; 

     (2)  Allowing licensees to include a percentage of the stamp
          value in the retail price to cover the stamp fee and
          other costs incurred by licensees;

     (3)  Providing that violations shall be either misdemeanors
          or Class C felonies; and

     (4)  Deleting the forfeiture penalty for violations.

     As affirmed by the record of votes of the members of your
Committee on Health that is attached to this report, your
Committee is in accord with the intent and purpose of S.B. No.
788, S.D. 2, as amended herein, and recommends that it pass
Second Reading in the form attached hereto as S.B. No. 788, S.D.
2, H.D. 1, and be referred to the Committee on Finance.

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

                                   ALEXANDER C. SANTIAGO, Chair