HOUSE OF REPRESENTATIVES

H.B. NO.

799

TWENTY-SIXTH LEGISLATURE, 2011

H.D. 1

STATE OF HAWAII

Proposed

 

 

 

 

 

A BILL FOR AN ACT

 

 

RELATING TO TAXATION.

 

 

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

 


SECTION 1. The purpose of this Act is to temporarily suspend the general excise and use tax exemptions for certain amounts received by certain persons and, instead, require those persons to pay the applicable tax on those amounts at a four per cent rate. The suspension and imposition of the tax commences on July 1, 2011, and ends on June 30, 2015.

This Act does not suspend the existing general excise tax exemption for nonprofit religious organizations.

SECTION 2. Chapter 237, Hawaii Revised Statutes, is amended by adding two new sections to be appropriately designated and to read as follows:

"237-A Temporary suspension of exemption of certain amounts; levy of tax at four per cent rate. (a) Notwithstanding any other law to the contrary, the exemption of the following amounts from taxation under this chapter shall be suspended from July 1, 2011, through June 30, 2015:

(1) Amounts deducted from the gross income received by contractors as described under section 237-13(3)(B);

(2) Reimbursements received by federal cost-plus contractors for the costs of purchased materials, plant, and equipment as described under section 237-13(3)(C);

(3) Gross receipts of home service providers acting as service carriers providing mobile telecommunication services to other home service providers as described under section 237-13(6)(D);

(4) Amounts deducted from the gross income of real property lessees because of receipt from sublessees as described under section 237-16.5;

(5) The value or gross income received by nonprofit organizations from certain conventions, conferences, trade shows, or display spaces as described under section 237-16.8;

(6) Gross income or gross proceeds of sale, but not donations or gifts, received by persons listed under section 237-23(a)(3) to (10); except that amounts received by corporations, associations, trusts, or societies organized and operated exclusively for religious purposes that were exempt from taxation under this chapter on June 30, 2011, shall continue to be fully exempt after that date;

(7) Amounts collected by distributors as fuel taxes on "liquid fuel" imposed by chapter 243 and fuel taxes imposed by any Act of the United States Congress as described under section 237-24(8);

(8) Taxes on liquor imposed by chapter 244D on dealers holding permits under that chapter as described under section 237-24(9);

(9) Amounts of taxes on cigarettes and tobacco products imposed by chapter 245 on wholesalers or dealers holding licenses under that chapter and selling the products at wholesale as described under section 237-24(10);

(10) Federal excise taxes imposed on articles sold at retail and collected from the purchasers and paid to the federal government by the retailers as described under section 237-24(11);

(11) Amounts of federal taxes under chapter 37 of the Internal Revenue Code or similar federal taxes imposed on sugar manufactured in the State and paid by the manufacturers to the federal government as described under section 237-24(12);

as described under section 237-24(13);

(12) Amounts received by sugarcane producers as described under section 237-24(14);

(13) Amounts received from the loading, transportation, and unloading of agricultural commodities shipped interisland as described under section 237-24.3(1);

(14) Amounts received from the sale of intoxicating liquor, cigarettes and tobacco products, and agricultural, meat, or fish products to persons or common carriers engaged in interstate or foreign commerce as described under section 237-24.3(2);

(15) Amounts received or accrued from the loading or unloading of cargo as described under section 237-24.3(4)(A);

(16) Amounts received or accrued from tugboat and towage services as described under section 237-24.3(4)(B);

(17) Amounts received or accrued from the transportation of pilots or government officials and other maritime-related services as described under section 237-24.3(4)(C);

(18) Amounts received by hospitals, infirmaries, medical clinics, health care facilities, pharmacies, or practitioners licensed to sell prescription drugs and prosthetic devices to individuals as described under section 237-24.3(7);

(19) Taxes on transient accommodations imposed by chapter 237D and passed on and collected by operators holding certificates of registration under that chapter as described under section 237-24.3(8);

(20) Amounts received as dues by unincorporated merchants associations from their membership as described under section 237-24.3(9);

(21) Amounts received by labor organizations for real property leases as described under section 237-24.3(10);

(22) Amounts received as rent for aircraft or aircraft engines used for interstate air transportation as described under section 237-24.3(12);

(23) Amounts received by exchanges and exchange members as described under section 237-24.5;

(24) Surcharge taxes on rental motor vehicles imposed by chapter 251 and passed on and collected by persons holding certificates of registration under that chapter as described under section 237-24.7(3);

