Report Title:

Tax Restructuring

Description:

Restructures the tax system over a five-year period.

Establishes a retail sales tax on tangible personal property of undecided rate to take effect over four years. Exempts food for home consumption, medicine, and medical health items from the retail sales tax. Repeals the income, general excise, and fuel taxes over four years. Requires the department of taxation with the cooperation of the department of business, economic development, and tourism to analyze the state revenues received from the income, general excise, and fuel taxes and estimate the amount of sales tax necessary to ensure the same amount of revenue for the state.

HOUSE OF REPRESENTATIVES

H.B. NO.

2919

TWENTY-SECOND LEGISLATURE, 2004

 

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

relating to taxation.

 

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

SECTION 1. The legislature finds that new ideas and actions are needed to propel Hawaii into the twenty-first century. Of primary concern is the strength of Hawaii's economy and its overall effect on Hawaii's people. The health and well-being of Hawaii's people depend on the performance and soundness of our economy.

The legislature finds that the general excise tax discourages business in Hawaii. The general excise tax, which directly taxes businesses, is a tax on the production of goods and services. It therefore directly increases the cost of doing business in the state, putting the burden directly on business. It is a tax which is based merely on sales price without regard to profit or loss, value added to a product, or taxes already paid. When a business experiences a loss, this tax must still be paid.

The general excise tax has also been criticized for the pyramiding effect which adds "hidden taxes" to the final cost of an item. Even though these "hidden taxes" on goods and services have been recently lowered, they continue to add to the costs of items and services.

Another difficulty caused by pyramiding is that establishing the exact amount of taxes on any one product is nearly impossible, creating a wide disparity in the actual taxes paid on specific goods and services, a disparity the consumer remains totally unaware of.

Income tax, even though used in most taxing jurisdictions, is a tax that is applied unevenly and can be overburdensome to some people in certain situations. While income tax is paid solely by Hawaii's residents, tourists and business visitors as well as residents would pay the sales tax. In addition, with the exclusion of food medicine, and medical equipment from sales tax, Hawaii's residents would have the ability to choose to buy only those products and services they need, thereby limiting their tax burden. The general excise tax does not offer such flexibility.

Another burden on Hawaii's business is the fuel tax, the highest in the nation. Hawaii's fuel tax adds an additional burden to an already high fuel cost. The cost of virtually every product and service in Hawaii includes a fuel tax component.

Business in Hawaii would be better served if a sales tax were substituted for the general excise, income, and fuel taxes. A sales tax would not pose the pyramiding problems of the general excise tax, and it is a well-understood tax used in an overwhelming majority of taxing jurisdictions in the United States.

A sales tax would provide a more direct, profit-related tax with a large base, but a base more equitably distributed, applying to those who actually use the product or service being taxed.

To make the sales tax fairer and protect those with limited means, this Act exempts food products for home consumption, medicines, and certain medical equipment.

The purpose of this Act is to replace the revenues produced by the income, general excise, and fuel taxes with revenues produced by a new retail sales tax exempting certain foods, medicine, and medical necessities.

PART I. SALES TAX

SECTION 2. The purpose of this part is to add a new chapter establishing a retail sales tax over a period of four years.

SECTION 3. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:

"CHAPTER

RETAIL SALES TAX

DEFINITIONS

§   -1 Definitions. As used in this chapter, unless the context requires otherwise:

"Gross receipts" means the total sales price received by vendors as a consideration for retail sales.

"Penalty" or "penalties", when used in connection with the additions to the tax imposed for delinquency in payment, includes interest.

"Person" or "company" includes every individual, partnership, society, unincorporated association, joint venture, group, hui, joint stock company, corporation, trustee, personal representative, trust estate, decedent's estate, trust, trustee in bankruptcy, or other entity, whether such persons are doing business for themselves or in a fiduciary capacity, and whether the individuals are residents or nonresidents of the state, and whether the corporation or other association is created or organized under the laws of the State or of another jurisdiction. Any person who has in the person's possession, for sale in the state, the property of a nonresident owner, other than as an employee of such owner, shall be deemed the seller of the property, when sold.

