REPORT TITLE: 
GET; export of services
DESCRIPTION:
Exempts from the general excise tax all services sold out of
state.

 
HB HMIA 99-291
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                            1305        
HOUSE OF REPRESENTATIVES                H.B. NO.           
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
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                     A BILL FOR AN ACT

RELATING TO A GENERAL EXCISE TAX EXEMPTION FOR THE EXPORT OF
   SERVICES.



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


 1      SECTION 1.  The legislature finds that exemption of gross
 
 2 income from the general excise tax arising from the sale of
 
 3 services to clients or customers located outside the State would
 
 4 send a message to the business world that Hawaii is "open for
 
 5 business".  In addition, this Act brings equity into the law,
 
 6 putting services on equal footing with goods sold to customers
 
 7 located outside the State.  This exemption recognizes that Hawaii
 
 8 is a service economy and by exporting services, the State would
 
 9 be encouraging the influx of capital into the State by placing
 
10 Hawaii-based services on equal competitive footing with service
 
11 providers from the mainland or around the Asia-Pacific region.
 
12      SECTION 2.  Chapter 237, Hawaii Revised Statutes, is amended
 
13 by adding a new section to be appropriately designated and to
 
14 read as follows:
 
15      "§237-     Exemption for certain sales of services.  (a)
 
16 There shall be exempted from, and excluded from the measure of,
 
17 the taxes imposed by this chapter all of the gross proceeds
 
18 arising from the sale of services to a purchaser at a point
 
19 outside the State for use outside the State.
 

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 1      As used in this section, "sale of services" means all
 
 2 activities engaged in by a service business or calling, or other
 
 3 business, for other persons which involve the rendering of a
 
 4 service, as distinguished from the sale of tangible property or
 
 5 the production and sale of tangible property, for which
 
 6 consideration was received.  "Sale of services" includes all of
 
 7 the professional services as defined in chapter 415A.  "Sale of
 
 8 services" does not include the services rendered by an employee
 
 9 to the employee's employer.
 
10      (b)  For the purposes of this section, the seller who makes
 
11 a sale of services to a purchaser at a point outside the State
 
12 for use outside the State, shall take from the purchaser a
 
13 certificate, in such form as the department shall prescribe,
 
14 certifying that the services were purchased for use outside the
 
15 State.  Any purchaser who shall furnish such a certificate shall
 
16 be obligated to pay to the seller, upon demand, if the services
 
17 supplied are used in the State, the amount of additional tax
 
18 which by reason of such use is imposed upon the seller.  The
 
19 seller may take the necessary legal action to recover amounts due
 
20 for the additional tax as a result of the consumption or use of
 
21 the services in the State."
 
22      SECTION 3.  Section 237-21, Hawaii Revised Statutes, is
 
23 amended to read as follows:
 

 
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 1      "§237-21  Apportionment.  If any person, other than persons
 
 2 liable to the tax on manufacturers as provided by section
 
 3 237-13(1), is engaged in business both within and without the
 
 4 State or in selling goods or services for delivery outside the
 
 5 State, and if under the Constitution or laws of the United States
 
 6 or section 237-29.5 [or], 237-29.6, or 237-    the entire gross
 
 7 income of such person cannot be included in the measure of this
 
 8 tax, there shall be apportioned to the State and included in the
 
 9 measure of the tax that portion of the gross income which is
 
10 derived from activities within the State, to the extent that the
 
11 apportionment is required by the Constitution or laws of the
 
12 United States or section 237-29.5 [or], 237-29.6[.], or 237-   .
 
13 In the case of a tax upon the production of property in the State
 
14 the apportionment shall be determined as in the case of the tax
 
15 on manufacturers.  In other cases, if and to the extent that the
 
16 apportionment cannot be accurately made by separate accounting
 
17 methods, there shall be apportioned to the State and included in
 
18 the measure of this tax that proportion of the total gross
 
19 income, so requiring apportionment, which the cost of doing
 
20 business within the State, applicable to the gross income, bears
 
21 to the cost of doing business both within and without the State,
 
22 applicable to the gross income."
 
23      SECTION 4.  Statutory material to be repealed is bracketed.
 

 
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 1 New statutory material is underscored.
 
 2      SECTION 5.  This Act shall take effect on July 1, 1999.
 
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