Honolulu, Hawaii
                                                     , 1999

                                   RE:  S.B. No. 788
                                        S.D. 2

Honorable Norman Mizuguchi
President of the Senate
Twentieth State Legislature
Regular Session of 1999
State of Hawaii


     Your Committee on Ways and Means, to which was referred S.B.
No. 788, S.D. 1, entitled: 


begs leave to report as follows:

     The purpose of this measure is to require cigarette or
tobacco licensees to affix a stamp certifying payment of
applicable excise taxes on packages of cigarettes prior to being
sold to the general public.

     Testimony in support of this measure was received from the
Hawaii State Department of Health, American Lung Association, and
American Heart Association.  Testimony in support of this measure
with reservations was received from the Department of Taxation.
Testimony commenting on this measure was received from the Tax
Foundation of Hawaii.  One individual submitted testimony in
opposition to this measure.

     Your Committee finds that this measure will provide for
greater assurance that state cigarette taxes are paid thereby
reducing the sales of untaxed cigarettes and keeping the price of
the product at market levels.  As a result, there will be greater
assurance that untaxed cigarettes, which are less expensive, will
not find their way into the hands of minors.  Therefore, minors
will be discouraged from experimenting with smoking cigarettes
and the likelihood of them becoming adult smokers will be

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                                   STAND. COM. REP. NO. 723
                                   Page 2

     Your Committee has amended this measure by:

     (1)  Deleting as unnecessary, the provision that permits
          cigarette or tobacco licensees to include in the price
          of taxed cigarettes a percentage of the value of the

     (2)  Replacing the Legislative Auditor with the Director of
          Taxation as the designee with the responsibility of
          determining whether this measure has the effect of
          reducing the loss of cigarette tax revenue to the State
          from the illegal sale of untaxed cigarettes;

     (3)  Requiring the Director of Taxation to submit a report
          to the Legislature twenty days prior to the beginning
          of the Regular Session of 2005 and allowing the
          Director to submit an interim report of any findings
          regarding the effectiveness of this measure; and

     (4)  Making technical, nonsubstantive changes for purposes
          of clarity and preferred drafting style.

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

                                 Respectfully submitted on behalf
                                 of the members of the Committee
                                 on Ways and Means,

                                 CAROL FUKUNAGA, Co-Chair

                                 ANDREW LEVIN, Co-Chair

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