"Purchaser" means a person who purchases tangible personal property the retail sale of which is taxable under this chapter and includes a buyer, vendee, lessee, licensee, or grantee.

"Sale" or "sales" includes the transfer of title or possession, or both, exchange, barter, lease, rental, conditional or otherwise, of tangible personal property for a consideration, in any manner, or by any means.

"Sale at retail" or "retail sale" means a sale of tangible personal property for any purpose other than resale in the regular course of business.

"Sales price" means the total amount paid by a purchaser to a vendor as consideration for a retail sale, valued in money or otherwise.

"Taxpayer" means any person liable for any tax hereunder.

"Vendor" means a retailer or other person selling tangible personal property of a kind the gross receipts from the retail sale of which are required to be included in the measure of the tax imposed by this chapter.

PERMIT; TAX; EXEMPTIONS

§   -2 Permit for retail sales. (a) Before any person can make sales at retail within the state, the person shall obtain a retail sales permit from the department, upon a one- time payment of the sum of $20. The permit shall be issued on the condition that the person shall collect and pay the taxes accruing to the State under this chapter. The permit shall not be transferable and shall be valid only for the person in whose name it is issued. The permit may be inspected and examined, and shall at all times be conspicuously displayed at the place for which it is issued.

(b) Permits and applications therefor shall be in such form as the department shall prescribe. The permit provided for by this section shall be effective until canceled in writing. Any application for the reissuance of a previously canceled permit identification number shall be regarded as a new permit application and subject to the payment of the one-time permit fee of $20. The director of taxation may revoke or cancel any permit issued under this chapter for cause as provided by rules adopted pursuant to chapter 91.

(c) If the permit fee is paid, the department shall not refuse to issue a license or revoke or cancel a permit for the exercise of a privilege protected by the First Amendment of the Constitution of the United States, or for the carrying on of interstate or foreign commerce, or for any privilege the exercise of which, under the Constitution and laws of the United States, cannot be restrained on account of nonpayment of taxes, nor shall section    -18 be invoked to restrain the exercise of such a privilege, or the carrying on of such commerce.

§   -3 Imposition and rate of tax. (a) There is hereby imposed a retail sales tax on every sale at retail within the State of tangible personal property. The rate of tax shall be          per cent of the sales price.

(b) The tax hereby imposed shall be paid by the purchaser to the vendor, and each vendor shall add to the sales price and shall collect from the purchaser the full amount of the tax imposed by this chapter, or an amount as nearly as possible or practical. The tax shall be a debt from the purchaser to the vendor, when so added to the sales price, and shall be recoverable by law.

(c) Upon each sale of tangible personal property subject to the provisions of this chapter, the amount of tax collected by the vendor from the purchaser shall be stated and charged separately from the sales price on any record made at the time of the sale, or on any evidence of sale issued; provided the retail sales tax of liquor and cigarette and tobacco do not need to be stated separately.

§   -4 Sales exempt from tax. (a) This chapter shall not apply to the sales of food products for home consumption.

(1) "Food products" includes:

(A) Cereals and cereal products, flour and flour products, milk and milk products, including ice cream, oleomargarine, meat and meat products, fish and fish products, eggs and egg products, vegetables and vegetable products, fruit and fruit products, soft drinks, herbs, spices, salt, sugar and sugar products, candy, and confectionery;

(B) Coffee and coffee substitutes, tea, cocoa and cocoa products; and

(C) Ice when used for household consumption.

(2) "Food products" does not include:

(A) Alcoholic beverages subject to chapter 244D;

(B) Meals consisting of any of the items in paragraph (1) for consumption on or off the premises where sold.

(3) For the purposes of this chapter:

"Meals" means any food or beverage, or both, prepared for human consumption and provided by a restaurant, where the food or beverage is intended for consumption on or off the restaurant premises, and includes food or beverages sold on a "take out" or "to go" basis, whether or not they are wrapped or packaged and whether or not they are taken from the premises of the restaurant.

"Restaurant" means any eating establishment where food products or beverages are provided and for which a charge is made, including a cafe, lunch counter, private or social club, cocktail lounge, hotel dining room, catering business, tavern, diner, snack bar, dining room, vending machine, and any other place or establishment where food or beverages are provided whether stationary or mobile, or temporary or permanent.

