REPORT TITLE: 
General excise taxes; holiday
DESCRIPTION:
Establishes an annual general excise tax holiday for consumers
and businesses that sell clothing under $100 on condition that
business pass the savings on to consumers.

 
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HOUSE OF REPRESENTATIVES                H.B. NO.           
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
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                     A BILL FOR AN ACT

RELATING TO AN ANNUAL GENERAL EXCISE TAX HOLIDAY.



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


 1      SECTION 1.  The purpose of this Act is to give both
 
 2 consumers and business a break from the high cost of living in
 
 3 Hawaii by establishing an annual general excise tax holiday not
 
 4 to exceed three days.  For years, consumers and business have
 
 5 suffered under the weight of this most regressive tax.
 
 6      For a period not to exceed three days each year, sales of
 
 7 clothing and footwear under $100 would be exempt from the normal
 
 8 retail or general excise tax of 4%.  However, because the tax is
 
 9 imposed on the seller rather than the buyer, the only requirement
 
10 is that the tax savings be passed on to the consumer.
 
11      Tax holidays have been used successfully across the United
 
12 States.  For example, Texas has lifted its 6.25% state sales tax-
 
13 -along with all local sales taxes--on clothing and footwear under
 
14 $100.  New York and Florida already have similar programs.  
 
15      More importantly, tax holidays have been found to create
 
16 sales, not merely displace sales from a different time.  Many
 
17 Texas retailers have reported seeing crowds usually seen only
 
18 during the Christmas selling season.  To accommodate all of the
 
19 shoppers, stores in Texas adopted extended hours, added staff,
 

 
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 1 and offered special promotions usually reserved for the Christmas
 
 2 season.  While depressed sales might be expected after a tax
 
 3 holiday, retailers have not noticed fewer sales after a sales
 
 4 spike.
 
 5      While Hawaii's oppressive excise tax has stifled economic
 
 6 growth, retarded retail sales and profits, and dampened job
 
 7 creation, a tax holiday would have the opposite effect by
 
 8 stimulating sluggish retail sales and give a boost to our sagging
 
 9 economy.  
 
10      A similar program in Hawaii would help both consumers and
 
11 retailers alike.
 
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-    Tax holiday.  (a) Taxes under this chapter are not
 
16 due on the sale of clothing or footwear if the sales price of the
 
17 article is less than $100; and the sale takes place during a
 
18 period beginning at 12:01 a.m. on the first Friday in August and
 
19 ending at 12 midnight of the following Sunday; provided that all
 
20 savings generated by this section shall be passed on by the
 
21 seller to the purchaser.
 
22      (b)  This exemption shall apply to each article of clothing
 
23 or footwear selling for less than $100, regardless of how many
 

 
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 1 items are sold on the same invoice to a customer.  For example,
 
 2 if a customer purchases two shirts for $80 each, both items
 
 3 qualify for the exemption, even though the customer's total
 
 4 purchase price ($160) exceeds $99.99.
 
 5      (c)  This exemption shall not apply to:
 
 6           (1) the first $99.99 of an article selling for more
 
 7           than $99.99;
 
 8           (2) accessories, including jewelry, handbags, purses,
 
 9           briefcases, luggage, umbrellas, wallets, watches, and
 
10           similar items carried on or about the human body;
 
11           (3) the rental of clothing or footwear;
 
12           (4) taxable services performed on the clothing or
 
13           footwear, such as repair, remodeling, or maintenance
 
14           services and cleaning or laundry services;
 
15           (5) purchases of items used to make or repair clothing
 
16           or footwear, including fabric, thread, yarn, buttons,
 
17           snaps, hooks, and zippers;
 
18           (6) rebates, layaway sales, rain checks, or exchanges
 
19           when the exchanges occur before or after the tax
 
20           holiday period; or
 
21           (7) mail, telephone, e-mail, or Internet orders.
 
22      (d)  Articles that are normally sold as a unit must continue
 
23 to be sold in that manner; they cannot be priced separately and
 

 
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 1 sold as individual items in order to obtain the exemption.
 
 2      (e)  When exempt clothing or footwear is sold together with
 
 3 taxable merchandise as a set or single unit, the full price is
 
 4 subject to tax unless the price of the exempt item is separately
 
 5 stated.  When exempt clothing is sold in a set that also contains
 
 6 taxable merchandise as a free gift, the exempt clothing may
 
 7 qualify for the exemption.
 
 8      (f)  A retailer may offer discounts to reduce the sales
 
 9 price of an item.  If the discount reduces the sales price to
 
10 $99.99 or less, the item qualifies for the exemption.
 
11      (g)  The total price of items advertised as "buy one, get
 
12 one free," or "buy one, get one for a reduced price," cannot be
 
13 averaged in order for both items to qualify for the exemption.
 
14      (h)  For purposes of this section, shipping and handling
 
15 charges shall be included as part of the sales price of the item,
 
16 whether or not separately stated.
 
17      (i)  The retailer shall not be required to obtain any
 
18 special license, permit, or other documentation on sales of
 
19 eligible items during the exemption holiday period.  However, the
 
20 retailer's records should clearly identify the type of item sold,
 
21 the date the item was sold, and the sales price of the item.
 
22      (j)  No special reporting procedures are necessary to report
 
23 exempt sales made during the exemption holiday period.  Sales
 

 
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 1 shall be reported as currently required by law."
 
 2      SECTION 3.  New statutory material is underscored.
 
 3      SECTION 4.  This Act shall take effect upon its approval.
 
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