STAND. COM. REP. NO. 37

 

Honolulu, Hawaii

                  

 

RE:    S.B. No. 1034

 

 

 

Honorable Colleen Hanabusa

President of the Senate

Twenty-Fourth State Legislature

Regular Session of 2007

State of Hawaii

 

Madam:

 

     Your Committee on Transportation and International Affairs, to which was referred S.B. No. 1034 entitled:

 

"A BILL FOR AN ACT RELATING TO TAXATION,"

 

begs leave to report as follows:

 

     The purpose of this measure is to exempt common carriers from the general excise and use taxes for fuel sold from a foreign trade zone to common carriers for use in intrastate transportation.

 

     Your Committee received testimony in support of this measure from the Department of Business, Economic Development, and Tourism, Aloha Airlines, The Chamber of Commerce of Hawaii, Transport Workers Union, Aloha Airlines Pilots' Union, International Association of Machinists and Aerospace Workers District 141, Hawaiian Airlines and the Hawaii Fueling Facilities Corporation.  Comments were received from the Department of Taxation and Tax Foundation of Hawaii.

 

     Your Committee finds that a healthy inter-island airline industry is vital to the State's economy.  Hawaii's inter-island airlines continue to face severe financial challenges.  Fuel costs in particular have skyrocketed and grown volatile in recent years.  In fact, for most airlines, the cost of fuel has surpassed labor as the highest operating cost factor.

 

     The intent of this measure is to level the playing field and create a fairer market for all airlines.  Sales of fuel sold from a foreign-trade zone for use by airlines traveling out of the State of Hawaii are exempt from general excise and use taxes.  However, intrastate flights are not exempt.  To the extent that the Hawaii general excise and use taxes apply to intrastate flights, these taxes only exacerbate the problem for Hawaii airlines.  Your Committee received a fiscal impact statement from the Department of Taxation on a revenue loss of $12.3 million annually.  The Department did not submit the methodology by which the fiscal impact was calculated.

 

     As affirmed by the record of votes of the members of your Committee on Transportation and International Affairs that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 1034 and recommends that it pass Second Reading and be referred to the Committee on Economic Development and Taxation.

 

Respectfully submitted on behalf of the members of the Committee on Transportation and International Affairs,

 

 

 

____________________________

J. KALANI ENGLISH, Chair