(b) This chapter shall not apply to sales of medicine, insulin needles and insulin syringes on prescriptions of licensed physicians and sales of insulin, oxygen, blood or blood plasma, artificial devices individually designed and constructed solely for the use of a particular person as to become a brace support, support, supplement, correction or substitution for the bodily structure, including the extremities of the individual, sales of artificial limbs, artificial eyes, hearing aids and other equipment worn as a correction or substitution for any functioning portion of the body, sales of artificial teeth by a dentist and the materials used by a dentist in dental treatment, sales of eyeglasses, when especially designed or prescribed by an ophthalmologist, oculist, or optometrist for the personal use of the owner or purchaser, sales of crutches and wheel chairs, the rental, sales, and repairs of kidney dialysis machines, feeding devices, suction machines, oxygen concentrators, oxygen regulators, oxygen humidifiers, oxygen masks, life sustaining resuscitators, incubators, heart pacemakers, canes, all types of hospital beds for home use, tripod canes, breast prosthesis, and patient lifts when prescribed by a licensed physician.

RETURNS AND PAYMENTS

§   -5 Monthly, quarterly, or semiannual return, computation of tax, payment. (a) The taxes levied hereunder shall be payable in monthly installments on or before the last day of the calendar month following the month in which they accrue. The taxpayer, on or before the last day of the calendar month following the month in which the taxes accrue, shall make out and sign a return of the installment of tax for which the taxpayer is liable for the preceding month and transmit the same, together with a remittance, in the form required by section    -6, for the amount of the tax, to the office of the department of taxation in the appropriate district hereinafter designated.

(b) Notwithstanding subsection (a), the director of taxation, for good cause, may permit a taxpayer to file the taxpayer's return required under this section and make payments thereon:

(1) On a quarterly basis during the calendar or fiscal year, the return and payment to be made on or before the last day of the calendar month after the close of each quarter, to wit: for calendar year taxpayers, on or before April 30, July 31, October 31, and January 31, or, for fiscal year taxpayers, on or before the last day of the fourth month, seventh month, and tenth month following the beginning of the fiscal year and on or before the last day of the month following the close of the fiscal year; provided that the director is satisfied that the grant of the permit will not unduly jeopardize the collection of the taxes due thereon and the taxpayer's total tax liability for the calendar or fiscal year under this chapter will not exceed $2,000; or

(2) On a semiannual basis during the calendar or fiscal year, the return and payment to be made on or before the last day of the calendar month after the close of each six-month period, to wit: for calendar year taxpayers, on July 31 and January 31, or, for fiscal year taxpayers, on or before the last day of the seventh month following the beginning of the fiscal year and on or before the last day of the month following the close of the fiscal year; provided that the director is satisfied that the grant of the permit will not unduly jeopardize the collection of the taxes due thereon and the taxpayer's total tax liability for the calendar or fiscal year under this chapter will not exceed $1,000.

The director, for good cause, may permit a taxpayer to make monthly payments based on the taxpayer's estimated quarterly or semiannual liability; provided the taxpayer files a reconciliation return at the end of each quarter or at the end of each six-month period during the calendar or fiscal year, as provided in this section.

(c) If a taxpayer filing the taxpayer's return on a quarterly or semiannual basis, as provided in this section, becomes delinquent in either the filing of the taxpayer's return or the payment of the taxes due thereon, or if the liability of a taxpayer who possesses a permit to file the taxpayer's return and to make payments on a semiannual basis exceeds $1,000 in general excise taxes during the calendar year, or exceeds $2,000 in general excise taxes during the calendar year if making payments on a quarterly basis, or if the director determines that any such quarterly or semiannual filing of return would unduly jeopardize the proper administration of this chapter, including the assessment or collection of the general excise tax, the director may, at any time, revoke a taxpayer's permit, in which case the taxpayer shall then be required to file the taxpayer's return and make payments thereon as herein provided in subsection (a).

(d) The director may adopt rules to carry out the purposes of this section.

(e) Section 232-2 does not apply to a monthly return.

