REPORT TITLE:
GET; Taxes Due


DESCRIPTION:
Provides a wholesale sale for general excise and use tax purposes
occurs when a printer sells to a magazine publisher who under
contract distributes some of those magazines without a charge to
the persons who receive the magazine.  (CD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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THE SENATE                              S.B. NO.           S.D. 1
TWENTIETH LEGISLATURE, 2000                                H.D. 1
STATE OF HAWAII                                            C.D. 1
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO TAXATION.



BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1      SECTION 1.  Section 237-4, Hawaii Revised Statutes, is
 
 2 amended by amending subsection (a) to read as follows:
 
 3      "(a)  "Wholesaler" or "jobber" applies only to a person
 
 4 making sales at wholesale.  Only the following are sales at
 
 5 wholesale:
 
 6      (1)  Sales to a licensed retail merchant, jobber, or other
 
 7           licensed seller for purposes of resale;
 
 8      (2)  Sales to a licensed manufacturer of materials or
 
 9           commodities that are to be incorporated by the
 
10           manufacturer into a finished or saleable product
 
11           (including the container or package in which the
 
12           product is contained) during the course of its
 
13           preservation, manufacture, or processing, including
 
14           preparation for market, and that will remain in such
 
15           finished or saleable product in such form as to be
 
16           perceptible to the senses, which finished or saleable
 
17           product is to be sold and not otherwise used by the
 
18           manufacturer;
 
19      (3)  Sales to a licensed producer or cooperative association
 

 
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 1           of materials or commodities that are to be incorporated
 
 2           by the producer or by the cooperative association into
 
 3           a finished or saleable product that is to be sold and
 
 4           not otherwise used by the producer or cooperative
 
 5           association, including specifically materials or
 
 6           commodities expended as essential to the planting,
 
 7           growth, nurturing, and production of commodities that
 
 8           are sold by the producer or by the cooperative
 
 9           association;
 
10      (4)  Sales to a licensed contractor, of materials or
 
11           commodities that are to be incorporated by the
 
12           contractor into the finished work or project required
 
13           by the contract and that will remain in such finished
 
14           work or project in such form as to be perceptible to
 
15           the senses;
 
16      (5)  Sales to a licensed producer, or to a cooperative
 
17           association described in section 237-23(a)(7) for sale
 
18           to a licensed producer, or to a licensed person
 
19           operating a feed lot, of poultry or animal feed,
 
20           hatching eggs, semen, replacement stock, breeding
 
21           services for the purpose of raising or producing animal
 
22           or poultry products for disposition as described in
 
23           section 237-5 or for incorporation into a manufactured
 

 
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 1           product as described in paragraph (2) or for the
 
 2           purpose of breeding, hatching, milking, or egg laying
 
 3           other than for the customer's own consumption of the
 
 4           meat, poultry, eggs, or milk so produced; provided that
 
 5           in the case of a feed lot operator, only the segregated
 
 6           cost of the feed furnished by the feed lot operator as
 
 7           part of the feed lot operator's service to a licensed
 
 8           producer of poultry or animals to be butchered or to a
 
 9           cooperative association described in section
 
10           237-23(a)(7) of such licensed producers shall be deemed
 
11           to be a sale at wholesale; and provided further that
 
12           any amount derived from the furnishing of feed lot
 
13           services, other than the segregated cost of feed, shall
 
14           be deemed taxable at the service business rate.  This
 
15           paragraph shall not apply to the sale of feed for
 
16           poultry or animals to be used for hauling,
 
17           transportation, or sports purposes;
 
18      (6)  Sales to a licensed producer, or to a cooperative
 
19           association described in section 237-23(a)(7) for sale
 
20           to the producer, of seed for producing agricultural
 
21           products, or bait for catching fish (including the
 
22           catching of bait for catching fish), which agricultural
 
23           products or fish are to be disposed of as described in
 

 
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 1           section 237-5 or to be incorporated in a manufactured
 
 2           product as described in paragraph (2);
 
 3      (7)  Sales to a licensed producer, or to a cooperative
 
 4           association described in section 237-23(a)(7) for sale
 
 5           to such producer; of polypropylene shade cloth; of
 
 6           polyfilm; of polyethylene film; of cartons and such
 
 7           other containers, wrappers, and sacks, and binders to
 
 8           be used for packaging eggs, vegetables, fruits, and
 
 9           other agricultural products; of seedlings and cuttings
 
10           for producing nursery plants; or of chick containers;
 
11           which cartons and such other containers, wrappers, and
 
12           sacks, binders, seedlings, cuttings, and containers are
 
13           to be used as described in section 237-5, or to be
 
14           incorporated in a manufactured product as described in
 
15           paragraph (2);
 