(25) Amounts received as high technology development grants under section 206M-15 as described under section 237-24.7(10);

(26) Amounts received as beverage container deposits collected under chapter 342G, part VIII, as described under section 237-24.75(1);

(27) Amounts received from the servicing and maintenance of aircrafts or construction of aircraft service and maintenance facilities as described under section 237-24.9;

(28) Gross proceeds received from the sale of tangible personal property to the United States and state-chartered credit unions as described under section 237-25(a)(3);

(29) Amounts received by petroleum product refiners from other refiners for further refining of petroleum products as described under section 237-27;

(30) Gross proceeds received from the construction, reconstruction, erection, operation, use, maintenance, or furnishing of air pollution control facilities, as described under section 237-27.5, that do not have valid certificates of exemption on July 1, 2011;

(31) Gross proceeds received from shipbuilding and ship repairs as described under section 237-28.1;

(32) The value of or gross proceeds received from tangible personal property shipped out of the State as described under section 237-29.5;

(33) The value of or gross income received from contracting or services performed for use outside the State as described under section 237-29.53;

(34) Gross proceeds or gross income received from the sale of tangible personal property imported for subsequent resale at wholesale as described under section 237-29.55;

(35) Amounts received by telecommunications common carriers from call center operators for interstate or foreign telecommunications services as described under section 237-29.8;

(36) Gross proceeds received by qualified businesses in enterprise zones, as described under section 209E-11, that do not have valid certificates of qualification from the department of business, economic development, and tourism on July 1, 2011; and

(37) Gross proceeds received by contractors licensed under chapter 444 for construction within enterprise zones performed for qualified businesses within the enterprise zones or businesses approved by the department of business, economic development, and tourism to enroll into the enterprise zone program, as described under section 209E-11.

(b) Except as otherwise provided under subsection (d), there is levied, assessed, and collected annually against the persons under subsection (a), a tax at the rate of four per cent on the previously exempt gross income or gross proceeds of sale.

As used in this section, "previously exempt gross income or gross proceeds of sale" means the amount of the gross income or gross proceeds of sale, the exemption for which is suspended under subsection (a). The term also includes the following:

(1) The value received by a nonprofit organization from conventions, conferences, trade show exhibits, and display spaces, the exemption for which is suspended under subsection (a)(5);

(2) The value of tangible personal property shipped out of the State, the exemption for which is suspended under subsection (a)(32);

(3) The value of contracting or services performed for use outside the State, the exemption for which is suspended under subsection (a)(33); and

(4) Taxes and surcharge taxes listed under subsection (a)(7), (8), (9), (10), (11), (19), and (24).

The persons exempted under subsection (a), against whom the tax is levied and assessed under this section, shall be responsible for payment of the tax to the director of taxation.

(c) Notwithstanding section 237-8.6, no county surcharge shall be levied, assessed, or collected on any previously exempt gross income or gross proceeds of sale that is subject to taxation under subsection (b).

(d) This section shall not apply to gross income or gross proceeds from binding written contracts entered into prior to July 1, 2011, that do not permit the passing on of increased rates of taxes.

(e) This chapter shall apply to the payment, collection, enforcement, and appeal of the tax levied under this section.

The director of taxation may establish additional requirements, procedures, and forms pursuant to rules adopted under chapter 91, to effectuate this section.

237-B Information reporting. The director shall require information reporting on all exclusions or exemptions of all amounts, persons, or transactions from this chapter, except for the following:

(1) Amounts received that are exempt under section 237-24(1) through (7); and

(2) Any other amounts, persons, or transactions as determined by the director in the best interest of tax administration and made by official pronouncement."

SECTION 3. Chapter 238, Hawaii Revised Statutes, is amended by adding two new sections to be appropriately designated and to read as follows:

"238-A Temporary suspension of exemption of certain amounts; levy of tax at four per cent rate. (a) Notwithstanding any other law to the contrary, the exemption of the following from taxation under this chapter shall be suspended from July 1, 2011, through June 30, 2015:

(1) The leasing or renting of aircraft or keeping of aircraft solely for leasing or renting for commercial transportation of passengers and goods or the acquisition or importation of aircraft or aircraft engines by a lessee or renter engaged in interstate air transportation, as described under paragraph (6) of the definition of "use" in section 238-1;