§   -6 Remittances. All remittances of taxes imposed by this chapter shall be made by money, bank draft, check, cashier's check, money order, or certificate of deposit to the office of the department of taxation to which the return was transmitted. The department shall issue its receipts therefor to the taxpayer and shall pay the moneys into the state treasury as a state realization, to be kept and accounted for as provided by law; provided that the sum from all general excise tax revenues realized by the State that represents the difference between $90,000,000 and the proceeds from the sale of any general obligation bonds authorized for that fiscal year for the purposes of the state educational facilities improvement special fund shall be deposited in the state treasury in each fiscal year to the credit of the state educational facilities improvement special fund; provided further that a sum, not to exceed $5,000,000, from all retail sales tax revenues realized by the State shall be deposited in the state treasury in each fiscal year to the credit of the compound interest bond reserve fund.

§   -7 Penalties. Penalties and interest shall be added to and become a part of the tax, when and as provided by section 231-39.

§   -8 Annual return, payment of tax. On or before the twentieth day of the fourth month following the close of the taxable year, each taxpayer shall make a return showing the gross receipts of sales and compute the amount of tax chargeable against the taxpayer in accordance with this chapter and deduct the amount of monthly payments (as hereinbefore provided), and transmit with the taxpayer's report a remittance in the form required by section    -6 covering the residue of the tax chargeable against the taxpayer to the district office of the department of taxation hereinafter designated. The return shall be signed by the taxpayer, if made by an individual, or by the president, vice-president, secretary, or treasurer of a corporation, if made on behalf of a corporation. If made on behalf of a partnership, firm, society, unincorporated association, group, hui, joint venture, joint stock company, corporation, trust estate, decedent's estate, trust, or other entity, any individual delegated by the entity shall sign the same on behalf of the taxpayer. If for any reason it is not practicable for the individual taxpayer to sign the return, it may be done by any duly authorized agent. The department, for good cause shown, may extend the time for making the return on the application of any taxpayer and grant such reasonable additional time within which to make the same as may, by it, be deemed advisable.

Section 232-2 applies to the annual return, but not to a monthly return.

§   -9 Filing of returns; disclosure of returns unlawful, penalty; destruction of returns. (a) All monthly and annual returns shall be transmitted to the office of the taxation district in which the privilege upon which the tax accrued is exercised. Where the privilege is exercised in more than one taxation district the returns shall be transmitted to the office of the first district.

(b) All tax returns and return information required to be filed under this chapter, and the report of any investigation of the return or of the subject matter of the return, shall be confidential. It shall be unlawful for any person or any officer or employee of the State to intentionally make known information imparted by any tax return or return information filed pursuant to this chapter, or any report of any investigation of the return or of the subject matter of the return, or to wilfully permit any such return, return information, or report so made, or any copy thereof, to be seen or examined by any person; provided that for tax purposes only the taxpayer, the taxpayer's authorized agent, or persons with a material interest in the return, return information, or report may examine them. Unless otherwise provided by law, persons with a material interest in the return, return information, or report shall include:

(1) Trustees;

(2) Partners;

(3) Persons named in a board resolution or a one per cent shareholder in case of a corporate return;

(4) The person authorized to act for a corporation in dissolution;

(5) The shareholder of an S corporation;

(6) The personal representative, trustee, heir, or beneficiary of an estate or trust in case of the estate's or decedent's return;

(7) The committee, trustee, or guardian of any person in paragraphs (1) to (6) who is incompetent;

(8) The trustee in bankruptcy or receiver, and the attorney-in-fact of any person in paragraphs (1) to (7);

(9) Persons duly authorized by the State in connection with their official duties;

(10) Any duly accredited tax official of the United States or of any state or territory;

(11) The Multistate Tax Commission or its authorized representative; and

(12) Members of a limited liability company.

Any violation of this subsection shall be a misdemeanor.

(c) The department may destroy the monthly returns filed pursuant to section    -5, or any of them, upon the expiration of three years after the end of the calendar year in which the taxes so returned accrued.

§   -10 Consolidated reports; interrelated business. When any taxpayer is engaged in two or more forms of business activity taxable under this chapter which are interrelated, or which are of like character, the taxpayer shall file a consolidated return covering all business activities, which are thus interrelated or of like character.

