Report Title:

Liquor tax rates

Description:

Increases liquor tax revenue by converting the State's gallonage tax to an ad valorem tax.

THE SENATE

S.B. NO.

2832

TWENTY-FIRST LEGISLATURE, 2002

 

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

RELATING TO LIQUOR TAX RATES.

 

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

SECTION 1. The purpose of this bill is to increase parity between liquor tax revenue and revenue growth in other state taxes.

The current liquor tax is a gallonage tax imposed on every person who sells or uses liquor in the State. Different rates are provided for the various types of liquor, such as distilled spirits, wine, cooler beverages, and beer.

Since 1987, revenue for general excise or use, public service company, income, and tobacco taxes has increased over 100 per cent compared to a 9.6 per cent growth in liquor tax revenue over the same period. Tobacco tax revenue, the other "sin tax," increased 188.9 per cent since 1987.

During the period from 1987 to the present, total dollar sales of liquor increased nearly 60 per cent. This increase in total dollar sales has not increased liquor tax revenue because the liquor tax is based on gallons consumed, not sales price. This bill will raise liquor tax revenue to the level it would have been had liquor tax revenue growth been similar to the revenue growth for general excise or use, public service company, income, and tobacco taxes during the period 1987 to the present.

By converting from a gallonage tax to an ad valorem tax, liquor tax revenue will increase with increasing prices thereby eliminating the need to adjust the gallonage rates. Moreover, an ad valorem tax is consistent with taxes on other luxury items; the more expensive the item the more excise tax is collected. Under the current gallonage method, the tax on a bottle of the most expensive wine is the same as the tax on the cheapest bottle.

SECTION 2. Section 244D-1, Hawaii Revised Statutes, is amended by adding a new definition to be appropriately inserted and to read as follows:

""Wholesale price" means the total amount for which liquor is sold by a dealer, valued in money, whether or not paid, and without any deduction for cash discounts, but the amount of tax imposed by this chapter, whether or not separately charged and collected, shall be deducted in determining the wholesale price. In the case of a sale not made at wholesale, or not made by a dealer, or if the tax is upon the use, the wholesale price shall be deemed to be the average price of sales to retail dealers of like liquor, made by the taxpayer during the month preceding the accrual of the tax, or if no such sales were made during the month by the taxpayer, the average price of sales to retail dealers of like liquor made by permittees in the same county during the month preceding the accrual of the tax."

SECTION 3. Section 244D-4, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) Every person who sells or uses any liquor in the State not taxable under this chapter, in respect of the transaction by which the person or the person's vendor acquired the liquor, shall pay a gallonage tax which is hereby imposed at the following rates for the various liquor categories defined in section 244D-1:

For the period July 1, 1997, to June 30, 1998, the tax rate shall be:

(1) $5.92 per wine gallon on distilled spirits;

(2) $2.09 per wine gallon on sparkling wine;

(3) $1.36 per wine gallon on still wine;

(4) $0.84 per wine gallon on cooler beverages;

(5) $0.92 per wine gallon on beer other than draft beer;

(6) $0.53 per wine gallon on draft beer;

[On] For the period July 1, 1998, to June 30, 2002, [and thereafter, ] the tax rate shall be:

(1) $5.98 per wine gallon on distilled spirits;

(2) $2.12 per wine gallon on sparkling wine;

(3) $1.38 per wine gallon on still wine;

(4) $0.85 per wine gallon on cooler beverages;

(5) $0.93 per wine gallon on beer other than draft beer;

(6) $0.54 per wine gallon on draft beer;

and at a proportionate rate for any other quantity so sold or used.

On July 1, 2002, and thereafter, every person who sells or uses any liquor not taxable under this chapter, in respect of the transaction by which such person or his vendor acquired such liquor, shall pay an excise tax equal to twenty-four per cent of the wholesale price of the liquor so sold or used."

SECTION 4. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 5. This Act shall take effect on July 1, 2002.

INTRODUCED BY:

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