16      (8)  Sales of tangible personal property:
 
17           (A)  To a licensed seller engaged in a service business
 
18                or calling; provided that:
 
19                (i)  The property is not consumed or incidental to
 
20                     the performance of the services;
 
21               (ii)  There is a resale of the article at the
 
22                     retail rate of four per cent; and
 
23              (iii)  The resale of the article is separately
 

 
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 1                     charged or billed by the person rendering the
 
 2                     services; and
 
 3           (B)  Where:
 
 4                (i)  Tangible personal property is sold upon the
 
 5                     order or request of a licensed seller for the
 
 6                     purpose of rendering a service in the course
 
 7                     of the person's service business or calling
 
 8                     or upon the order or request of a person,
 
 9                     subject to tax under section 237D-2, for the
 
10                     purpose of furnishing transient
 
11                     accommodations;
 
12               (ii)  The property becomes or is used as an
 
13                     identifiable element of the service rendered;
 
14                     and
 
15              (iii)  The cost of the property does not constitute
 
16                     overhead to the licensed seller;
 
17           the sale shall be subject to section 237-13.3.  Where
 
18           the taxpayer is subject to both subparagraphs (A) and
 
19           (B), then the taxpayer shall be taxed under
 
20           subparagraph (A).  Subparagraph (A) shall be repealed
 
21           on January 1, 2006.
 
22      (9)  Sales to a licensed leasing company of capital goods
 
23           that have a depreciable life, are purchased by the
 

 
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 1           leasing company for lease to its customers, and are
 
 2           thereafter leased as a service to others;
 
 3     (10)  Sales of services to a licensed seller engaging in a
 
 4           business or calling whenever:
 
 5           (A)  Either:
 
 6                (i)  In the context of a service-to-service
 
 7                     transaction, a service is rendered upon the
 
 8                     order or request of a licensed seller for the
 
 9                     purpose of rendering another service in the
 
10                     course of the seller's service business or
 
11                     calling;
 
12               (ii)  In the context of a service-to-goods
 
13                     transaction, a service is rendered upon the
 
14                     order or request of a licensed seller for the
 
15                     purpose of manufacturing, producing,
 
16                     preparing, or acquiring tangible personal
 
17                     property to be sold;
 
18              (iii)  In the context of a services-to-contracting
 
19                     transaction, a service is rendered upon the
 
20                     order or request of a licensed contractor as
 
21                     defined in section 237-6 for the purpose of
 
22                     assisting that licensed contractor in
 
23                     executing a contract; or
 

 
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 1               (iv)  In the context of a services-to-transient
 
 2                     accommodations rental transaction, a service
 
 3                     is rendered upon the order or request of a
 
 4                     person subject to tax under section 237D-2
 
 5                     for the purpose of furnishing transient
 
 6                     accommodations;
 
 7           (B)  The benefit of the service passes to the customer
 
 8                of the licensed seller, licensed contractor, or
 
 9                person furnishing transient accommodations as an
 
10                identifiable element of the other service or
 
11                property to be sold, the contracting, or the
 
12                furnishing of transient accommodations; and
 
13           (C)  The cost of the service does not constitute
 
14                overhead to the licensed seller, licensed
 
15                contractor, or person furnishing transient
 
16                accommodations.
 
17           Sales subject to this paragraph shall be subject to
 
18           section 237-13.3;
 
19     (11)  Sales to a licensed retail merchant, jobber, or other
 
20           licensed seller of bulk condiments or prepackaged
 
21           single-serving packets of condiments that are provided
 
22           to customers by the licensed retail merchant, jobber,
 
23           or other licensed seller; [and]
 

 
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 1     (12)  Sales to a licensed retail merchant, jobber, or other
 
 2           licensed seller of tangible personal property that will
 
 3           be incorporated or processed by the licensed retail
 
 4           merchant, jobber, or other licensed seller into a
 
 5           finished or saleable product during the course of its
 
 6           preparation for market (including disposable,
 
 7           nonreturnable containers, packages, or wrappers, in
 
 8           which the product is contained and that are generally
 
 9           known and most commonly used to contain food or
 
10           beverage for transfer or delivery), and which finished
 
11           or saleable product is to be sold and not otherwise
 
12           used by the licensed retail merchant, jobber, or other
 
13           licensed seller[.]; and
 
14     (13)  Sales by a printer to a publisher of magazines or
 
15           similar printed materials containing advertisements,
 
16           when the publisher is under contract with the
 
17           advertisers to distribute a minimum number of magazines
 
18           or similar printed materials to the public or defined
 
19           segment of the public, whether or not there is a charge
 
20           to the persons who actually receive the magazines or
 
21           similar printed materials."
 