ASSESSMENTS, REFUNDS, AND RECORDS

§   -11 Erroneous returns, disallowance of exemption, payment. If any return made is erroneous, or is so deficient as not to disclose the full tax liability, or if the taxpayer, in the taxpayer's return, shall disclaim liability for the tax on any gross receipts of sales liable to the tax, or if the taxpayer shall make application for an exemption under section    -4 to which the taxpayer is not entitled, the department of taxation shall correct the error or assess the proper amount of taxes. If such recomputation results in an additional tax liability, or if the department proposes to assess any gross receipts of sales by reason of the disallowance of an exemption claimed in the return or for which application has been filed, the department shall first give notice to the taxpayer of the proposed assessment, and the taxpayer shall thereupon have an opportunity within thirty days to confer with the department. After the expiration of thirty days from the notification, the department shall assess the gross receipts of retail sales of the taxpayer or any portion thereof which the department believes has not theretofore been assessed, and shall give notice to the taxpayer of the amount of the tax, and the amount thereof shall be paid within twenty days after the date the notice was mailed, properly addressed to the taxpayer at the taxpayer's last known address or place of business.

No preliminary notice shall be necessary where the amount of the tax is calculated by the department from gross receipts of retail sales returned by the taxpayer as subject to the tax (unless the taxpayer shall have claimed that the applicable rate of tax is lower than the rate of tax applied by the department); in such case the tax shall be due and payable on the tenth day after the date the statement was mailed. In a case of disallowance of an exemption the department, before making an assessment, may require the applicant, by demand made upon the applicant by mail or delivery thereof to the address shown in the application, to file information returns as to the applicant's gross receipts of retail sales within such reasonable time as the department may allow, and in the event of failure, neglect, or refusal to comply with the demand, the department shall make an assessment under section    -13, in lieu of this section.

§   -12 Refunds and credits. If the amount already paid exceeds that which should have been paid on the basis of the tax recomputed as provided in section    -11, the excess so paid shall be immediately refunded to the taxpayer in the manner provided in section 231-23(c). The taxpayer, at the taxpayer's election, may apply an overpayment credit to taxes subsequently accruing hereunder. All refunds and the details thereof, including the names of the persons receiving the refund and the amount refunded shall be accessible for the inspection of the public in the office of the department of taxation in the taxation district in which the person receiving the refund made the person's returns.

No recourse may be had except under section 40-35 or by appeal for refunds of taxes paid pursuant to an assessment by the director of taxation; provided that if the assessment by the director shall contain clerical errors, transposition of figures, typographical errors, and errors in calculation, or if there shall be an illegal or erroneous assessment, the usual refunds procedures shall apply. No refund or overpayment credit may be had under this section in any event unless the original payment of the tax was due to the law having been interpreted or applied in respect of the taxpayer concerned differently than in respect of taxpayers generally. As to all tax payment for which a refund or credit is not authorized by this section (including without prejudice to the generality of the foregoing cases of unconstitutionality), the remedies provided by appeal or under section 40-35 are exclusive.

§   -13 Failure to make return. If any person fails, neglects, or refuses to make a return, the department of taxation may proceed as it deems best to obtain information on which to base the assessment of the tax. After procuring the information, the department shall proceed to assess the tax as provided in section    -11. The assessment shall be presumed to be correct until and unless, upon an appeal duly taken as provided in this chapter, the contrary shall be clearly proved by the person assessed, and the burden of proof upon such appeal shall be upon the person assessed to disprove the correctness of the assessment.

§   -14 Audits; procedure, penalties. For the purpose of verification or audit of a return made by the taxpayer, or where there is reasonable ground to believe that any return made is so deficient as not to form the basis of a satisfactory assessment of the tax, or for the purpose of making an assessment where no return has been made, the department of taxation or the Multistate Tax Commission pursuant to chapter 255 or the authorized representative thereof may examine all account books, bank books, bank statements, records, vouchers, taxpayer's copies of federal tax returns, and any and all other documents and evidences having any relevancy to the determination of the gross receipts of retail sales of any taxpayer as required to be returned under this chapter and may summon or require the attendance of the person by or for whom the return, if any, has been made or whose tax is being assessed, and any employee of the person, and may summon or require the attendance of any person having knowledge in the premises, naming the time and place in the summons, and may require the production of any books, statements, or other evidences open to examination, and may take testimony in reference to any such matter relevant to the gross receipts of retail sales of the taxpayer for the period under consideration, with power to require that the person so called and appearing shall be interrogated under oath and to administer the oath.

