Honolulu, Hawaii



RE:    S.B. No. 778

       S.D. 1




Honorable Shan S. Tsutsui

President of the Senate

Twenty-Sixth State Legislature

Regular Session of 2011

State of Hawaii




     Your Committee on Ways and Means, to which was referred S.B. No. 778 entitled:




begs leave to report as follows:


     The purpose and intent of this measure is to repeal Act 155, Session Laws of Hawaii 2010.


     Your Committee received comments in support of this measure from the Chamber of Commerce of Hawaii; David M. Carr, CPA, Chair, Tax Committee of the Hawaii Society of Certified Public Accountants; and Lisa Maruyama, President and CEO, Hawaii Alliance of Nonprofit Organizations.  Your Committee received comments on this measure from the Tax Foundation of Hawaii; Ray Kamikawa, Chun, Kerr, Dodd, Beaman and Wong; Katherine P. Lloyd, General Counsel and Vice President of Operations, Hawaii Community Foundation; and two individuals.


     Your Committee finds that Act 155, Session Laws of Hawaii 2010, requires all businesses with excise tax exemptions to register to do business in Hawaii, file their tax returns in a timely manner, and expressly claim their entitlement.  Act 155 also creates a personal trust liability for businesses that use the general excise tax as the basis for increasing their prices, and ensures that those funds are paid to the State for the benefit of consumers and businesses.


     Your Committee also finds that, while well-intentioned, Act 155 severely penalizes taxpayers who inadvertently fail to file general excise tax returns, even if those taxpayers would not otherwise owe any tax.  The taxpayers most likely to unintentionally violate the technical requirements of Act 155 are small businesses, individuals, and non-profit organizations, who are least likely to have access to sophisticated tax advice and are least able to bear the burden of such severe penalties.  Your Committee further finds that the imposition of personal trust fund liability is inappropriate since the businesses affected are not holding the general excise tax in trust for other parties.


     Your Committee has amended this measure by changing the effective date to July 1, 2050, to facilitate further discussion on the measure.


     As affirmed by the record of votes of the members of your Committee on Ways and Means that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 778, as amended herein, and recommends that it pass Third Reading in the form attached hereto as S.B. No. 778, S.D. 1.


Respectfully submitted on behalf of the members of the Committee on Ways and Means,