22      SECTION 2.  Section 238-2, Hawaii Revised Statutes, is
 
23 amended to read as follows:
 

 
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 1      "238-2 Imposition of tax; exemptions.  There is hereby
 
 2 levied an excise tax on the use in this State of tangible
 
 3 personal property which is imported, or purchased from an
 
 4 unlicensed seller, for use in this State.  The tax imposed by
 
 5 this chapter shall accrue when the property is acquired by the
 
 6 importer or purchaser and becomes subject to the taxing
 
 7 jurisdiction of the State.  The rates of the tax hereby imposed
 
 8 and the exemptions thereof are as follows:
 
 9      (1)  If the importer or purchaser is licensed under chapter
 
10           237 and is:
 
11           (A)  A wholesaler or jobber importing or purchasing for
 
12                purposes of resale; or
 
13           (B)  A manufacturer importing or purchasing material or
 
14                commodities which are to be incorporated by the
 
15                manufacturer into a finished or saleable product
 
16                (including the container or package in which the
 
17                product is contained) wherein it will remain in
 
18                such form as to be perceptible to the senses, and
 
19                which finished or saleable product is to be sold
 
20                in such manner as to result in a further tax on
 
21                the activity of the manufacturer as the
 
22                manufacturer or as a wholesaler, and not as a
 
23                retailer,
 

 
Page 10                                                    2716
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 1           there shall be no tax; provided that if the wholesaler,
 
 2           jobber, or manufacturer is also engaged in business as
 
 3           a retailer (so classed under chapter 237), paragraph
 
 4           (2) shall apply to the wholesaler, jobber, or
 
 5           manufacturer, but the director of taxation shall refund
 
 6           to the wholesaler, jobber, or manufacturer, in the
 
 7           manner provided under section 231-23(c) such amount of
 
 8           tax as the wholesaler, jobber, or manufacturer shall,
 
 9           to the satisfaction of the director, establish to have
 
10           been paid by the wholesaler, jobber, or manufacturer to
 
11           the director with respect to property which has been
 
12           used by the wholesaler, jobber, or manufacturer for the
 
13           purposes stated in this paragraph;
 
14      (2)  If the importer or purchaser is licensed under chapter
 
15           237 and is:
 
16           (A)  A retailer or other person importing or purchasing
 
17                for purposes of resale, not exempted by paragraph
 
18                (1);
 
19           (B)  A manufacturer importing or purchasing material or
 
20                commodities which are to be incorporated by the
 
21                manufacturer into a finished or saleable product
 
22                (including the container or package in which the
 
23                product is contained) wherein it will remain in
 

 
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 1                such form as to be perceptible to the senses, and
 
 2                which finished or saleable product is to be sold
 
 3                at retail in this State, in such manner as to
 
 4                result in a further tax on the activity of the
 
 5                manufacturer in selling such products at retail;
 
 6           (C)  A contractor importing or purchasing material or
 
 7                commodities which are to be incorporated by the
 
 8                contractor into the finished work or project
 
 9                required by the contract and which will remain in
 
10                such finished work or project in such form as to
 
11                be perceptible to the senses; [or]
 
12           (D)  A person engaged in a service business or calling
 
13                as defined in section 237-7, or a person
 
14                furnishing transient accommodations subject to the
 
15                tax imposed by section 237D-2, in which the import
 
16                or purchase of tangible personal property would
 
17                have qualified as a sale at wholesale as defined
 
18                in section 237-4(a)(8) had the seller of the
 
19                property been subject to the tax in chapter
 
20                237[.]; or
 
21           (E)  A publisher of magazines or similar printed
 
22                materials containing advertisements, when the
 
23                publisher is under contract with the advertisers
 

 
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 1                to distribute a minimum number of magazines or
 
 2                similar printed materials to the public or defined
 
 3                segment of the public, whether or not there is a
 
 4                charge to the persons who actually receive the
 
 5                magazines or similar printed materials.
 
 6           the tax shall be one-half of one per cent of the
 
 7           purchase price of the property, if the purchase and
 
 8           sale are consummated in Hawaii; or, if there is no
 
 9           purchase price applicable thereto, or if the purchase
 
10           or a person furnishing transient accommodations subject
 
11           to the tax imposed by section 237D-2, or sale is
 
12           consummated outside of Hawaii, then one-half of one per
 
13           cent of the value of such property; and
 
14      (3)  In all other cases, four per cent of the value of the
 
15           property."
 
16      SECTION 3.  Statutory material to be repealed is bracketed.
 
17 New statutory material is underscored.
 
18      SECTION 4.  This Act shall take effect upon its approval;
 
19 provided that this Act shall apply to gross income or gross
 
20 proceeds received, or gross value accruing, after June 30, 2000.