If the department determines that any gross receipts of retails sales liable to the tax have not been assessed, the department may assess the same as provided in sections    -11 and    -13.

Any individual who knowingly gives false testimony under oath at any such hearing before the department shall be guilty of perjury and shall be punished as provided by law.

Any person refusing or neglecting to obey any summons issued by the department, and any individual appearing and refusing to testify under oath, shall be fined $50 for the first offense and $100 for each succeeding offense.

§   -15 Limitation period. (a) General rule. The amount of sales taxes imposed by this chapter shall be assessed or levied within three years after the annual return was filed, or within three years of the due date prescribed for the filing of said return, whichever is later, and no proceeding in court without assessment for the collection of any such taxes shall be begun after the expiration of the period.

(b) Exceptions. In the case of a false or fraudulent return with intent to evade tax, or of a failure to file the annual return, the tax may be assessed or levied at any time; however, in the case of a return claimed to be false or fraudulent with intent to evade tax, the determination as to the claim shall first be made by a judge of the circuit court as provided in section 235-111(c) which shall apply to the tax imposed by this chapter.

(c) Extension by agreement. Where, before the expiration of the period prescribed in subsection (a) or (d), both the department of taxation and the taxpayer have consented in writing to the assessment or levy of the tax after the date fixed by subsection (a) or the credit or refund of the tax after the date fixed by subsection (d), the tax may be assessed or levied or the overpayment, if any, may be credited or refunded at any time prior to the expiration of the period agreed upon. The period so agreed upon may be extended by subsequent agreements in writing made before the expiration of the period previously agreed upon.

(d) Refunds. No credit or refund shall be allowed for any tax imposed by this chapter, unless a claim for such credit or refund shall be filed as follows:

(1) If an annual return is timely filed, or is filed within three years after the date prescribed for filing the annual return, then the credit or refund shall be claimed within three years after the date the annual return was filed or the date prescribed for filing the annual return, whichever is later; or

(2) If an annual return is not filed, or is filed more than three years after the date prescribed for filing the annual return, a claim for credit or refund shall be filed within:

(A) Three years after the payment of the tax; or

(B) Three years after the date prescribed for the filing of the annual return,

whichever is later.

Paragraphs (1) and (2) are mutually exclusive. The limitation shall not apply to a credit or refund pursuant to an appeal provided for by section    -17.

§   -16 Records to be kept; examination. Every taxpayer shall keep in the English language within the State, and preserve for a period of three years, suitable records of gross receipts of retail sales, and such other books, records of account, and invoices as may be required by the department of taxation, and all such books, records, and invoices shall be open for examination at any time by the department or the Multistate Tax Commission pursuant to chapter 255, or the authorized representative thereof.

APPEALS

§   -17 Appeals. Any person aggrieved by any assessment of the tax for any month or any year may appeal from the assessment in the manner and within the time and in all other respects as provided in the case of income tax appeals by section 235-114; provided the tax so assessed shall have been paid.

§   -18 Collection by suit; injunction. The department of taxation may collect taxes due and unpaid under this chapter, together with all accrued penalties, by action in assumpsit or other appropriate proceedings in the circuit court of the judicial circuit in which the retail sales have occurred. After delinquency shall have continued for sixty days, or if any person lawfully required so to do under this chapter shall fail to apply for and secure a permit as provided by this chapter for a period of sixty days after the first date when the person was required under this chapter to secure the same, the department may proceed in the circuit court of the judicial circuit in which the retail sales have occurred, to obtain an injunction restraining the further retail sales until full payment shall have been made of all taxes and penalties and interest due under this chapter, or until such permit is secured, or both, as the circumstances of the case may require.

§   -19 District judges; concurrent civil jurisdiction in tax collections. Except as otherwise specifically provided by this chapter, the several district judges shall have concurrent jurisdiction with the circuit courts to hear and determine all civil actions at law in assumpsit for the collection and enforcement of collection and payment of all taxes assessed hereunder, irrespective of the amount claimed.

