STAND. COM. REP. NO. 944

                                   Honolulu, Hawaii
                                                     , 1999

                                   RE:  H.B. No. 1207
                                        




Honorable Norman Mizuguchi
President of the Senate
Twentieth State Legislature
Regular Session of 1999
State of Hawaii

Sir:

     Your Committee on Ways and Means, to which was referred H.B.
No. 1207 entitled:

     "A BILL FOR AN ACT RELATING TO THE CIGARETTE TAX,"

begs leave to report as follows:

     The purpose of this bill is to restore the tax exemption for
sales of cigarettes and tobacco products to United States
agencies and instrumentalities. 

     This bill fully restores an exemption that was inadvertently
repealed in legislation enacted during 1993 and 1997.  The
original amendments in 1993 were made in anticipation of a
federal law change that never materialized.

     Your Committee heard testimony in support of this measure
from the Department of Taxation, Hawaii Food Industry
Association, and S & K Sales Co.  The Tax Foundation of Hawaii
submitted informational comments.

     Your Committee finds that the legislature never intended to
impose the cigarette and tobacco tax on sales of cigarettes and
tobacco to United States agencies.  This measure will rectify the
current situation and the retroactive effective date clarifies
the exemption for previous years.


 
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                                   STAND. COM. REP. NO. 944
                                   Page 2


     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 H.B.
No. 1207 and recommends that it pass Second Reading and be placed
on the calendar for Third Reading.

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



                                 ________________________________
                                 CAROL FUKUNAGA, Co-Chair



                                 ________________________________
                                 ANDREW LEVIN, Co-Chair

 
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