(2) The use of oceangoing vehicles for passenger or passenger and goods transportation from one point to another within the State as a public utility, as described under paragraph (7) of the definition of "use" in section 238-1;

(3) The use of material, parts, or tools imported or purchased by a person licensed under chapter 237 which are used for aircraft service and maintenance or the construction of an aircraft service and maintenance facility, as described under paragraph (8) of the definition of "use" in section 238-1;

(4) The use of services or contracting imported for resale where the contracting or services are for resale, consumption, or use outside the State, as described under paragraph (9) of the definition of "use" in section 238-1;

(5) The use or sale of intoxicating liquor and cigarette and tobacco products imported into the State and sold to any person or common carrier in interstate commerce, whether ocean-going or air, for consumption out of State by the person, crew, or passengers on the shipper's vessels or airplanes, as described under section 238-3(g);

(6) The use of any vessel constructed under section 189-25 prior to July 1, 1969, as described under section 238‑3(h);

(7) The use of property, services, or contracting subject to section 237-26 or section 237-29 as described under section 238-3(j); and

(8) The use of any air pollution control facility subject to section 237-27.5 as described under section 238‑3(k).

(b) Except as otherwise provided under subsection (c) or (e), there is levied, assessed, and collected annually against the persons under subsection (a), a tax at the rate of four per cent on the previously exempt value of property, services, or contracting.

As used in this section, "previously exempt value of property, services, or contracting" means the value of property, services, or contracting, the exemption for which is suspended under subsection (a).

The persons exempted under subsection (a), against whom the tax is levied and assessed under this section, shall be responsible for payment of the tax to the director of taxation.

(c) The tax imposed under subsection (b) shall not apply to any property, services, or contracting or to any use of the property, services, or contracting that cannot legally be so taxed under the Constitution or laws of the United States, but only so long as, and only to the extent to which the State is without power to impose the tax.

To the extent that any exemption, exclusion, or apportionment is necessary to comply with the preceding sentence, the director of taxation shall:

(1) Exempt or exclude the property, services, or contracting or the use of the property, services, or contracting, from the tax under subsection (b); or

(2) Apportion the gross value of services or contracting sold to customers within the State by persons engaged in business both within and without the State to determine the value of that portion of the services or contracting that is subject to taxation under chapter 237 for the purposes of section 237-21.

(d) Notwithstanding section 238-2.6, no county surcharge shall be levied, assessed, or collected on any previously exempt value of property, services, or contracting that is subject to taxation under subsection (b).

(e) This section shall not apply to the value of property, services, or contracting from binding written contracts entered into prior to July 1, 2011, that do not permit the passing on of increased rates of taxes.

(f) This chapter shall apply to the payment, collection, enforcement, and appeal of the tax levied under this section.

The director of taxation may establish additional requirements, procedures, and forms pursuant to rules adopted under chapter 91, to effectuate this section.

238-B Information reporting. The director shall require information reporting on all exclusions or exemptions of all amounts, persons, or transactions from this chapter, except for any amounts, persons, or transactions as determined by the director in the best interest of tax administration and made by official pronouncement."

SECTION 4. In codifying the new sections added by sections 2 and 3 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act.

SECTION 5. New statutory material is underscored.

SECTION 6. This Act shall take effect on July 1, 2011, and shall be repealed on June 30, 2015; provided that:

(1) The department of taxation shall have the authority to postpone the payment of the tax imposed under this Act until the deadline to file the general excise or use tax annual return and reconciliation form, as applicable, without regard to any extension;

(2) The suspension of certain exemptions of section 237-24, Hawaii Revised Statutes, pursuant to section 2 of this Act, shall not be affected by the repeal and reenactment of that section on December 31, 2013, pursuant to Act 70, Session Laws of Hawaii 2009; and

(3) The suspension of certain exemptions of sections 237-24.3 and 237-24.7, Hawaii Revised Statutes, pursuant to section 2 of this Act, shall not be affected by the repeal and reenactment of those sections on December 31, 2014, pursuant to Act 91, Session Laws of Hawaii 2010.


 


 

Report Title:

General Excise and Use Taxes; Temporary Suspension; Exemption for Certain Persons and Gross Amounts

 

Description:

Suspends temporarily the exemptions for certain persons and certain amounts of gross income or proceeds from the general excise and use tax and requires the payment of the tax at a 4% rate. Effective 07/01/11 and sunsets on 06/30/15. (HD1 Proposed)

 

 

 

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