OFFENSES; PENALTIES

§   -20 Unfair competition; penalty. No taxpayer shall advertise or hold out to the public in any manner, directly or indirectly, that the tax hereby imposed upon the taxpayer is not considered as an element in the price to the purchaser. Any person violating this section shall be fined not more than $50 for each offense."

PART II. REPEAL OF INCOME TAX

SECTION 4. The purpose of this part is to repeal the income tax over a period of four years.

SECTION 5. Chapter 235, Hawaii Revised Statutes, is repealed.

SECTION 6. The Hawaii Revised Statutes is amended by deleting references to the income tax and chapter 235 in sections 11-217, 11-226, 46-16.7, 111-5, 145D-1, 171-48, 171-74, 207-12, 209E-2, 209E-10, 211F-52, 231-8.6, 231-15.8, 231-23, 231-39, 231-51, 231-52, 231-57, 237D-11, 238-6, 239-2, 239-7, 241-1, 241-2, 241-4, 241-4.6, 241-4.7, 241-5, 241-6, 244D-12, 244D-13, 245-3, 245-10, 245-11, 247-4.5, 251-10, 257-10, 261-34, 328C-1, 346E-8, 351-2, 383-161, 383-163, 412:5-305, 412:6-306, 412:7-306, 412:9-409. 421:23, 425D-105, 425D-305, 425E-111, 431:2-201.5, 431:10H-301, 431-10H-302, 437-4, 466-9, 480B-2, 516-27, 576D-6, 576E-10, 612-11, 657D-43, and 842-11.

PART III. REPEAL OF GENERAL EXCISE TAX

SECTION 7. The purpose of this part is to repeal the general excise tax over a period of four years.

SECTION 8. Chapter 237, Hawaii Revised Statutes, is repealed.

SECTION 9. The Hawaii Revised Statutes is amended by deleting references to the general excise tax and chapter 237 in sections 36-32, 39-151, 46-16.7, 103D-1002, 103D-1008, 182-16, 201G-116, 201G-459, 207-12, 209E-10, 209E-11, 212-8, 231-3.2, 231-8.6, 231-9.3, 233-3, 238-1, 238-2, 238-2.3, 238-3, 238-5, 238-7, 238-13, 239-4.5, 239-6, 244D-13, 245-11, 246-34, 255D-2, 329-65, 343-3, 346E-1, 346E-3, 346E-13, 349-10, 421-23, 421H-4, 431:7-204, 431:10C-312, 432:2-503, 437B-13, 437D-8.4, 444-17, 445-232, 481I-2, 481I-3, 481K-1, 514E-3, and 842-11.

PART IV. REPEAL OF THE FUEL TAX

SECTION 10. The purpose of this part is to repeal the fuel tax over a period of four years.

SECTION 11. Chapter 243, Hawaii Revised Statutes, is repealed.

SECTION 12. The Hawaii Revised Statutes is amended by deleting references to the fuel tax and chapter 243 in sections 39-19, 47C-4, 171-19, 198D-2, 212-8, 248-8, and 261-7.

PART V. GENERAL PROVISIONS

SECTION 13. The department of taxation in cooperation with the department of business, economic development, and tourism shall compare the revenues provided the state by the general excise, income, and fuel taxes and estimate the amount of tax on the retail sales on personal property, as provided in section 2 of this Act, necessary to retain the same amount of state tax revenue once this Act becomes fully effective. The department of taxation shall provide a copy of the report to the legislature no later than twenty days prior to the beginning of the 2005 regular session.

SECTION 14. This Act shall take effect upon its approval; provided that:

(1) Parts II through IV shall take effect on January 1, 2010; provided that all general excise, income tax, and fuel rates shall be cut by twenty per cent of the current rate each year beginning on January 1, 2006, until the rates reach zero on January 1, 2011; and

(2) Twenty per cent of the retail sales tax rate shall become effective on January 1, 2006, with an additional twenty per cent of the rate becoming effective each year until the full rate is in effect on January 1, 2011.

INTRODUCED BY:

_____________________________