General Excise Tax; Holiday
Establishes an annual general excise tax holiday for entities that sell clothing or footwear on condition that the seller passes the savings on to consumers.
HOUSE OF REPRESENTATIVES
TWENTY-FIRST LEGISLATURE, 2002
STATE OF HAWAII
A BILL FOR AN ACT
relating to an annual excise tax holiday.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The purpose of this Act is to give both consumers and businesses a break from the high cost of living in Hawaii by establishing an annual general excise tax holiday not to exceed three days.
For years, consumers and businesses have suffered under the
weight of this most regressive tax. For a period not to exceed three days each year, sales of clothing and footwear under $100 would be exempt from the normal retail or general excise tax of four per cent. However, because the tax is imposed on the seller rather than the buyer, the only requirement of this Act is that the tax savings be passed on to the consumer.
Tax holidays have been used successfully across the United States. For example, Texas has lifted its 6.25 per cent state sales tax -—along with all local sales tax —- on clothing and footwear under $100. New York and Florida already have similar programs.
More importantly, tax holidays have been found to create sales, not merely displace sales from a different time. May Texas retailers have reported seeing crowds usually seen only during the Christmas selling season. To accommodate all of the shoppers, stores in Texas adopted extended hours, added staff, and offered special promotions usually reserved for the Christmas season. While depressed sales might be expected after a tax holiday, retailers have not noticed fewer sales after sales spike.
While Hawaii's oppressive excise tax stifled economic growth, retarded retail sales and profits, and dampened job creation, a tax holiday would have the opposite effect by stimulating sluggish retail sales and give a boost to our sagging economy.
A similar program in Hawaii would help both consumers and retailers alike.
SECTION 2. Chapter 237, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:
"§237-___ Tax holiday. (a) Taxes under this chapter shall not apply to amounts received from sales of clothing or footwear if:
(1) The sale price of the articles purchased is less than $100; and
(2) The sale takes place during a period beginning at 12:01 a.m. on the first Friday in August and ending at 12:00 midnight of the following Monday,
provided that all savings generated by this section shall be passed on by the seller to the purchaser.
(b) This exemption shall apply to each article of clothing or footwear selling for less than $100, regardless of how many items are sold on the same invoice to a customer. For example, if a customer purchases two shirts for $80 each, both items qualify for the exemption, even though the customer's total purchase price ($160) exceeds $99.99.
(c) This exemption shall not apply to:
(1) The first $99.99 of an article selling for more than $99.99;
(2) Accessories, including jewelry, handbags, purses, briefcases, luggage, umbrellas, wallets, watches, and similar items carried on or about the human body;
(3) The rental of clothing or footwear;
(4) Taxable services performed on the clothing or footwear, such as repair, remodeling, or maintenance services and cleaning or laundry services;
(5) Purchases of items used to make or repair clothing or footwear, including fabric, thread, yarn, buttons, snaps, hooks, and zippers;
(6) Rebates, layaway sales, rain checks, or exchanges when the exchanges occur before or after the tax holiday period; or
(7) Mail, telephone, e-mail, or internet orders.
(d) Articles that are normally sold as a unit shall continue to be sold in that manner; provided that they are not priced separately and sold as individual items in order to obtain the exemption.
(e) When exempt clothing or footwear is sold together with non-exempt merchandise as a set or single unit, the full price is subject to tax unless the price of the exempt item is separately stated. When the exempt clothing is sold in a set that also contains non-exempt merchandise as a free gift, the exempt clothing may qualify for the exemption.
(f) Discounted items on sale for $99.99 or less, qualifies for the exemption.
(g) The total price of items advertised as "buy one, get one free", or "buy one, get one for a reduced price", cannot be averaged in order for both items to qualify for the exemption.
(h) For the purposes of this section, shipping and handling charges shall be included as a part of the sales price of the item, whether or not separately stated.
(i) The retailer shall not be required to obtain any special license, permit, or other documentation on sales of eligible items during the exemption holiday period; provided that the retailer's records shall clearly identify the type of item sold, the date the item was sold, and the sales price of the item.
(j) No special reporting procedures are necessary to report exempt sales made during the exemption holiday period. All sales shall be reported as provided by law."
SECTION 3. New statutory material is underscored.
SECTION 4. This Act shall take effect upon its approval.