Report Title:

General Excise Tax; Depyramiding

 

Description:

Amends the general excise tax law to accelerate the timetable for pyramiding relief for the sale of services by reducing the tax rate applicable to 2.0% for sales in calendar year 2002, 1.0% for sales in calendar year 2003, and 0.5% for sales in calendar year 2004 and thereafter.

HOUSE OF REPRESENTATIVES

H.B. NO.

426

TWENTY-FIRST LEGISLATURE, 2001

 

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

relating to the general excise tax.

 

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

SECTION 1. The legislature finds that Act 71, Session Laws of Hawaii 1999, addressed the pyramiding problem of the general excise tax on intermediary services and service businesses. The Act phased-in tax relief over a period of six years. The general excise tax rate on service businesses is reduced by 0.5 per cent each year during calendar years 2000 to 2005. In 2006, the tax rate on affected services and contracting will be 0.5 per cent, equal to the tax rate on transactions involving wholesale goods.

Pyramiding of the general excise tax increases the cost of doing business in the State. As a tax on a tax, pyramiding is viewed as an inequity within the tax system and negatively impacts the perception of Hawaii as a place to do business.

Based on the original revenue expenditure estimates used by the Council on Revenues in May 2000, the estimated cost of accelerating the timetable by two years to two per cent in calendar 2002, one per cent in calendar 2003, and 0.5 per cent in 2004 would be an additional $25,000,000 in 2002 and an additional $50,000,000 per year in calendar years 2003 and 2004.

The purpose of this Act is to accelerate the timetable for pyramiding relief for the sale of services by reducing the tax rate applicable to two per cent for sales in calendar year 2002, one per cent for sales in calendar year 2003, and 0.5 per cent for sales in calendar year 2004.

SECTION 2. Section 237-13.3, Hawaii Revised Statutes, is amended to read as follows:

"§237-13.3 Application of sections 237-4(a)(8), 237-4(a)(10), 237-4(a)(13), 237-13(2)(A), 237-13(4)(A), and 237-13(6)(A). (a) Sections 237-4(a)(8), 237-4(a)(10), 237-4(a)(13), 237-13(2)(A), 237-13(4)(A), and 237-13(6)(A) to the contrary notwithstanding, instead of the tax levied under section 237-13(2)(A) on wholesale sales subject to section 237-4(a)(8)(B), under section 237-13(4)(A) on a wholesaler subject to section 237-4(a)(13), and under section 237-13(6)(A) on a wholesaler subject to section 237-4(a)(10) at one-half of one per cent, during the period January 1, 2000, to December 31, 2005, the tax shall be as follows:

(1) In calendar year 2000, 3.5 per cent;

(2) In calendar year 2001, 3.0 per cent;

(3) In calendar year 2002, [2.5] 2.0 per cent;

(4) In calendar year 2003, [2.0] 1.0 per cent; and

(5) In calendar year 2004[, 1.5] and thereafter, the tax shall be 0.5 per cent[;

(6) In calendar year 2005, 1.0 per cent; and

(7) In calendar year 2006 and thereafter, the tax shall be 0.5 per cent]."

SECTION 3. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 4. This Act shall take effect on July 1, 2001.

INTRODUCED BY:

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